Nel Hydrogen - Portfolio Addition

Over the past year or so I have been following a range of companies which focus on green hydrogen. I have added some of these to my green portfolio and seen some spectacular returns in a very short period. This has given me the confidence to add more and diversify this part of my portfolio, often with taking part profits from existing holdings.

One such recent addition has been NEL ASA, a Norwegian clean energy specialist listed on the Oslo exchange and also the Frankfurt exchange. It's operation covers the whole hydrogen chain from production via electrolysis through to storage solutions and the provision of hydrogen fueling stations. It is the worlds largest manufacturer of green hydrogen electrolysers with deliveries to over 80 countries and provides the solutions for the transition to clean energy with its proprietary H2Stations.

Results

As with most of these hydrogen companies, Nel is not yet profitable but is investing heavily to grow the operations and frequently places new shares to raise capital for investment. Obviously over the past year it has been affected by Covid but according to the latest Q3 report (pdf), revenues of 147.7 NOK are in line with the previous year (148.9). However the order backlog is up 63% YoY and cash balance has increased from 651 NOK to 2,543.

Jon André Løkke, CEO of Nel, said, "The markets in which we operate continue to show high activity and strong growth momentum, in addition to significant governmental interest for developing green energy infrastructure and industries post Covid-19.

While our short-term operations, production and installations are affected by the pandemic, with the financial performance in the third quarter in line with our outlook, the adoption of green hydrogen and industrial hydrogen applications continues to accelerate."

The market for clean hydrogen is expected to grow significantly over the coming decade and beyond as the world turns to zero emissions fuels for energy, transport and to decarbonise many aspects of industry currently powered by coal, oil or gas. The EUs new hydrogen strategy suggests that hydrogen could account for a quarter of the world's energy needs by 2050 and analysis suggests the market could grow at least 10-fold and drive annual revenues to over $1 trillion. Germany has pledged to instal 5GW of green hydrogen capacity by 2025, France 6.5GW and S Korea 15GW by 2040.

The likes of Nel (and UK-listed ITM Power, Ceres Power etc.) are likely to benefit from this transition. Nel was one of the first companies to roll-out commercial electrolysers in the 1970s and has now provided over 3,500 worldwide. In addition to production, Nel is a leading manufacturer of hydrogen fueling stations for fuel-cell cars, buses, lorries and forklifts.

One year share price

Earlier this year, the company signed a $30m deal with US truck company Nikola. On the back of this deal, Nel decided to build a megafactory in Norway to scale up manufacturing. Nel purchased 1.1m shares in the US company. Unfortunately soon after this deal was agreed Nikola founder resigned under a cloud of and is currently under investigation. Although the deal with Nikola is still on the cards, there is now a greater degree of uncertainty. The shares took a hit as a result but have since recovered momentum but I missed an opportunity to pick up some shares on the cheap.

Conclusion

Despite the disdain shown by Elon Musk for anything hydrogen, fuel-cell technology is rapidly gaining acceptance with governments and policy makers as the best decarbonisation solutions for heavy transport - trucks, shipping, trains and even aircraft. Unlike battery-powered vehicles, hydrogen fuel cells are relatively light and also can be refueled in minutes rather than the hours taken to charge a battery.

The shares have seen a strong surge in recent weeks as investors start to appreciate the potential for green hydrogen solutions and there may well be some pull-back/profit taking. However longer term I am hoping there will be much more to come as the US rolls out its green new deal under the Biden administration and Europe pushes ahead with the transition to a greener economy.

However, electrolysis is just one way of producing hydrogen. It will require investment from governments and large global companies like Apple and Google to scale up production and bring down costs and there may be other ways to make clean hydrogen as the transition gets underway so I will continue to hedge my bets with the likes of Ceres, Ballard and Plug Power for example.

Market cap is approx £3.2bn. The shares were purchased last week in my ISA at €2.50 (around 230p at current exchange rates).

More on this following the full year results due February 2021.

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 individual companies can be rewarding but is higher risk compared to collective investments - always DYOR!

SolarEdge Technologies - Portfolio Addition

Last month I acquired a holding in Enphase Energy which provides clean energy from solar combined with storage solutions. SolarEdge operates in the same space and I have decided to add this second solar energy company to my portfolio as the pace for the green revolution seems to be gathering speed as Joe Biden is about to replace Trump in the White House in January.

Like Enphase, the basic model is to maximise power generation from solar PV with their inverter solutions and thus reduce the costs of renewable energy for the consumer. Their products are sold in over 100 countries on every continent around the globe.

As renewables such as wind and solar grow around the world in the transition away from fossil fuels, so the centralised energy network will need to change to a system where energy is produced near to where it is consumed e.g. at the home of the consumer with roof-top solar PV combined with energy storage. This will create opportunities for new interconnected and decentralised energy networks which ensure a reliable connected service combined with low costs and stability.

