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Charbone Hydrogen
Overview
Charbone Hydrogen (TSXV:CH,OTCQB:CHHYF,FWB:K47) is the only publicly listed green hydrogen firm in Canada looking to expand across North America (US and Canada) with a pipeline of new projects. This is an opportune time for Charbone as the world races to find effective solutions to meet its net-zero ambitions by 2050. Green hydrogen could be a perfect fit as a potentially low-emitting fuel source. There is an increasing realization of the potential of hydrogen in serving as a low-emissions substitute for fossil fuels in residential as well as industrial use cases.
The Government of Canada has laid out its hydrogen policy, aiming to meet nearly 30 percent of its energy requirement in 2050 by hydrogen, as well as become one of the top three clean hydrogen producers globally. The presence of abundant hydroelectric power, favorable government policies, and a progressive tax regime should boost hydrogen production in the country. The 2023 federal budget includes more than $17 billion in tax credits over the next five years to help fund clean energy projects, including hydrogen.
Source: IRENA - Geopolitics of energy transformation: the hydrogen factor
The US Department of Energy expects to produce 10 million metric tons (MMT) of hydrogen annually by 2030 and eventually reach 50 MMT by 2050. According to US Deputy Secretary of Energy David Turk, 50 MMT of hydrogen could power every bus, train, plane and ship in the US. This is the scale of hydrogen production the government is aiming to achieve. This would imply massive investments in creating the infrastructure to support production. The US government’s Bipartisan Infrastructure Law sets aside $9.5 billion in total funding, including $8 billion for creating 10 regional hydrogen hubs and $1.5 billion in additional funding for other support.
Charbone stands to benefit from rapid adoption of hydrogen as an alternative to fossil fuels. Moreover, Charbone’s focus solely on “green hydrogen” should further its position among investors looking for opportunities to invest in sustainable energy solutions. Green hydrogen is produced when the energy used to power electrolysis comes from renewable sources like wind, water, solar or nuclear. Charbone has clearly stated its intentions to leverage hydropower and nuclear energy to produce hydrogen.
Company Highlights
- Charbone Hydrogen is a Canada-based producer of green hydrogen, and is the only publicly listed green hydrogen producer in Canada.
- The company aims to develop a pipeline of 16 green hydrogen projects across the US and Canada. Of which, the first facility at Sorel-Tracy (Quebec, Canada) is under construction and is expected to be production-ready in mid-2024.
- The company will leverage hydropower and nuclear energy to produce green hydrogen which will allow it to control production costs while lowering emissions. Energy costs remain a significant portion of hydrogen production and the ability to lower these costs will make Charbone’s offering more competitive.
- Charbone has developed several strategic partnerships aimed at strengthening its position in the hydrogen market. This includes a construction agreement with EBC, a supply agreement with NEK Community Broadband, and an MOU with Oakland County for the development of the first green hydrogen plant in the US.
- In December 2023, the company announced the closing of the second tranche of private placement. When combined with the previous closing, the company has raised an aggregate of $499,877, which will be used to fund the construction of the Sorel-Tracy Project.
- Charbone is well positioned to participate in the rise of green hydrogen as a potential low-emitting alternative to fossil fuels.
Project Pipeline and Key Partnerships
The company plans to construct 16 hydrogen projects across North America (six in Canada and 10 in the US) over the next four years. The first of which is under construction at Sorel-Tracy in Quebec, which is expected to be production-ready by mid-2024. The Sorel-Tracy facility is located on a 40,000-square-meter land parcel along Quebec Highway 30. The highway is known as the “Steel Highway” because of the numerous steel mills and process plants operating along the highway.
The construction of Phase 1 of its Sorel-Tracy facility is being done in partnership with EBC, one of the largest construction companies in Quebec. EBC has a proven track record of designing and building facilities in Canada and the US. The partnership agreement gives EBC the right of first refusal to construct additional Sorel-Tracy phases, as well as one or all of Charbone’s facilities within the North American market.
In addition, Charbone has entered into several other strategic partnerships all aimed to expand its footprint in North America.
Superior Plus
This partnership allows Charbone to sell hydrogen produced at the Sorel-Tracy facility to Superior Propane, a subsidiary of Superior Plus. Such supply agreements ensure that Charbone can generate cash flow immediately following the commencement of production.
NEK Community Broadband
Another such supply agreement was signed in November 2023 with NEK Community Broadband, which ensures the supply of green hydrogen in the Northeast Kingdom of the state of Vermont (USA). NEK Broadband is building a high-speed broadband infrastructure and plans to install a hydrogen fuel cell backup system for a reliable power supply.
