Powerhouse Energy LON:PHE, has had a steady but unspectacular year since we last reported on the Cottingley-based, AIM-listed waste-to-energy (WTE) company.
The plastics-to-hydrogen company opened trading today (13th April), at 1p, and has offered a -8.6% year-to-date return and a -65.7% one-year return, with its shares ranging between 0.85p and 2.85p over a 52-week period. The company has a market capitalisation of GBP39.1m.
Given the last year’s events – especially the War in Ukraine and its impact on electricity and gas prices and the drive for nations to become more self-sufficient in energy – one would have expected that Powerhouse’s unique solution to turn end-of-life plastics into a clean, green, energy feedstock might have resonated more with the market. Powerhouse also acquiesces well with the drive to reduce environmental pollution and transition to a low-carbon energy system.
Part of the reason that Powerhouse’s shares haven’t soared like a methane-fuelled balloon is that the business still isn’t making much money. In its last financial report dated 25th August 2022 Powerhouse reported revenues for the six months to end-June 2022 of GBP352,000, down 5.6% on the corresponding period in 2021. However gross profit was up 378% to GBP79,900 with GBP7.5m cash in hand.
Long, winding road
Although the company has been in operation for 23 years and listed in 2011, the company is still a way from commercialising its technology to utility scale. Although methane can be used as a lifting gas in balloons, it’s also very combustible, so isn’t used in balloon flights as it could simply blow up – an analogy that is apt for early-stage, pre-commercial technology.
As previously reported, Powerhouse converts waste plastics – especially unrecyclable end-of-life or single-use plastics – though a process called pyrolysis (or devolatilization, a process of thermally-decomposing materials at elevated temperatures in oxygen-free conditions, often in an inert atmosphere that changes the materials’ chemical composition) to fuels.
The energy company’s primary product is Distributed Modular Generation (DMG) Technology, which is a form of chemical recycling of non-recyclable plastics, which are becoming a significant global pollution problem.
DMG is a form of advanced thermal conversion that takes unrecyclable plastics and recovers the maximum amount of calorific value, or energy, through an innovative approach to waste management. The end-of-life and unrecyclable plastics are exposed to high indirect temperatures causing them to break down into their constituent molecules, and through a series of endothermic chemical reactions, turn into energy-rich syngas which is similar to natural gas used for heating homes, cooking and after refining transportation fuel.
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Powerhouse uses the gas rendered from the process to generate electricity. The chemical process also emits excess heat, which is captured and used for heating and cooling solutions locally. The syngas produced is a mixture of a mixture of hydrogen, carbon monoxide, methane, and carbon dioxide, which are then separated. The carbon dioxide is captured using membrane separation technology, a thin, porous material that allows the hydrogen and methane to pass through, but it blocks the carbon dioxide. The carbon dioxide-rich stream is then compressed and stored.
Greener than green
The methane and hydrogen can be separated – the actual process is still a work in progress. The hydrogen is extracted and used as road-quality fuel, and Powerhouse’s technology will usually extract 2 tonnes of hydrogen for every 40 tonnes on plastic waste feedstock and is ‘greener’ than ‘green hydrogen’ in that it uses less energy to produce, and more efficient than ‘blue hydrogen’ as its production doesn’t need vast piping and storage networks and can be produced locally at source. The methane is used as a combustible fuel to replace natural gas in boilers for electricity generation or as a cooking gas – and if fully combusted is a clean fuel.
Despite the positives of Powerhouse’s technology, it still remains primarily an R&D operation as its hasn’t scaled-up its technology to a size that can affect the energy system and is caught between a rock and a hard place in that it has great tech, that can’t be proved to be commercial until it has created an at-scale pilot plant. However, as it is still developing its technology it isn’t creating the kind of revenues that attract significant investors, and it will need to capital to scale-up and prove its technology, something that won’t come along until it scales-up.
Powerhouse isn’t the only game in town – especially in the low-carbon space – and other technology which has advanced further, such as green hydrogen, or has developed scale by standing on the shoulders of giants, like solar or wind, is an easier sell and is attracting the investment dollar. It’s a busy, trend-driven market and Powerhouse will have to shout loudly to get itself heard in the renewable energy hubbub.
Volatile elements
The volatility of the stock market, and AIM especially, haven’t helped and the sub-market for low carbon energy and pollution clearance is exceptionally volatile. But despite this Powerhouse is still punching and has a team with a track record of gradual, systematic growth. If Powerhouse can successfully commercialise its unique technology it could become a major player in the low-carbon energy market, and remains ‘one to watch.’
Bridgewise has Powerhouse as a ‘Hold’ saying: “Powerhouse’s results from 2Q22 indicate that Powerhouse is performing reasonably well and on par with its peers. It is highly likely that it will be mostly tethered to market performance and sector movements for the near term. Therefore, Powerhouse received an overall score of 62/100.”
In November the company announced that work was progressing well on the construction of its first hydrogen facility at Protos Energy Park in Cheshire having, with its partner Peel, installed the initial infrastructure. However, the company then announced that the finished item was a fair way from completion as the plant needed more engineering work – and most critically – was dependent on raising further funds. This call for capital saw Powerhouse’s shares fall as investors reacted negatively to the lack of secured funding for the project and a need to raise finance at a time when purse strings were being tightened across the board.
Also in November, Powerhouse was spinning news that the University of Manchester had received a government grant that would fund the development and validation of a novel, cost effective and potentially game-changing hydrogen separation technique that extracts hydrogen from synthesis gas – an important process if Powerhouse is going to produce hydrogen.
Polish promise
The company is also progressing its agreement with Aquis-listed Hydrogen Utopia International (HUI) [AQSE:HUI] to develop a waste-to-energy plant in Poland, and signed an agreement with the City of Walbrzych to develop a plastics recycling plant. Again, investors reacted negatively to the news, given that the joint development of a WTE plant doesn’t over the short-term add to revenue, but does eat up a lot of time and money. Powerhouse has agreed to develop three WTE plants with HUI.
The biggest positive news for Powerhouse though was from February, where it signed a framework services agreement with Petrofac LON:PFC where the energy services company will provide engineering design and supply chain development services on PHE’s pipeline of projects, including the plastics-to-hydrogen project at Protos. The announcement was accompanied by a long-awaited rally in the share price.
There has been a vacuum of leadership in Cottingley and this is creating a culture of inertia around the company. Paul Drennan-Durose was appointed CEO in February 2022, but was gone by the end of August for “personal reasons”. Keith Riley, Powerhouse’s interim non-executive chairman was appointed acting chief executive officer following Drennan-Durose’s resignation. Myles Kitcher, non-executive director also left the company, moving to Peel. He was joined in the lobby by NED, Gill Weeks. The CFO’s chair is being kept warm by Ben Briar in an acting capacity. Until Powerhouse sorts out its leadership, it will have difficulty in deciding which way to go, which is a shame, given that it has potentially great solutions and in the energy sector the iron is definitely hot, laying on the anvil waiting to be struck.
