Longspur Research has initiated coverage onProvaris Energy Ltd (ASX:PV1, OTC:GBBLF), a first mover for regional storage and transport of compressed hydrogen.
Longspur has a central case valuation of A$0.15 per share, saying the company offers investors exposure to an integrated hydrogen project developer and exporter as near-term downstream demand starts to pick up.
This central case valuation is based only on the initial project pipeline and further project demand could take this to A$0.28. Provaris is currently trading at A$0.07 per share.
Provaris offers a cost-effective solution to hydrogen delivery that beats competing technologies. It also allows Provaris to develop hydrogen projects where it can take advantage of cheap renewable energy and deliver more hydrogen per unit of electricity generated.
Following are excerpts from the Longspur report:
The cheapest solution for regional hydrogen delivery
Provaris has designed a hydrogen delivery solution that uses established compression technology, rather than liquefication or conversion to a derivative fuel.
While the solution does need more vessels than alternatives, when alternative solutions factor in processing and reprocessing costs, the outcome shows a clear advantage for compression in ranges up to 2,000 nautical miles and potentially up to 3,000nm. These are ranges where considerable opportunity exists.
Because the overall process is more efficient, it reduces the total amount of renewable energy capacity required for every tonne delivered. This allows Provaris to develop efficient projects linking near-term demand centres with sites of low-cost renewable energy.
Developing strong projects
Having forged key partnerships, Provaris is developing a number of projects targeting end uses in key markets with an early focus primarily on regional demand in Europe with supply from projects in Norway. Singapore, Japan and South Korea present a secondary target region for supply from the company’s project in Australia.
Provaris’ projects are located where compression has a competitive advantage, based on a reliable low-cost renewable electricity to deliver the lowest cost of gaseous hydrogen. It gives exposure to early mover production where green hydrogen economics can already be commercial.
Valuation: initial project pipeline
Longspur’s central case valuation of A$0.15 per share was derived using a discounted cash flow valuation for two Norwegian projects based on FjordH2, which it considers is the closest to reaching a final investment decision.
The group’s high case model adds the first planned Asian project for a A$0.28 valuation, while the low case valuation uses a delayed Norway project.
- by Meagan Evans.
