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PowerHouse Energy jigsaw is coming together


  • Blue-chip development partner 
  • First project has planning permission 
  • Acquisition close to completion 
Powerhouse Energy Group PLC -

Quick facts: Powerhouse Energy Group PLC

Price: 2.77 GBX

Market: LSE
Market Cap: £102.91 m

The pieces of the jigsaw are coming together for PowerHouse Energy Group PLC (LON:PHE) under the stewardship of chief executive David Ryan.

Close to a conclusion is an all-paper acquisition of PowerHouse’s development partner Waste2Tricity.

And it has a deal to be the technology provider for 11 sites managed by Peel Environmental that will turn household plastics into power and hydrogen, and for Peel to become the exclusive project developer for PowerHouse in the UK.

This frees up the AIM-listed company to focus on one task in the immediate term: delivering its ground-breaking DMG waste to hydrogen technology process to be used by Peel.

The units take waste feedstock, typically unrecyclable plastic, and thermally converts it into an extremely valuable intermediate product called syngas – a mix of hydrogen, methane and carbon monoxide.

Fuel cell hydrogen

Syngas can either be burned to produce electricity or, as is the case with the Peel roll-out, the hydrogen can be separated out to power fuel cells in vehicles.

Work with Peel kicks off with the Protos operation, near Ellesmere Port in Cheshire, for which planning permission was granted in March this year.

Construction would normally be expected to take 10-12 months, though of course, these are not normal times.

Before construction work begins, the project must first be brought to financial close.

“Funders and project pricing must be aligned and Peel will receive a price from its engineering, procurement and construction contractor to complete the build of the DMG plant at the Protos site,” Ryan explains.

If, for example, initial quotes are submitted by the end of July, ‘close’ could be achieved in a matter of a couple of months according to Ryan.

Recurring licence fee

Under the Peel deal, the company will receive a £500,000 annually recurring licence fee for every individual site developed by the industrial property giant. It will also be paid for “engineering hours” or any other costs associated with the build.

Peel’s fundraising efforts are already well advanced for the publicly-stated build plans, though Ryan suggests its partner has scope to be more aggressive with its rollout than is currently being suggested.

Whether Peel opts to accelerate or expand its ambitions, the PowerHouse business and technology has third-party technical validation from world-leading technical assurance company, DNV-GL

The task soon will be to create an operating team that will help oversee the Protos build and Ryan will later consider recruiting key personnel to deal with new business opportunities emerging from Asia, Australia and Europe.

“International interest and engagement have been mounting and will build into other projects going through the engineering and planning stages… there’s a potential avalanche from overseas,” said Ryan.

Tried and tested approach

He said the company will stick to the tried and tested licence fee approach for the vast majority of the deals in the pipeline, though there are projects where other revenue models may apply.

If there is some frustration among shareholders that the Waste2Tricity transaction has not yet been concluded, then it is shared by the PowerHouse CEO and the team.

The third-party approval process for the deal had been lengthier than had been envisaged by PowerHouse’s independent directors in what they considered as a simple 60-40 acquisition process.

While the transaction is now nearing completion, Ryan said he had been “rather frustrated” at the length of time it has taken to complete.

Financial close for Protos and the Waste2Tricity acquisition are landmarks that make PowerHouse a more attractive investment proposition, particularly from an institutional investor perspective.

Significant landmarks 

“They [the two landmarks] will have a significant impact on how we are perceived, which could be the trigger for institutional investment,” said Ryan.

He added that he very much sees the merit of attracting potential cornerstone shareholders who may supplement the loyal base of private backers that have supported the company thus far.

While PowerHouse has bucked the market trend to double in value over the last month, there are a number of potential value kickers still to come. The £34mln market capitalisation doesn’t at this stage speak to a stock that has been overbought. So, there may be further to go.

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