The Weekly JMP Report

June 7, 2021

Welcome to this week’s JMP Report.

On the equities side we saw good interest in BSP shares after the ASX listing and also the stock went ex-dividend on Friday 28^th of May. BSP (ASX code BFL) are yet to trade on the ASX. If you would like more information on how you can transfer POMX listed BSP shares to the ASX or you would like to buy BSP shares on the ASX, please contact me for details.

Last week the POMX reports that BSP, OSH , NCM and CPL traded. BSP saw 1,000 shares trade at K12.30 to finish the week up 2.5%, OSH traded 914 shares at K10.50, NCM had 57 shares trade at K75.00 while CPL traded 37,982 shares at K0.70. Refer details below;

 

WEEKLY MARKET REPORT 31.05.21 – 04.06.21
STOCK	QUANTITY	CLOSING	CHANGE	% CHANGE
BSP	1,000	12.30	.30	+2.5%
KSL	–	3.25	–
OSH	914	10.50	–
KAM	–	1.08	–
NCM	57	75.00	–
CCP	–	1.90	–
CPL	37,982	0.70	–

On the interest rate front, the 364 TBills continues their range of 7.20%. No real surprises in the shorter end with rates remaining stable. There is a lot of liquidity so this end of the curve will continue as we see it today for the medium term.                                       

In the longer end we are seeing some switching opportunities in the Secondary Market. There has been no formal word on a possible June Bond auction. I will keep you posted. 

There are some attractive rates offered by some players in the Finance Company Sector. We see 1yr paper at 5.50% but is offered higher on approach. 

Further along the curve our order book stands with interest in both ends. If you have interest in bonds and would like to know more about investing in bonds, please do give me a call. 

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What we have been reading this week

Got Gas? Natural gas cops blows as hydrogen shines

The natural gas sector has not had a good week after Shell was ordered by a court in the Hague to slash its carbon emissions by 45 per cent before the end of 2030.

Shell has substantial liquefied natural gas assets in Australia and there is every reason to believe that its local operations will come under the microscope as well.

While the supermajor plans to appeal the judgement, it is telling that the company has just awarded WorleyParsons (ASX:WOR) with a services contract to support the development of a new 200 megawatt electrolysis-based green hydrogen plant in Rotterdam.

A clear sign that it is setting the stage for a move away from fossil fuels even if its appeal is successful.

It’s not the only supermajor facing some very tough questions ahead.

ExxonMobil is set to field those questions from its own board after a small activist fund focussed on the company’s poor performance and its failure to adapt to a decarbonised world secured enough support from shareholders to secure two seats.

Likewise, Chevron investors have voted in favour of a proposal to reduce the company’s Scope 3 emissions though they did not approve a separate proposal that would require it to report on how a significant reduction in fossil fuel demand would affect its business.

Given that both supermajors also have significant Australian natural gas assets, it is not hard to see why the ABC has questioned if the government’s gas-fired recovery has run out of steam before it even began, a point that this column has raised previously.
 

This is the (hydrogen) way

So what’s a company to do instead of venturing down the natural gas route?

Taking a page out of Shell’s playbook and invest into hydrogen seems to be a pretty good idea if the response investors have to such moves is anything to go by.

Shares in Prominence Energy (ASX:PRM) climbed 45 per cent yesterday after acquiring a 20 per cent stake in Patriot Hydrogen, which is building a biomass to hydrogen plant at Port Anthony in Victoria.

The hydrogen plant is expected to take around 12 months to be built, commissioned and reach steady state production.
Patriot will licence, build and develop “Patriot 2 Hydrogen” (PH2) branded units for biomass to hydrogen plants within Australia.

The same was also true for Hexagon Energy Materials (ASX:HXG), which saw its shares climb early this year after investors had the opportunity to digest its acquisition of unlisted hydrogen play Ebony Energy.

Other factors that lend itself to supporting the push towards hydrogen is the strong backing from the Australian Federal and State governments for hydrogen projects.

The expanded remit of the Australian Renewable Energy Agency to include a wider range of clean energy technologies may seem tilted towards the Federal Government’s preference to reduce emissions from existing fossil fuels, but there’s also a strong remit for hydrogen – with the caveat that the changes were made with blue hydrogen in mind.

It appears all but certain that hydrogen is now in its ascendancy but the actual pace of the transition from fossil fuels is far from certain.

 

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Carbon Price Boom Attracts Investors to Emissions-Trading Market

Growth of new ETF signals increasing appetite for carbon-credit investments

By David Hodari Wall Street Journal

Investors have piled into new carbon-credit-trading funds, helping make the upstart market one of the best-performing commodities-related investments of the past year.

