The Weekly JMP Report

May 04, 2021

Good morning and welcome to this week’s JMP Report.

On the equity front we saw BSP, OSH, KAM, CCP and NCM trade. BSP traded 76,000 shares trade unchanged at K12.00, OSH traded 1,884 shares at K10.50, KAM saw 134,380 shares trade at K0.90, CCP traded 2,823 shares at K1.70 and NCM 208 shares traded at K75.00. Refer details below.

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WEEKLY MARKET REPORT 26.04.21 – 30.04.21
STOCK	QUANTITY	CLOSING	CHANGE	% CHANGE
BSP	76,000	12.00	–
KSL	–	3.20	–
OSH	1,884	10.05
KAM	134,380	0.90	–
NCM	208	75.00	–
CCP	2,823	1.70	0.01
CPL	–	0.60	–

On the news front, OSL 2021 Annual Meeting Chairman’s address and Managing Director’s Presentation (attached), BSP AGM Notice of Meeting (attached), SST (Steamships Trading) AGM Notice and AGM (attached).

The short end of the market remains unchanged with a small weekly TBill auction averaging 7.20%. Fincorp leads the non-bank borrowers at 5.50% for 12mth money. In the longer end, the market was reasonably quiet in the secondary market as the successful bidders from last week’s Treasury Bond auction settled their portfolios and refocus on the next Treasury Bond Issue. I will bring you the news once Bank PNG have confirmed the details.

 

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What we have been reading this week

Carbon Pulse – Edition 16 GLOBAL DEVELOPMENTS IN PROGRESS TOWARDS NET-ZERO EMISSIONS-

 

Shipping news forecast:

 The World Bank Group has published a report entitled Potential of Zero-Carbon Bunker Fuels in Developing Countries, published on-line on April 23, 2021. In identifying green fuels – ammonia and hydrogen – “as the most promising zero-carbon bunker fuels within the shipping industry at present”, the World Bank says that “Liquefied natural gas (LNG) … is likely to play a limited role in the decarbonisation of the shipping sector, and countries should avoid new public policy [settings that support] LNG as a bunker fuel … and continue to regulate methane emissions to put shipping on a [Paris Agreement] aligned GHG emissions trajectory.” 10 Global Director of Climate Change at the World Bank, Ms Bernice Van Bronkhorst identifies the broader benefits of ammonia and hydrogen: “Not only [do] zero carbon bunker fuels help decarbonise shipping, but they can also be used to boost domestic infrastructure needs and chart a course for low-carbon development more generally”. See: Ammonia and hydrogen are key to decarbonising maritime transport, says World Bank report

 

• At the Singapore Maritime Technology Conference (SMTC) Shell’s Global Head of Shipping, Mr Grahaeme Henderson addressed directly the World Bank report. Mr Henderson noted that: “LNG is the lowest emission fuel available at scale in the shipping sector today. It has no clear rival in this regard. … The [shipping] sector cannot afford [simply to wait] for [the development of] alternative fuels [including ammonia and hydrogen]”. For corporations like Shell, commitments to the reduction of GHG emissions are taken seriously: ultimately it aims to achieve net-zero GHG emissions, across Scopes 1, 2 and 3, through the reduction of GHG emissions across its reservoir to bowser supply chain is fundamental, including the reduction in GHG emissions arising from shipping. This does not mean that the use of LNG bunkers is the beginning and the end of transition for Shell: the progress towards net-zero GHG emissions is iterative and requires change, it is not immutable. Consistent with this theme, the Chief Responsible Investment Officer for the Church of England Pensions Board, Mr Adam Matthews, said that: “Given Shell’s progress as a result of engagement and leadership’s commitment to continue meaningful on the remaining areas of the Climate Action 100+ benchmark (see Edition 13 of Low Carbon Pulse for Climate Action 100+), the Church of England Pensions Board is likely to vote in support of [the Shell] Energy Transition Strategy”. (See Edition 14 of Low Carbon Pulse.) See: Shell defends LNG, shipping ‘cannot afford simply to wait for alternative fuels’