SolarEdge is at the cutting edge of this transition to a more decentralised energy network with its cloud-based management tools which can link up small scale communities which use PV, storage and electic vehicles to create a virtual power plant.

Latest Results

Since listing on the market in 2015, SolarEdge has seen impressive growth in revenues - average 45% p.a. making it the largest PV inverter provider globally. Around half of revenues are from the US with a further 40% coming from Europe. Obviously revenues have been affected by the global pandemic this past year. According to the latest Q3 results to end September, revenues of $338m were up 2% on the previous quarter but down 18% compared to Q3 2019. Hopefully, with the roll-out of the vaccines, production can return to normal in the coming year.

Gross profits have increased by 4.5% at $351m over the first 9 months compared to the same period in 2019. Cash and cash equivalents have quadrupled from $247m to just over $1bn at end September 2020.

Conclusion

Solar capacity is expected to increase by 15% each year for at least the next decade and could be responsible for up to 50% of total energy requirements in many countries by 2050. According to the latest report from the International Energy Association, 90% of all new electricity generation this year will be from renewables. This means clean, green electricity will become the largest global power source by 2025 providing one third of the world's electricity.

Looking at 2021, the new Biden administration will be giving substantial support to the renewable energy sector. SolarEdge and Enphase hold around 80% of the market in the US for inverters and power optimisers and I expect them to be the logical beneficiaries of the green new deal which aims to make the US energy system carbon neutral by 2035.

Share Price past 12 months

Finally, just a heads up...both of these companies are currently held in the iShares Global Clean Energy ETF (also Vestas Wind, Orsted and Plug Power) so this is probably an easier way for investors who wish to gain access to this sector.

The shares have seen a good run this year, rising from $100 to reach a high of $315 in October. Obviously there is a possibility that they are currently over-priced but if they continue to grow revenues at anywhere near the pace of the past four years, I think there will be much more to come. The shares were purchased in my ISA at the price of $285 (which works out at £214 based on current FX).

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 individual companies can be rewarding but is higher risk compared to collective investments - always DYOR!

Invinity Energy Storage - Portfolio Addition

Just as there are many ways to generate energy - wind, nuclear, coal. solar - so there are many ways to store the energy - lithium-ion batteries, pumped hydro, flow battery and hydrogen for example. In recent years there has been a move away from generating energy from fossil fuels due to climate change and a corresponding transition to cleaner solutions such as wind and solar. As the world increases capacity for these clean generation options, the costs of solar and wind have fallen which makes them the cheapest way for creating energy in many parts of the world. As costs fall, it follows that more and more capacity can be deployed which will create more energy than can be used at certain periods and this energy can be stored for use at a later time.

The reality is that renewable energy has arrived and will increasing dominate the world's energy requirements in the future as we retire coal, oil and natural gas (fossil fuels). However, these renewable forms of energy are inherently intermittent - the wind doesn't always blow and there is no sun at night so we will need to store excess energy when available in much greater volumes than is required at the time and the excess will be stored for use later.

Vandium Flow Battery

V-flow batteries are large, containerised operations which can store and discharge energy over long periods, typically 20 to 25 years. They offer unlimited options by merely by using larger storage tanks. Because of their size, they are not suited to vehicles but more for industrial and utility applications.

Most grid storage is currently pumped hydro but obviously there are constraints on where this can be deployed as it relies on gravity. As baseload energy from fossil fuels is phased out we will need reliable forms of storage to fill the gap. It is estimated that flow batteries could provide up to one third of all stored energy over the coming decade. Vanadium is more common in the Earth's crust than Lithium and we currently extract about twice as much V compared to Li.

Invinity

The company is a merger of redT (UK) and Avalon(Canada). The company aims to become a global leader in flow batteries and compete head-to-head with Li-ion batteries and provide energy storage solutions to decarbonise global energy to achieve net zero emissions by 2050.

The company has around 40 energy storage operations worldwide

Invinity Storage Solutions from Renewable Solar

Earlier this month the Company announced a 1.8 MWh deal with European Marine Energy for a project in Orkney to provide clean power from tidal energy combined with storage and green hydrogen. The project is due for delivery next year and will be a world-first.

The Company are involved with the Energy Superhub Oxford project which will demonstrate the key role played by flow batteries in the decarbonisation of the world's transport and electricity networks. The smart power network installed in Oxford will deliver flexible, reliable power to fast-track the roll-out of EVs. If all goes to plan the aim is to roll out this syten throughout the UK.

Results

According to the latest half-year results to end June 2020 (link via Investegate) the company increased revenues by 50% to £0.3m. Net assets increased from £12.6m at the end of 2019 to £38.7m.