The price of carbon credits traded in Europe has jumped 135% over the past 12 months and recently hit a series of records as economic activity rebounded from pandemic lockdowns. Only lumber, driven higher by the housing boom, has proved a better commodities investment.

 

Tighter government controls, a bitter European winter and low inventories of liquefied natural gas—which required the need to burn more carbon-intensive coal—also played a role.

The soaring market has attracted investor cash from a collection of nascent carbon-only investment funds that seek to profit as economies transition away from fossil fuels. launched in July 2020, has quickly attracted close to $400 million in investor money, most of those inflows this year. It trades under the ticker symbol KRBN.

Jonathan Shelon, chief operating officer at KraneShares, says demand has grown steadily from both retail investors and professionals who see the investment as a way to profit from tighter regulation and investor pressure on companies to reduce carbon emissions.

 

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Saudi Aramco invests in Swiss energy storage company Energy Vault

Joshua S Hill

The world’s biggest oil and gas company has taken a stake in Swiss energy storage company Energy Vault, allowing it to accelerate the deployment of its “gigawatt scale” storage that can support large scale wind and solar.

Energy Vault’s new energy storage technology was inspired by pumped hydro plants that rely on the power of gravity and the movement of water to store and discharge electricity.

However, instead of using water, Energy Vault designed custom-made composite blocks and combined them with a proprietary system design and machine vision, AI-enabled software.

The result is the operation of a specially designed crane which uses proprietary technology to autonomously orchestrate the lifting and lowering of the blocks, which enables storage of potential energy at height and then discharged electricity as the blocks are lowered.

The technology relies on custom-made composite blocks that are made from locally sourced soil, sand, or waste materials – such as the output of fossil fuel production, including coal combustion residuals, and end of life energy components, such as wind turbine blades.

“Energy Vault has made rapid and meaningful progress over the last 12-18 months as we completed the first commercial scale deployment of our technology and we are pleased to have SAEV’s support as a strategic partner,” said Robert Piconi, CEO and Co-Founder, Energy Vault.

Energy Vault’s first 5MW/35MWh commercial scale system achieved mechanical completion in July 2020 at the same time as it was connected to Switzerland’s national utility grid.

It has created a modular platform called EVx that can building out storage architecture in 10MWh increments and which can scale up to multi-gigawatt-hour storage capacity.

EVx also offers incredible duration flexibility allowing deployment for both high power/shorter duration needs in the 2 to 6 hour range, up to longer duration storage applications in the 6 to 12 hour range.

The new EVx platform has also been compressed and is now 40% lower in height while utilising the same composite blocks that are made from waste materials.

 

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BlackRock CEO says Shell decarbonisation ruling “not a solution

 

Last week’s Dutch court decision against Royal Dutch Shell (RDSa.L) is not the way to solve the global decarbonisation issue and risks shifting the problem to private firms, the head of the world’s largest money manager said on Thursday.

BlackRock (BLK.N) CEO Larry Fink said the ruling that requires Shell to deepen its planned greenhouse gas emission cuts was an example of a general attitude that failed to address the overall problem.

 

The ruling, which could trigger legal action against other energy companies, is expected to force Shell to shed assets to comply.

Shell said it was disappointed with the ruling and planned to appeal.

 

That (the ruling) doesn’t change the global footprint, that’s not a solution,” Fink told a conference on infrastructure investing.

We’re doing a lot of greenwashing because we’re not changing the carbon footprint of the world. We may change the carbon footprint of a company.

Fink said governments were not doing enough to ensure a widespread push towards a carbon-neutral future, creating an incentive for companies to offload their hydrocarbon businesses and cause a huge capital markets arbitrage.

 

What I worry about is that we’re going to put all pressure on public (listed) companies and very little pressure on the private side,” he said.

“If we are really sincere about the world having a net zero carbon (status) in 2050, we cannot move these parts of the economy out of public entities into private hands. The net zero world doesn’t change, but the company looks better.

 

Fink said investors had to work with energy companies to support their green transition and that BlackRock was engaging with those in which it holds stakes.

It’s not running away from the current hydrocarbon companies, it’s working with them as they navigate the move forward,” Fink said.

BlackRock is the top investor in BP (BP.L) and last week backed a shareholder resolution from activist group Follow This asking the energy group to set deeper climate targets.

I hope you have found our weekly report informative, If you would like more information on shares or interest rate products, please contact me 

Have a great week,

Regards