Interest in hydrogen stocks heats up

The alternative energy gets investor support as a carbon abatement force in heavy industry.

A concept hyrdrogen-powered truck is displayed at the Hyundai booth at a 'Hydrogen and Mobility expo' at the Kintex exhibition centre in Ilsan, near Seoul on July 2, 2020. (Photo by Ed Jones / AFP)

Chief scientist Alan Finkel describes hydrogen as “Australia’s next multi-billion-dollar export opportunity’’ — and judging from two recent equity raisings investors are willing to back the future of the earth’s most abundant element as a clean energy source.

Creating clean-burning energy from water and oxygen sounds like fairyland stuff that would put a Greens manifesto to shame.

The revival of interest revolves around carbon abatement and hydrogen’s potential role as an energy storage and transport medium that’s lighter and more efficient than batteries.

According to Bank of America, hydrogen is unlikely to supplant lithium-ion batteries in most cars, but will come to the fore in “hard to abate” carbon-­intensive sectors such as steel, cement, trucks and chemicals.

About 99 per cent of hydrogen is produced by steam methane reforming, which requires coal or gas. The process is costly and not exactly green.

Investor focus is on the alternative method of electrolysis, which involves liberating the hydrogen with electricity from renewable sources. Here’s two local stocks worth considering.

Hazer Group (HZR)

The only pure-play hydrogen stock on the ASX, the Perth-based Hazer is commercialising its process that uses iron ore as a catalyst to produce hydrogen and useful graphite — rather than — from methane.

Hazer last month completed an oversubscribed $8.4m placement and a $6m loan to fund a $15.8m demo plant, at Perth’s Woodman Point wastewater treatment plant.

The Water Corporation provides the biogas feedback, while Hazer is working on a non-binding offtake deal with gas equipment player BOC.

Struck at 42c a share and a 26 per cent discount, the placement was increased from $6m because of strong demand.

Leigh Creek Energy (LCK)

Then there’s “grey” (fossil fuel derived) hydrogen, but with a twist. Leigh Creek is furthering coal gasification based on the remnants of an old coal mine, where the deposit is said to be the biggest 2P (proven and probable) gas reserve in the country.

Urea (fertiliser) production is in the mix and the company reasons that if it can produce ammonia and urea (ammonia plus CO) from its coal derived syngas, it can also produce hydrogen. What’s more, it expects to produce the gas at a knockout price of $1 a kilogram.

We are betting on [hydrogen] it as the next big thing,” says CEO Phil Staveley.

Investors are convinced enough to oversubscribe the company’s $1m share purchase plan — at a 20 per cent discount — by more than fourfold

Tim Boreham edits The New Criterion

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