"Without a viable alternative, project developers interested in large-scale energy storage have looked almost exclusively to lithium-ion systems, even when they aren't the optimum fit. Invinity's strategy is to make Invinity the commercially viable complement or alternative to lithium-ion batteries.

The Company has made significant commercial progress in the months following the merger as the June 2020 Trading Update detailed with over £1m of orders signed. Since then, Invinity's late stage project pipeline has continued to expand in terms of both project quality and scale. Thanks to the ongoing work of Invinity's transatlantic commercial team, the Company remains confident in its ability to close a significant number of these opportunities into confirmed orders over the coming months".

The company are focused on key markets in UK, West Coast US, S Africa and Australia.

Conclusion

The vanadium flow battery technology seems to be gaining traction as the limitations of Li-ion batteries becomes apparent and as the transition towards renewable energy drives the structural changes for storage solutions. There are environmental concerns in relation to the extraction of lithium in areas such as Tibet and Bolivia where local water supplies have been polluted as the mineral is mined from vast salt flats. Also the batteries can become unstable and burst into flame or explode.

As demand for renewable electricity surges, so too does the requirement for safe, sustainable storage solutions. The market for energy storage will become huge over the coming decade and beyond and hopefully provide opportunities for the likes of Invinity to take advantage.

Invinity Share Price YTD

This is a small AIM-listed company with big ambitions but has yet to turn its potential into profits. The share price has had a good run moving from 40p 6 months back to a high of 185p (currently) so there could well be some volatility and taking of profits and maybe better opportunities at lower prices down the line. However I have recently sold some of my ITM Power shares at 370p (purchase price 37p) so I can take a little more risk with this acquisition. The shares were purchased in my SIPP at 165p and I will add to my holding should there be any significant pull-back in the coming weeks. I hope the performance can match some of my other acquisitions this past year such as McPhy, Plug Power, Ceres etc.

To Invinity and Beyond... (With apologies to Buzz...I'll get my coat...)

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 AIM-listed companies can be rewarding but is usually higher risk - always DYOR!

My Next (and Final) House Move

It's certainly been quite a year. During three months of Lockdown 1 earlier in the year I had plenty of time to reflect on many aspects of life. It's just four years since I made my last house move and I have always thought I would be making another move at some point but have been putting it off for the past year or two.

In any event, one of the decisions I made during those periods of quiet contemplation during April/May was to make a move. When the Chancellor announced the stamp duty holiday in July, this was the trigger to start the ball rolling. So, I spent a few weeks making the place look a bit more presentable and put my property on the market following the lifting of restrictions and the opening of estate agents. Of course, there had been a great deal of pent-up demand and so lots of interest and viewings during the first week. I was lucky to get an offer at the asking price and so began my search for a suitable property.

For some time I have had the idea of finally retiring to a nice quiet bungalow. I started life in the 1950s in a modest wooden bungalow in South Yorkshire so maybe there is some need to return and complete the gestalt. Unfortunately in the area that I live they are not so common - mainly traditional Victorian terraced or pre-war semi-detached two storey houses so the few bungalows that occasionally come on to the market are quite expensive - particularly in the better, quieter locations. Luckily after a couple of weeks searching on Rightmove, I saw just the sort of property I wanted and after the first visit put in my offer which was accepted the next day.

I am ignoring the warning of 'bungalow legs' from my family but I guess it's surprising just how many times I am up and down the stairs in my house!

Finances

I was pleased to see property prices receiving a boost from all the demand built up during lockdown combined with the Chancellor's decision to suspend stamp duty which resulted in a boost to prices generally and my house suddenly being valued at 35% more than I bought it for in 2016. Of course, the property I want to purchase has no doubt gone up as well this year!

My investment portfolio has grown quite a fair bit over recent years - average returns of 9% each year has resulted in a doubling of its value over the past 8 years. Last year saw an above-average year with a 21% uplift and with a further 30% uplift since the meltdown in March so I have decided to sell down quite a large proportion of my ISA and put this towards a really nice final retirement property.

I have had a good run these past few years and I am thinking there may not be so much upside in the equity markets going forward - Covid, climate change, huge public debt etc. so a nice property may be a better bet and certainly there is very little incentive to remain in cash. But financials aside, it just makes sense to finally retire to a life of peace and quiet in the leafy suburbs.

The property is detached and hopefully nice and quiet which will be a contrast to my current house which is close to a busy main road. It has a garden which should be ideal for a return to growing my veggies - I may need a few tips from weenie - and also some space for a wildflower patch for the bees and butterflies. I also want to make the house carbon neutral and will be looking at the option of adding solar PV + battery storage...will give Enphase a call! So should be plenty to keep me occupied for the first couple of years!