• On April 26, 2021 it was announced that Royal Dutch Shell is conducting a feasibility study in respect of the use of fuel cells for ships. This is reported as being a first step for Shell. The feasibility study is reported to be taking place in world shipping hub, Singapore, and will include tests involving the installation of an auxiliary power unit on a vessel currently used as a ro-ro carrier. For the purposes of the study and tests, Shell is working with SembCorp Marine Ltd, and LGM Marin (a wholly-owned subsidiary of SembCorp). Shell Shipping and Maritime Asia Pacific and Middle East General Manager, Mr Nick Potter, said: “We see fuel cells and hydrogen as a promising pathway to decarbonising shipping and working with partners in this way will develop our understanding of this critical technology”. This news item illustrates the iterative nature of progress towards net-zero. See: Royal Dutch Shell to test hydrogen fuel cells for ships

• The International Maritime Organisation (IMO) is lobbying governments for the introduction of a global regime to provide a carbon price for the international shipping industry. The advantage of a global regime is that it provides a level playing field for all participants in the international shipping industry. The international shipping industry is responsible for up to 2% of total global GHG emissions: if the international shipping industry were a country, it would be the world’s sixth largest emitter of GHGs by mass. As outlined in Edition 13 of Low Carbon Pulse, the imposition of a carbon price allows investment decisions to be taken on that basis of a low or lower or no carbon technology options. The initiative by the IMO is most welcome, but may be regarded as likely to take some time to align countries consistently. See: Climate change: Shipping industry calls for new global carbon tax

• It has been reported that Maersk Mc-Kinney Moller Center for Zero Carbon Shipping and Lloyd’s Register Maritime Decarbonisation Hub are to undertake an assessment of the safe use of ammonia as a bunker fuel. It is reported that AP Moller-Maersk, MAN Energy Solutions, Mitsubishi Heavy Industries and TOTAL are all committed to the development of best practice safety practices and guidelines for use of ammonia. See: New coalition for safe ammonia bunkering

 

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Gas customers to pay more for pipelines ahead of mass exodus and stranded assets

Giles Parkinson 3 May 2021

Gas customers in the ACT face higher bills in the next five years after the energy regulator allowed a network request to extract more money from its customers before many of them switch to alternative technologies such as renewables.

EvoEnergy, which owns and operates the distributed gas network and supplies more than 150,000 customers in the ACT and neighbouring Queanbeyan in NSW, has won regulatory approval to accelerate the depreciation on its gas network, and pass on the cost to consumers.

It wants to do this because it expects many of its consumers to stop using gas, partly because of cheaper alternatives and partly because of a new ACT government mandate to reach zero emissions by 2045, which means no use of a fossil fuel such as gas.

The local government is also banning the connection of gas pipelines to new suburbs, and any new gas connections in the ACT from 2023. As a result of this government policy and technology switch to cheaper renewables, EvoEnergy has shortened the anticipated lifetime of its long term assets to 50 years from 80 years, and to 30 years from 50 years for some newer assets.

But it says the lifetime of the assets could be even shorter – as little as 15 years – given the life-cycle of most household appliances. “An economic life of 50 to 80 years, based on the technical life of modern plastics and steel, is simply not a reasonable estimate,” it says.

The Australian Energy Regulator argues that the price increases are fair because it protects those that will remain on the gas grid from even higher bills down the track. (The potential write-down of such stranded assets is  rarely discussed, but surely must be in coming years, presenting another regulator headache).

“As consumers make the switch to renewable energy under the ACT Government’s climate change strategy it’s expected there will be less demand for gas in the ACT,” AER chair Clare Savage said in a statement over the weekend.

“This means any remaining consumers who can’t or don’t yet choose renewable energy services are at risk of future bill increases because less homes and businesses can share the cost of maintaining gas network services.

“Faster depreciation means that some of the costs for gas network services can be recovered from more consumers today, compared to a smaller number of consumers in the future.”

EvoEnergy expects that the number of customers and demand for gas could fall by nearly one quarter in the next five years. The AER thinks there will be fewer defections, and predicts only a fall in demand of 9.8 per cent.

“We consider that our alternative demand forecast is better than Evoenergy’s forecast in terms of accuracy and represents a more appropriate allocation of demand risk to consumers,” it said.

Still, it approved an increase in the network component of consumer bills that will addd $14 a year to households and $127 a year to business, around half the bill increase that would have occurred had it accepted EvoEnergy’s forecasts. (Network charges will actually fall in the coming year, but then rise in the four years of the regulatory period that follow).

The increase in bills is not huge, but the regulatory signal is important, as gas networks across the country are  facing the same issue of stranded assets and grid defections that had been expected of the electricity networks.

In the case of electricity networks, the slow rollout of household batteries, and the realisation that the cheapest back-up is the grid, along with the rollout of programs such as virtual power plants, that will ultimately include electric vehicles and which can deliver added revenues to the grid, has caused less defection than thought.

