Sunday 24 November 2019

Octopus Renewables IPO

The Octopus Group is one of Europe's largest owners of solar power and globally manages over £3bn of assets in renewable energy. It operates a venture capital arm and also a household energy supply business with over 1 million UK customers.

With increasing concern about climate change in recent times from public, pension funds and other institutional fund managers, there is a growing demand for climate-friendly investment options and the renewables infrastructure sector has seen over £1bn of new capital invested in the first half of 2019 with several new trusts being launched as well as expansion of existing trusts. Most of these trusts trade at a significant premium to net assets - average around 12% to 14%.

So, tapping into this market is a natural step for Octopus Renewables (ORIT) who hope to raise an initial £250 million from mainly institutional investors however the IPO is also available for retail investors via most of the popular brokers. I have applied for some shares in my ISA with AJ Bell Youinvest.

The proceeds from the launch will be invested in mainly onshore wind and solar renewables throughout the UK and Europe and also Australia. The dividend will be paid quarterly and is expected to be 3% for the first year and 5% when fully invested with a target for total return of 7 to 8% p.a. Here's the link from AJ Bell for further details.

One of the advantage of acquiring shares via an IPO is there are no dealing charges or stamp duty, therefore a saving of around 1%. The offer closes on 5th December and the new shares should start trading shortly after this date. The launch costs will be capped at 2% and therefore the shares initial net asset value will be 98p.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Wednesday 20 November 2019

Air Liquide - Portfolio Addition

Over the past few months I have gradually removed oil and gas holdings from my portfolio and replaced them with more climate-friendly alternatives. This has involved the selling of my globally diverse index funds such as Vanguard Lifestrategy and HSBC Global Strategy which had previously formed the mainstay of my portfolio. Unfortunately, there are few if any ready-made index funds which do not hold either fossil fuel companies or the large banks which fund their operations. 

Therefore I have been increasingly looking at individual holdings and gradually building my own tailor-made fossil-free fund which includes the likes of Orsted, Vestas Wind, ITM Power and AFC Energy - I must adopt a name for this fund...thinking the "DIY's Fossil-Free Fund" doesn't quite hit the mark but any suggestions for a better name for the fund in the comments below!! 

Obviously the new strategy of replacing a global index fund such as VLS which has over 10,000 holdings of equities and bonds, will carry much more risk than a portfolio with a handful of individual shares and so, whilst it may not be for many small investors, I am prepared to run the higher risks involved to ensure my investments are more fully aligned with my values and lifestyle.

Who Are They?

So, on to my latest acquisition. Air Liquide (AL) is a large company listed on the Paris stock exchange - CAC 40 and included in the Euro Stoxx 50 index and also FTSE4Good Indexes. It operates in 80 countries and employs around 66,000 people. It is a global leader in gases technology - mainly oxygen, nitrogen and hydrogen.

The main attraction for me is its commitment to developing hydrogen as a clean source of energy. It has extensive expertise in this field spanning 50 years and across the entire chain from production to end use. In particular, development of low carbon production including green hydrogen produced from electrolysis using renewable energy.

The Hydrogen Economy

AL is currently investing heavily in hydrogen infrastructure across Europe, North America and Asia and wants to see H2 powering a large proportion of the global economy over the coming decade as we transition away from fossil fuels. If its vision of a global hydrogen-based economy can be delivered, it could spark a transformation across multiple global industries. This is because H2 has a wide range of potential applications and uses in many different sectors.

Hydrogen filling station - France

There is an urgent need to find zero-emission solutions to replace fossil fuels for transport - road, rail, sea, air - as well as heavy industrial sectors such as steel and concrete which together account for around 16% of global CO2 emissions.
It is estimated this total hydrogen economy could be worth $2.5tr per year in revenues so if AL could take just 1% of this it would double the company's current revenues.

AL currently produces around 14 billion cubic metres of hydrogen - enough to fuel 10 million hydrogen fuel-cell cars. It is currently expanding its facility in Canada by 50% to meet demand for carbon-free hydrogen in North America. At 20MW, the electrolyser will be the largest in the world. It is also building a $150m liquid hydrogen plant in California for the hydrogen energy markets.

Obviously Air Liquide cannot generate a global H2 economy all on its own. More government and policy support is required across the chain, however, the opportunities and versatility offered by hydrogen is starting to be recognised by policy makers and the only question mark seems to be how quickly will they move.

The company will release full year results next February however at the half-year mark, revenues were up 5% at just under 11bn EUR with net profits up 12%. Dividends  are around 2% paid in May and have grown at an average of 8% per year over the past decade.