Conclusion

It is very satisfying to reap some rewards from my lifetime habit of saving and the ability to generate a decent return from these savings to afford a really nice house. I have to thank my green investments such as Orsted, Vestas, ITM, McPhy and Tesla for providing a nice boost these past couple of years. I have aspergers (autism) and have experienced an increased sensitivity to noise as I get older so it will hopefully be much quieter in a detached house in a cul-de-sac away from the busy/vibrant area I am leaving behind.

I have been thinking of starting another (final) book so maybe in the new year this will be an opportunity to make a start as well as update some chapters of existing titles.

I may be offline for a week or so while the broadband service is transferred over to the new property so maybe no posts for a short while.

Fingers crossed all goes smoothly on the big day!

Update 24/11...I am pleased to report that all went well on the big day, just 3 hours from the removal van arriving to unloading at my new place and now all boxes unpacked and phone/broadband switch completed.

A Green Industrial Revolution for the UK

This week the Prime Minister unveiled his 10 point plan to tackle climate change. This is the vision to bring about the UK's transition to net zero emissions by 2050 and the plan will focus on the coming decade to 2030.

The plan includes:

Offshore Wind ... confirming a manifesto pledge to increase capacity to 40GW by 2030...includes 1GW of floating offshore wind. This is a really big deal and will provide around 50% of our current energy demand. Clearly some big opportunities for the likes of Vestas and Orsted.

Hydrogen  ... £500m to provide 5GW from low carbon hydrogen by 2030 includings plans to provide home heating solutions with a blend of gas/hydrogen mix for heating by 2023 and a competition to become the country's first hydrogen town. Really good to see the government are switched on to the potential of hydrogen and also good for the likes of ITM Power and Ceres Power!

Nuclear ...less clear on detail but expecting to give the green light to a large operation - probably Sizewell C - as well as a range of small reactors and £525m to help it all along. A big mistake imho.

Electric Vehicles ...the phasing out of petrol/diesel cars by 2030 to accelerate the take up of EVs. This will be the first global major market to take such a big step. There is £1.3bn for the widespread roll-out of charging points and grants for buyers to help them to switch. Maybe top up my Tesla holding! Possibly the biggest change since the days of the horse and carriage!

Carbon Capture ...a plan to remove 10m tonnes of CO2 via this untried technology. The government have been promising this for the past 10 years but nothing has developed and I suspect not much will happen over the coming 10 years...but they will be planting a lot more trees which do capture carbon!

(click to enlarge)

Heat Pumps ...plans to make public buildings and homes more energy efficient which includes a plan to instal 600,000 heat pumps each year by 2028 (currently 26,000). The government will bring forward the date to phase out gas for all new homes to 2023. The Green Homes Grant will be extended by a further 12 months to March 2022.

Other provisions include more provision for cleaner public transport and also cycling/walking, protection and restoration of the natural environment, research for zero emission aircraft and shipping and plans to make London the global centre for green finance.

The government will add a further £4bn of new money making a total of £12bn for these initiatives and expect there will be much more than this coming from industry and the private sector...maybe £40bn in total so not an insignificant amount. However critics say it is a good start but not enough and point to the £100bn for HS2 and the billions spent on the likes of track n trace.

Chris Stark, Chief Executive of the Climate Change Committee said:

“The plans announced today will transform Britain for the better, bringing new opportunities and new investment. This is our path out of the economic challenges created by the COVID crisis. And it is a set of commitments that will raise the UK’s credibility ahead of the pivotal COP26 climate summit next year. This is just the tonic as we look to 2021.”

I agree, this is a good start but will need more finance and policies to get us where we need to be. The governments Energy White Paper should provide some of the nitty-gritty when published next month. Once the ball is rolling it will become easier to add other complimentary provisions - carbon pricing, energy storage, wave power etc. and hopefully get us on track to meet our targets for zero carbon. I think it was important that this came directly from the PM and gives a clear indication to all that the government is serious about climate change.

Of course, for us small investors there will be lots of opportunities to invest in the green technologies which will thrive in the new industrial revolution.

What do you think...are you looking forward to driving EVs? What do you think of the plans generally? Leave a comment below.

Zoom - Portfolio Addition

Before Covid I suspect not many people would have heard of this company...today almost everyone has heard of it and many will have installed the app for virtual meetings during lockdown.

The company was founded in 2011 with HQ in California (where else...?). It provides online facilities for video conferencing via its cloud-based software. Obviously the Covid situation has provided a unique opportunity for the company providing face-to-face communication solutions for governments, businesses, organisations and groups of people to meet up in a virtual online world.

The company went public in April last year raising $750m and shares priced at $36. Today it is worth over $100bn

Demand for their video conferencing software has surged as many countries around the world entered lengthy periods of lockdown and we were told to work from home. It has quickly morphed into a social norm as it became the easy way to keep in touch with family, friends and work colleagues via zoom.

The key to the surge in demand is that the basic package is free but also it is intuitively easy to use. Conversations can be one-to-one, one-to-many or many-to-many. On a larger scale, Zoom webinars allow customers to conduct large-scale online events such as conferences and town hall meetings for up to 10,000 view-only attendees and 100 panelists.