The gas networks, however, have a problem. In a country aiming for net-zero emissions, and the alternatives currently being pursued, biogas and hydrogen, may only offer partial solutions and may not be cost competitive.

“The future of natural gas is a live issue, particularly as renewable energy becomes cheaper and is increasingly becoming the choice of consumers,” the AER notes.

EvoEnergy noted that none of the avenues it had been pursuing for “renewable gas” – such as biogas and green hydrogen – were strong enough yet to present to regulators for spending approval. They both require significant investment in new infrastructure.

It’s ironic, though. One of the country’s biggest electricity companies, Transgrid, had sought permission from the Australian Energy Market Commission, the main rule-maker, to fast forward the return on investment (i.e. higher network charges) to advance the case for the proposed new transmission link from South Australia to NSW.

The AEMC said no. So now we have a case where an incumbent gas asset owner can fast track returns from consumers because it is threatened by the switch to renewables, but another network operator is not allowed to do the same when it proposes an investment that will help fast track the switch away from incumbent gas to new renewables.

That’s what happens when the rules of the market do not allow the regulators and rule-makers to consider environmental or climate factors in their decision making. It’s been the single biggest failing of the National Electricity Market and one of the prime reasons why the sector is in a mess. It’s time it changed.

 

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Sydney solar and wind forecasting start-up seeks funds to tap booming global market

Sophie Vorrath 28 April 2021 

The Sydney-based company behind an Australian made technology that helps forecast and optimise the output of large-scale wind and solar projects is seeking to raise to up to $5 million to accelerate its international expansion.

Fulcrum3D said on Wednesday that it was working with advisory firm Energy Estate to tap investors for $A3-5 million to increase its market reach and capitalise on the global renewable energy boom – particularly in the US, where a renewables friendly government has taken the wheel.

The company first launched its ARENA-backed advanced cloud tracking system on the Australian market in mid-2016, where it was soon been applied to major commercial and grid-scale projects, including the 25MW Katherine Solar Farm in the Northern Territory.

Fulcrum3D’s CloudCAM, uses cameras, irradiance sensors and data analytics to track clouds to help manage the power output effects, enabling higher solar penetration and reducing the need for alternative generation, while also optimising the use of battery storage systems.

The company has since also developed a trailer-mounted wind energy monitoring technology, called Sodar, which it claims provides accurate wind resource data at a fraction of the cost of traditional met masts and with more flexibility for site location.

At this stage, Fulcrum3D says it provides operational performance monitoring on over 2,000MW of utility-scale solar as well as forecasting services for well over 2,000MW of wind and solar generation on Australia’s National Electricity Market (NEM).

Among the wind projects to have adopted its Sodar technology are the 270MW Snowtown 2 wind farm, the 131MW Waterloo Wind Farm, and the 111MW Granville Harbour Wind Farm, all owned by Palisade Integrated Management Services.

According to Palisade Integrated Management Services asset engineer Josh Lowndes, Waterloo wind farm – pictured above – actively uses self-forecasts to regularly achieve a causer pays factor (CPF) of zero, resulting in no regulation FCAS fees.

Elsewhere, Fulcrum3D has systems already deployed in China, Europe, India, Middle East, South America and the Pacific Islands, but is hoping to extend its reach overseas with the help of the planned fund-raising round. The company has forecast a total addressable market of $A1.8 billion by 2025.

Proceeds from the capital raise would in particular be focused on accelerating Fulcrum3D’s expansion in the US, the company said, where initiatives from the Biden administration were accelerating renewables penetration.

“The next few years are crucial for us,” said Fulcrum3D managing director and co-founder, Dr Colin Bonner.

“This capital injection will further accelerate our international expansion, scale our manufacturing capabilities, expand our marketing, and accelerate our R&D,” he said.

“We have had great Australian results and have our eyes on accelerating growth in international markets, so we can facilitate the global transition to renewables by providing the most accurate forecasting data on the market.

Sophie Vorrath Sophie is editor of One Step Off The Grid and deputy editor of its sister site, Renew Economy. Sophie has been writing about clean energy for more than a decade.

The order book this week indicates we are buyers of most equity stocks, particularly BSP and we have buyers in the bond market from 3yr out to the 10yr. Feel free to call Chris if you would like to find out how to switch your bond holding and take advantage of the yield curve.

Have a great week,