Climate issues and green energy transition have been one of the key investment themes this year, and a closer look at where funds have been putting their money in 2021 shows that SRI and ESG stocks have attracted the fourth largest inflow by net investment.
December is set to finish on the same note with the London IPO of Atome Energy Plc, a green hydrogen company. Atome Energy, a subsidiary of UK oil and gas producer President Energy PLC (LON: PPC), is due to list on AIM on 30 December and is expected to raise $11.9 million (£9 million). The fundraise issue price is 80 pence per new share.
Hydrogen is frequently talked about as the fuel of the future, one that can be used in shipping, for trucks and buses, but also potentially as a future green fuel contender for cars. At the moment, however, hydrogen is caught in a sort of Catch 22 situation. There isn’t a wide-ranging hydrogen distribution network in place, more people would use hydrogen if it was widely available but it will only become widely available if it is more widely used.
The role Atome Energy can play
Here is where Atome Energy sees its role. It aims to be one of the companies that will break this loop by providing the fuel more widely. It sets itself apart from numerous other hydrogen producers because, unlike them, it will use only green electricity for production. At the moment, more than 90% of hydrogen is still produced using electricity from coal or gas.
The firm is setting itself up to start operating in Paraguay and Iceland, two jurisdictions which almost entirely produce electricity from green sources (hydropower and geothermal).
“What you need to produce green hydrogen is access to clean electricity, to split the water molecules to produce hydrogen and oxygen. You also need water. In Paraguay and Iceland we would have cheap access to both,” says Olivier Mussat, the company’s chief operating officer.
Atome is taking a multi-pronged approach, talking to local electricity providers about long-term power purchase agreements, to engineering and construction companies which will build the production plants in the two locations once the PPAs are in place, and with potential buyers about future offtake.
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The company is the process of finalising a Memorandums of Understanding with ANDE, the operator of Paraguay’s national electricity grid and in Iceland it is in talks with an EPC company about building a production plant.
Will there be interest in Atome Energy’s hydrogen output?
There is also no shortage of parties interested in the hydrogen and ammonia which the company will produce. One of them is Swiss trading house Trafigura, a large shareholder of Atome and a major trader of ammonia, while others include a Japanese conglomerate which has already made a tentative approach. Talks are also in progress with a number of shipping companies which could be takers of the company’s ammonia when production starts in 2024.
Mussat estimates that it will cost between $60-$70 million to set up a 30MW production in Iceland with the first phase of hydrogen production starting by 2024 to be followed up with the second phase by 2027. The first phase of the Paraguay production is likely to be larger at 50MW and likely to cost around $100 million.
The company seems to have all its Lego pieces in the right place to provide the type of fuel that will be needed over the next decade.
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