Of course, as more and more people routinely use Zoom, there have been concerns over privacy and the company have recently introduced their end-to-end encryption software to address these issues.

Results

The company announced Q2 results in August and record revenues of $663m an increase of 355% year-on-year. Free cash flow was $373m compared to $17m a year earlier and cash in the bank of $1.5bn at the end of July 2020.

12 month share price

The share price has really taken off this past year rising from under $100 in January to over $500 by October. However, the price has retreated sharply in recent weeks following the announcement of two Covid vaccines and a light at the end of the tunnel for recovery from the global pandemic.

The company is due to release Q3 results on 30 November.

Obviously there will be competition from the likes of Google, Microsoft and Facebook but I am hoping Zoom now has a secure foothold in this market and can make further progress. I also would not rule out the possibility of takeover activity in the coming year.

Increasingly over the past year I have started to adopt the twin strategy of technology and climate-friendly green for my investments. I strongly believe they will provide the best opportunities for returns over the coming decade and beyond. These shares will not form part of my green portfolio but clearly any technology which reduces the need for travel on a global scale is good for the environment and tackling climate change.

I may be wrong, but I take the view that many of the new practices we have been forced to adopt due to Covid will continue after the pandemic has passed and I believe the video conference offered by Zoom will be one such habit. I added the shares to my ISA earlier this week at the price of $385 (approx. £290). The funding came from a partial sale of some Plug Power shares which have had a remarkable run since purchase @ $11.40 in September to $25 today. This means the Zoom shares are effectively free which makes the purchase at these lofty levels a little easier.

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 individual companies can be rewarding but is higher risk compared to collective investments - always DYOR!

Enphase Energy - Portfolio Addition

Following on from the recent election of Joe Biden as president and in anticipation of the acceleration of the US towards net zero, I have decided to add to my green portfolio.

Enphase Energy is a NASDAQ-listed energy tech company with HQ in California. It provides clean home energy solutions which includes solar generation, storage and web-based monitor and control. The core of the business is the manufacture and supply of microinverters which convert energy from the solar panel into the AC power used in the house. This technology has revolutionised the solar industry and provides the home owner with a simple solar+storage solution. This provides the potential for every home to become a mini power plant and reduce dependence on the national grid. To date, Enphase systems have been deployed in more than 130 countries worldwide.

They are the most well established and reliable brand and come with a 20 year warranty and have been rigorously tested to last over 100 years. The whole system can be monitored on a smart phone or tablet via their "Enlighten" app.

The Case for Solar PV

We need to decarbonise our global energy and transition away from fossil fuels and get to net zero emissions by 2050. Two thirds of the global community are now signed up to this transition - UK, Europe, China, Japan and now the US after Trump lost the election. Reducing energy-related CO2 is at the heart of this transition.

The deployment of renewable energy has been growing rapidly in recent years and particularly wind and solar. Solar capacity is expected to reach 120 GW by the end of this year as costs continue to fall. In many of the sunnier regions of the world it is now the cheapest form of energy generation. Capacity is expected to increase by 15% each year for at least the next decade and could be responsible for up to 50% of total energy requirements in many countries by 2050.

According to the latest report from the International Energy Association, 90% of all new electricity generation this year will be from renewables. This means green electricity will become the largest global power source by 2025 and will provide one third of the world's electricity.

Credit : Carbon Brief  (click to enlarge)

Solar power capacity has increased by 18 times since 2010 and wind power by four times, according to IEA data. In October, Fatih Birol said: “I see solar becoming the new king of the world’s electricity markets.”

Results

It's been a testing few months due to Covid however Q3 revenues increased by 42% on the previous quarter at $178.5m and diluted earnings per share at $0.28 compared with $0.23 in Q3 2019 so moving in the right direction. Revenues have been helped by the new Encharge storage system which boosted sales by 10% over the quarter. Revenue growth inEurope has been strong with a 67% above the previous quarter due to new installers and distributors in several EU countries.

Storage Solutions Provide Flexibility

Obviously it's hard to predict whether this growth will continue with the second wave of Covid causing more disruption however, with a vaccine now on the horizon and the Election of Biden and the introduction of a huge green stimulus for renewable energy, I am sure the longer term future will be positive for solar.

Conclusion

Enphase is a top ten holding in my iShares Global Clean Energy ETF along with SolarEdge but I wanted to increase my portfolio allocation with more solar-focused companies to balance out my higher allocation to wind with the likes of Orsted.

The shares have had a really good run this year rising from $30 in January to a recent high of $125 so I am expecting some pull back over the coming weeks. Timing is not my strong point but in the words of George Soros, "better to be roughly right than precisely wrong". My initial purchase was at $115 earlier this week and I may well be looking to top up should there be a significant share price retraction.

