It’s no secret that alternative energy sources are gaining interest. Arguably, many ASX investors are becoming more forward-looking with their investments, rather than making decisions based on lagging indicators. Examples of this include the electrification revolution and the growing interest in renewables technology.
Most recently, it appears ASX hydrogen shares have caught the eye of public markets.
The market is constantly at work, attempting to uncover the next innovation that will address existing problems. As a former engineer myself, I believe this very ‘first principles’ approach towards investing has worth. Financials are always important, but in my opinion, a business should (first and foremost) add value by solving a problem.
On that note, hot on the tail of the lithium trend, hydrogen energy is another potential innovation in the renewable energy space being closely watched by investors.
Hydrogen gaining its share of investments
As reported by the ABC, there have been a number of driving forces shining the spotlight on hydrogen in recent months. US President, Joe Biden’s plans for a carbon-free power supply by 2035, and $2 trillion in accelerated investments towards sustainable infrastructure, certainly give alternatives a boost.
More locally, Andrew Forest, best known for his role as chair of Fortescue Metals Group Limited (ASX: FMG), has announced his plans to invest billions into green hydrogen to expand his own energy business.
The beauty of hydrogen is, if it’s generated through electrolysis (a process of separating water molecules into hydrogen and oxygen using electricity), with the electricity sourced from renewable sources, the process is completely emission-free.
So let’s take a look at four ASX companies with exposure to hydrogen.
Hydrogen shares on the ASX
Hazer Group Ltd (ASX: HZR)
Hazer is a Perth-based company that is in the process of commercialising a more efficient process for producing hydrogen. This unique process utilises iron ore as the catalyst for converting natural gas and methane into hydrogen and graphite. Given Hazer is commercialising its own production process, this company is somewhat of a pure-play hydrogen share.
Last month, Hazer reported its second-quarter performance, in which it reiterated the company’s focus remains on its commercial development project (CDP). Hazer aims to successfully complete this project in order to demonstrate the potential of its ‘Hazer Process’.
The Hazer share price has performed exceptionally well over the last year. Shareholders have been rewarded with a price appreciation of 168% over the period. At the time of writing, Hazer shares are trading at $1.345, with a market capitalisation of around $176 million.
Santos Ltd (ASX: STO)
Taking it to the large-cap space, Santos is also dabbling in hydrogen’s potential. Santos is Australia’s second-largest independent oil and gas producer. Only last week, Santos reported record annual production, with 89 million barrels of oil equivalent – 18% higher than the prior year. Yet, it appears Santos isn’t putting all of its eggs in one basket.
In July of last year, the oil giant commenced a concept study into the potential for hydrogen for the Cooper Basin. Santos Managing Director and CEO Kevin Gallagher stated that natural gas can be decarbonised at its source to make ‘zero-emissions’ or ‘blue’ hydrogen. The carbon dioxide produced would then be captured and stored in the reservoirs from which the gas came.
Hydrogen is also mentioned extensively in Santos’ latest Climate Change Report. It appears the company is still investigating the potential economics of it all. Santos is also working towards a net-zero emissions goal by 2040, which hydrogen could potentially help contribute to.
The Santos share price has struggled over the last 12 months, as demand for oil slumped during lockdowns. At the time of writing, Santos shares are down 11.5% from this time last year, underperforming the S&P/ASX200 Index (ASX: XJO), down 5%.
Province Resources Ltd (ASX: PRL)
Province Resources is a small mining company with a number of gold, sand, copper, and other mineral projects. However, it also operates a green hydrogen project named the HyEnergy Project.
The HyEnergy project was recently acquired through the company’s acquisition of Ozexco. Located in the Gascoyne region of Western Australia, HyEnergy is projected to generate 1 gigawatt (1,000 megawatts) of renewable energy to generate approximately 60,000 tonnes of green hydrogen. The proximity to ports also opens up the potential for exporting to international markets.
The Province Resources share price was plodding along, not doing too much for most of the year until recently. Following the announcement of the company’s acquisition, Province Resources shares skyrocketed from 2.6 cents to 14.5 cents. Since then, the Province Resources share price has fallen back to the current level of 8.5 cents at the time of writing, up 750% in 12 months.
Fortescue Metals Group Limited (ASX: FMG)
Fortescue Metals Group is well known for its iron ore operations in Australia. However, chair Andrew Forrest, and CEO Elizabeth Gaines plan on achieving net-zero emissions for the company by 2040.
To curve Fortescue’s emissions, the decarbonisation pathway is paved by hydrogen and battery electric solutions. In this way, Fortescue won’t necessarily be exporting hydrogen, but the company certainly plans to benefit from its application.
The motivator for Fortescue is the potential to manufacture Australia’s own locally sourced “green steel”. Currently, Australia benefits from the exportation of our resources, such as iron ore. But if Fortescue can implement its green manufacturing plan through the use of hydrogen, we might be able to produce steel locally. This potential ‘vertical integration’ proposition would undoubtedly represent sweet whispers in the ears of investors.
The Fortescue share price has been boosted by strong iron ore prices over the past year, delivering 123% gains for shareholders.