3 Yr Share Price (click to enlarge)

The shares were purchased in my ISA at the price of EUR 121.00. The purchase was funded from the proceeds of the sale of Impax Environmental which I no longer wish to support as it seems to be part owned by French bank BNP Paribas which continues to finance fossil fuel companies.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation. Holding individual shares always carries more risk than collective investments - always DYOR!

Friday 15 November 2019

AFC Energy - Update

It's just over two months since I decided to add this small AIM-listed hydrogen fuel play to my portfolio.

In the past couple of weeks there have been some significant developments.

First, at the start of this month, the company announced four new brands as it seeks to push forward its hydrogen-powered technology. It will launch HydroX Cell (L) which is a highly efficient alkaline fuel cell for use in heavy-duty industrial applications. It will also launch the HydroX Cell (S) for use in mobile and stationary applications.

The third brand is H Power which is a group of power systems which includes an off-grid electric vehicle (EV) charger and the fourth is AlkaMem, a range of exchange polymer membranes inside the fuel cell which have a wide range of applications including energy storage and fuel synthesis.

AFC have been working closely on development in collaboration with Industie de Nora - a world-leading electrolyser manufacturer - in Italy over the past three years and have now received welcome news that the membrane exceeded internal expectations. AFC say this development offers opportunities in new market segments that it has previously been unable to penetrate and that revenues in this sector amount to over $1bn per year.

The market has welcomed these developments and the share price has soared from 5p to close at 17.5p at the end of this week - a rise of 250%!

AFC 12m share price (click to enlarge)

AFC Chairman John Rennocks purchased 114,000 shares this week for a total of £11,600. The company have just launched their new website.

Obviously, after such a surge in the share price over such a brief period it is tempting to take profits however my feeling is there is much more to come from zero-emissions, low cost hydrogen fuel cell technology. An abundant gas produced from low-cost fuel cell technology which produces no greenhouse gas emissions and has many applications...could be a game changer in the fight against climate change. So I will keep my fingers crossed and hang in for the long haul and see where we get to.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation... investing in smaller companies can be rewarding but is higher risk - always DYOR!

Monday 11 November 2019

Proton Power - Portfolio Addition

Earlier this year I started to take more interest in the potential of hydrogen as a solution in the fight against climate change. It is a gas which is the most abundant on earth and burns without producing greenhouse gases or carbon. The only waste product is water.

The costs of producing green hydrogen from using the energy from renewables such as wind and solar are falling rapidly which makes this once expensive form of producing energy more attractive.

On the back of this interest I purchased a small stake in ITM Power in late August and took advantage of adding some more shares as part of a placing last month. The combined holding have appreciated from 37p to currently 68p so up 83%. On the back of this I decided to add another player in the hydrogen sector, AFC Energy in mid September and that too has seen significant price movement - up from 4.8p to currently 9.4p, a gain of 95%.

I am probably pushing my luck but I will ride the alternative energy wave and have decided to add a third small hydrogen play Proton Power Services.

This is another small AIM-listed company - market cap. £145m - involved in the development of large scale hydrogen fuel cell technology which can be used for a variety of applications. The hydrogen fuel cell is highly efficient and, in contrast to power generated by conventional internal combustion engines, coal-fired power station or nuclear reactor, there are no toxic, radioactive or greenhouse gases produced or emitted.

According to the latest half-year results (link via Investegate), the company has initiated several new projects including taking deliver of an automated stack assembly machine capable of 5,000 units per year. They entered a joint venture with Skoda Electric to develop fuel cell electric buses using Proton's modular HyRange system. In August, they announced a joint venture to integrate large industrial fuel cells with power electronic battery storage to create a 'plug n play' power unit.

I suspect the hydrogen powered cars could well compete with battery powered EVs in the coming few years due to the higher GHG emissions produced from the manufacture of batteries. This is particularly the case for heavier vehicles like lorries and buses where the more efficient hydrogen powered vehicles have an advantage.
Basics of Fuel Cell Vehicle
(click to enlarge)

The global fuel cell market is estimated to be worth $8 bn by 2021 and growing at 15% per annum. The company has identified several key targets within this market including :

  • back-up power for telecoms and data centers
  • hydrogen battery zero emission vehicles - buses, airport vehicles, off-road vehicles, trucks and fork lift trucks
  • shipping
  • fuel cell trains

12 m share price

However exciting these projects appear, the fact remains that the company is still not making profits so for investors, it's about jam tomorrow which is always risky.
As can be seen from the chart, the share price has been volatile which is common for smaller companies - under 10p at the start of the year and rising quickly to 40p before falling back. My initial purchase price was 24p.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation... investing in smaller companies can be rewarding but is higher risk - always DYOR!