This now makes 17 individual companies in my green portfolio plus several collective investment trust, ETFs and funds.

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 individual companies can be rewarding but is higher risk compared to collective investments - always DYOR!

Joe Biden Heading to the White House!

After a few tense days of uncertainty, America and the world breathed a huge sigh of relief on Saturday when it was announced that Joe Biden had secured a narrow victory over Trump. True to form, the president was playing golf at the time and has so far refused to accept defeat and alleges all forms of fraud and intends to contest the count in the courts. There is no evidence of course and Trump would be well advised to reconsider, stop throwing his toys out of the pram, put on his big-boy pants and extend congratulations to president-elect Biden and vice-president elect Kamala Harris the first woman to ever be elected to the position.

What It Means

The new administration will take office in January following confirmation from the electoral college. There will be many changes of direction compared to the past four years - foreign policy, getting to grips with the science of Covid, racial issues which have caused so much division under Trump. But to my mind, the biggest changes will be on climate.

Joe Biden has already said that climate change is the "number one issue facing humanity" and has vowed a national transition away from fossil fuels towards renewable energy. The president elect has pledged to rejoin the Paris Climate Agreement within 77 days of taking office and has pledged to cut greenhouse gases and for the US to net zero emissions by 2050. Therefore some of the world's largest economies on the path to keep warming below 2C. The US will join the UK, Europe, Japan, China (2060), S Korea in the fight against global warming and this will put more pressure on the rest of the world - India, Australia, Brazil - to get on board.

This focus on climate will involve a massive green stimulus package and spending of up to $2 trillion on green technologies such as wind and solar, green hydrogen, EVs and infrastructure over the coming decade. This will be a boost to many companies already operating in this area and I am expecting to see some big orders coming down the line for some of my investments - Orsted, Vestas, Tesla. Plug Power etc.

From Biden's website: 

We can lead America to become the world’s clean energy superpower. We can export our clean-energy technology across the globe and create high-quality, middle-class jobs here at home.  Getting to a 100% clean energy economy is not only an obligation, it’s an opportunity. We should fully adopt a clean energy future, not just for all of us today, but for our children and grandchildren, so their tomorrow is healthier, safer, and more just.

Of course, what he wants to do and what he can actually achieve given the Republicans still control the Senate is a different matter. Probably very similar problems to those faced by president Obama. But getting rid of Trump has been the first big step to the goal of achieving a sustainable, climate neutral world.

Expect to see much more of this...

I feel hugely more optimistic about the future this week than I did last week and look forward to seeing how the green policies are implemented over the coming years of the new administration.

Have you been following the US elections? Are you pleased that Trump has been defeated. Feel free to leave a comment below.

ITM Power - Full Year Results

For some time now I have been thinking that hydrogen could play an increasing part in the transition from fossil fuels to clean energy. Here's an article from the start of the year suggesting green hydrogen could transform the global economy. It's the most commonly occurring element in nature and is set to play a defining role in the 'green' industrial revolution as it replaces fossil fuels. It can be stored and used to power long-distant transport such as cars, lorries, trains and ships. It can be used to generate electricity. It is a clean source of energy and when used the only emissions are water and heat.

So, last year, I decided to add a few companies to my green portfolio which I hoped would be able to take advantage of this revolution. One of these additions was ITM Power - a small AIM-listed clean energy company added to my portfolio in August 2019 at the price of 37p. I have added to my initial holding over the months and now hold in both SIPP and ISA.

Results

ITM has this week announced results for the full year to end April 2020 (link via Investegate).

This has been a difficult year with Brexit looming, a move to new accounting rules IFRS 15 and business hit by Covid-19. As a result sales revenues fell by 28% to £3.3m and grant income fell away sharply to just 2.1m compared to £12.9m the previous year.

Adjusted loss for the year was £18.1m (2019 £7.3m) however cash reserves increased to £39.9m compared to £5.2m last year. The value of assets increased to £67.5m compared to £38.3m in 2019.

On the positive side, the company announced a partnership with a leading global energy infrastructure operators, Snam who will make a £30m equity investment and 100MW preferred supplier to 2024. They are also raising an additional £135m to accelerate development of various projects and also an open offer to existing shareholders at 235p for an additional £7m.

"Our agreement and preferred supplier status with Snam more than doubles our contract backlog, a signpost of future revenue measuring amounts under contract and in the latter stages of negotiations, to £118 million while our tender opportunity pipeline, where we have provided written quotations over the last 12 months, now stands at some £325 million.  Raising additional funds allows us to accelerate our response to the growing worldwide demand for green hydrogen as a key tool in meeting net zero targets.  I am delighted to add Snam to our roster of partners.  Snam is one of the world's leading energy infrastructure operators and is committed to supporting our industry, showcased by our preferred supplier status for 100MW of PEM electrolysis equipment." CEO, Graham Cooley.

Their new Gigafactory at Bessemer Park, Sheffield is nearing completion and will have the capacity for 1,000MW by the end of 2023.

Commenting on the results, Cooley said , " 2020 has been a transformational year for ITM Power.  We attracted a strategic investor and joint-venture partner in Linde, the world's largest speciality gases company, we strengthened our balance sheet so that we can take full advantage of the rapidly expanding green hydrogen market and we put the finishing touches to the world's largest electrolyser factory in Sheffield.  I believe we have the right products at the right time and the capacity to produce them at scale."

The company has seen an increase in qualified tender opportunities to £325m - 37 projects and a corresponding record backlog of £118.7m.

Despite the setbacks from Covid this year, the company maintains a positive outlook. Global energy markets are increasingly recognising the need for the use of green hydrogen for energy storage, transport and heating. The UK Committee on Climate suggest we will need between 6 and 17GW of electrolysis to reach net zero emissions by 2050. ITM with its partner Linde are well positioned to benefit from these opportunities.

The EUs new hydrogen strategy announced in July sets out a plan to increase green hydrogen capacity from just 140MW in 2018 to 4,000MW by 2024 and then 40GW by 2030...this will be hugely ambitious and also challenging but is a strong indicator of the direction of travel for the energy sector.

However, the company is still not profit-making as it invests to scale-up its operations. Cash burn this year was £23.3m which includes expenses in connection with the new factory.

Linde Joint Venture

Global industrial engineering group Linde acquired a 20% stake in ITM for the £38m. The 50:50 joint venture will target an increasing number of companies and governments that are looking to green hydrogen as a solution to tackling climate change. These include the storage of renewable energy and grid balancing as well as the essential task of reducing CO2 emissions from sectors such as transport and heavy industry. ITM will focus on hydrogen production from its electrolysers whilst Linde will look after the engineering and construction side of the projects. The benefits from this collaboration will likely become more apparent in future years.

 

ITM One Year Share Price

The results are again disappointing but the markets seem fairly relaxed and the share price is up 5% today at 270p  - quite a jump from my purchase price of 37p last August. Hopefully the company can make some progress to profitability over the coming year or two with their new partners.

We are still in the early stages of the hydrogen revolution and whilst I thing there will be some big returns for investors in this sub-sector, there's are no guarantees that all the current players will reap the rewards. I am hoping ITM will make it with the help from Linde and will be looking to see what progress can be made over the coming 12 months. But for the time being, this can return to the bottom drawer.

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 individual companies, especially those listed on AIM can be rewarding but is higher risk compared to collective investments - always DYOR!

Looking Back on Some Portfolio Disposals

For several years, from moving to early retirement in 2008 to state pension in 2018, I was dependent on income generated from my investments to pay the bills. I certainly could not have made ends meet just from the interest on cash savings. Therefore some of the UK Growth and Income investment trusts were an important part of my investment mix during this period. The three trusts which formed the backbone of my income strategy were City of London (CTY), Aberforth Smaller Companies (ASL) and Temple Bar (TMPL).

By 2018, however I started to receive the state pension of £8,500 and so became much less in need of this income. It was around this time that I was starting to compare the performance (total return) of my UK-based investments and also think about climate change and how this might impact my investments, especially the big oil companies who were coming under increasing pressure on greenhouse gas emissions. I was paying more attention to the weighting of the fossil fuel companies in my collective portfolio holdings and wondering about the long term sustainability of returns from these sectors. 

I actually remember emailing Job Curtis at CTY and the managers of Aberforth and requesting they pay more attention to climate risk and suggesting they reduce/dispose of their fossil fuel holdings (a long shot I know). To be fair, both responded but politely declined my suggestion!

Disposals

And so I had a decision - compromise my values and continue with my investments and hope they come around to reducing the oil company holdings over time; or sell my investment trusts and replace them with something more ethical and in line with my values. Of course, I chose the latter.

Temple Bar was the first to be sold at the price of £12.10 in October 2018 and replaced with Baillie Gifford Positive Change @ 160p.

The following February I sold CTY held in both my SIPP and ISA @ 400p and also Aberforth in my SIPP @ £11.25 and added to my Positive Change fund as well as the initial purchase of iShares Clean EnergyETF @ 433p and also added Orsted @ DKK 500.

Making such big dramatic moves to a long-standing strategy which had served me well for many years is a leap of faith but luckily, this has turned out to be a good move in hindsight (so far). The climate-friendly green investments have all done well - Orsted currently more than doubled to DKK 1,035, iShares Clean Energy more than doubled to 908p and Positive Change up 90% at 304p. The disposals have been hit badly by the Covid pandemic and drop in the oil price - CTY down 19% at 325p, TMPL down 42% at 695p and Aberforth down 22% at 880p.

2 Yr Chart for CTY, ASL & TMPL
(click to enlarge)

Just looking at the final results for City to end June 2020, both Shell and BP were still top 10 holdings but much reduced in weight 5.4% compared to 10.8% in 2018 and now don't feature at all.

Conclusion

I can't help but conclude that these (and others) fund mangers have been blind to the consequences of the huge global shift in the tectonic plates of the transition from fossil fuels to renewable energy. As a result they have been caught out chasing the higher income offered by the oil & gas sector in recent years and are now paying the price of their short-sighted approach. It came as no surprise to see the likes of Shell and BP slash their dividend payments by 50% earlier this year.

I hope the events of recent months will serve as a wake-up call to these fund managers to take climate change more seriously and avoid those companies which fail or stubbornly refuse to align their business with a world of 1.5C. I just cannot see the point in continuing to back companies whose business models are completely at odds with a sustainable long-term future for the planet.

Over to you...do you think your fund managers take climate issues seriously? Do they still continue to hold fossil fuel companies in their portfolio? How have they performed so far this year? Feel free to leave a comment below.

Ocado - Portfolio Addition

Established in 2000 and floated on the market in 2010, Ocado has grown very rapidly to become a member of the FTSE 100 with a current market cap. of £18bn. They are transforming the world of grocery shopping in the UK and are now looking at expanding their technical know-how into a global market and into other wider sectors. Unlike the traditional supermarkets like Tesco or Sainsbury, Ocado has no physical stores but operates only online and does all home deliveries from a small number of customer fulfilment centres.

The business has grown rapidly in recent years as we move to more online shopping and of course the Covid-19 pandemic with periods of lockdown has boosted demand for even more online services. As a result, it  is looking like 2020 will be a breakthrough year when the company delivers its first annual profits. In a recent trading statement, the company announced an increase in revenues of 52% for the 3rd quarter to end August and expects full year profits of  at least £40m.

In 2019 Ocado stuck a deal with M&S to set up a joint retail operation which provides M&S with its first home delivery service. M&S have bought a 50% share of Ocado's retail business for £750m. Ocado customers can now access over 4,000 M&S lines as well as Ocado continuing with their own-label products. The deal with Waitrose has now ended. Ocado also has a deal with Morrison supermarket providing the technology for its online home deliveries. It will be interesting to see if Ocado customers who used the service mainly for Waitrose products are prepared to go along with this new offering...the switch took place this September so early days.

Technology

Whilst its main area of focus is retail, in essence, Ocado is a cutting edge tech company. Ocado Technology designs most of the in-house operation. The whole operation is highly automated - warehouse, app, deliveries, routing and customer service - everything is based on sophisticated algorithms and smart optimisation.

The Ocado Smart Platform is the world's most advanced filfilment and logistics platform. This technology has been developed in-house over many years and is protected from competition by over 200 worldwide patents. This should provide barriers to entry by potential competitors - the proverbial moat.

The warehouses feature thousands of robots swarming like bees across a huge grid. They can pick a 50-item order in minutes whizzing around thousands of bins at speeds of up to 20mph!

Expansion

This smart platform can be licensed to other operators around the globe which means these automated efficient warehouses can be set up in every country. Some other applications include baggage handling, parcel sorting, vertical farming, container ports etc. UK grocery retail is just the start of the journey.

The company is now rolling out International Solutions which secured fees of £73.7m in the first half of this year, an increase of 58%. In addition to the tie-up with M&S and Morrisons in the UK, Ocado is now working closely with Casino of France and Sobeys in Canada. Also Bon Preu in Spain, Coles of Australia, Aeon in Japan and Kroger in the US.  

It will be interesting to see where expansion and development goes from here.

Isuzus EV Delivery Van

On the environment, the company say greenhouse gas emissions are an area they are looking to improve along with food waste and plastic recycling. They are currently looking at the switch to EVs for deliveries which account for around 70% of the company's carbon emissions. Trials of the EV delivery vans started last year and this year the company are committed to move their North London fleet of vans to fully electric. I will be interested to hear more on this in the full-year results.

Now Close to Overtaking Tesco

The shares have had an excellent run this year moving from £12.50 at the start of 2020 and reaching a high point of £29 at the end of September before falling back over the past week or so. The shares were recently added to my ISA at the price of £23.65 and I will be looking to add on any significant pull-back from here. There may well be some share price volatility over the coming weeks and months as Covid-19 plays out. The share price has doubled this year to-date and I think the longer term prospects look very promising and I would not be surprised to see the shares hit £50 and beyond over the next year or two. There has been speculation they may become a target for a takeover by Amazon...

The next Q4 trading statement will be in December and the full year results are in February.

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 individual companies can be rewarding but is higher risk compared to collective investments - always DYOR!