Oakland County Economic Development Department, Michigan
Further advancing its goal of US expansion, Charbone signed a memorandum of understanding in December 2023 with Michigan’s Oakland County Economic Development Department to set up Charbone’s first green hydrogen facility in the United States. Oakland County is home to major automakers, and a green hydrogen facility in their proximity will support the effort of producing environmentally friendly mobility options.
Being the only publicly listed green hydrogen player in Canada, Charbone offers investors a unique opportunity to participate in the rise of green hydrogen as a potential low-emitting alternative to fossil fuels.
Management Team
Dave Gagnon – Chairman and CEO
Dave Gagnon has been chairman and chief executive officer of Charbone Hydrogen Corporation since April 21, 2022. He has been a climate tech entrepreneur for the last 25 years, and was the first entrepreneur in Canada to start a wind turbine company and offer a new alternative energy solution in North America. Gagnon also worked with an institutional investor that manages several public pension plans, Caisse de depot et placement du Quebec, where he gained deep knowledge of the financial markets.
Benoit Veilleux – Chief Financial Officer
Benoit Veilleux was appointed as the CFO of Charbone on August 15, 2022. Veilleux has over 15 years of experience in corporate accounting and finance. He began his professional career at KPMG in 2003, where he managed and coordinated audit teams for public companies until 2010. Since then, he has worked with a number of companies including Air Liquide Canada and the Hypertec Group.
Daniell Charette – Chief Operating Officer
Daniell Charette has been the chief operating officer of Charbone since February 2019. He brings over 25 years of experience in running and managing renewable energy companies. He has worked in senior leadership roles with several renewable companies including NEG Micon A/S, Vestas and Brookfield Power. He has served on various association boards and councils, including the Canadian Wind Energy Association, Association Québécoise des Producteurs d’Énergie Renouvelable, and Latin Wind Energy Association.
Francois Vitez – Director
Francois Vitez is a hydropower and energy storage expert with more than 24 years of experience in the development, engineering and construction management as well as operations and maintenance of hydropower and energy storage projects in North America and internationally. He is a board member and chair of the Value of Hydropower committee at Waterpower Canada, vice-chair of the Energy Storage Association of Canada, board member of the California Energy Storage Association, and member of the International Hydropower Association.
This article was written in collaboration with Couloir Capital.
Cleantech Market Update: Q1 2024 in Review
“In Q1 of 2024 we saw more of the ‘new normal’ in venture and growth investing — following the explosive years of financing during the pandemic, equity financing levels have essentially leveled out, but have settled at average levels higher than the averages pre-pandemic,” said Anthony DeOrsey, research team lead at Cleantech Group.
He told the Investing News Network (INN) that the period brought investment growth in hard-to-abate sectors such as green steel and cement, and said Q1 was a successful venture quarter in hydrogen production technologies. Additionally, the year's first quarter was marked by decreased levels of investment activity in the Asia Pacific region compared to 2023, when China was the biggest market for cleantech spending, as well as growth in the European market.
At a global level, the discussions and agreements at COP28 late last year highlighted the importance of addressing climate change through a swift and just transition to renewable, sustainable energy sources. This urgency provided a backdrop for evaluating the performance of the cleantech industry in 2024's first quarter.
What trends impacted cleantech in Q1?
US supports cleantech sector with funds and policies
Government investment is key for the cleantech industry to thrive and innovate, and in February, the US Department of Energy announced it would invest US$100 million to support pilot projects and testing facilities focused on carbon dioxide (CO2) removal technologies. This funding is part of the Carbon Negative Shot Initiative, which aims to reduce the cost of capturing and storing CO2 from the atmosphere to less than US$100 per net metric ton by 2032.
The Biden administration also demonstrated its commitment to addressing climate change by allocating US$6 billion to fund 33 projects focused on decarbonizing energy-intensive industries, such as aluminum and other metals mining, cement and concrete production and iron and steel operations. The project is part of the government's Investing in American Agenda, with funding coming from the Infrastructure Law and the Inflation Reduction Act.
According to a March press release, these efforts are expected to reduce the equivalent of over 14 million metric tons of CO2 emissions annually, comparable to the emissions of 3 million gasoline-powered cars.
Also in March, the Environmental Protection Agency announced a new rule to limit tailpipe emissions on light-duty and medium-duty vehicles starting in 2027. This rule, which the Biden administration has called the “strongest ever” of its kind, is part of the Investing in America Agenda and is funded by the Infrastructure Law and Inflation Reduction Act.
Steel and cement industries getting greener
Cement and steel are two of the most-produced materials globally, and are among the world's top sources of CO2 emissions. Now, however, efforts are being made to make these markets greener.
“These traditionally hard-to-abate sectors now have enough of a slate of innovative solutions to start charting a path forward to decarbonization,” DeOrsey said about these industries.
“We are now at an interesting stage in which there are new green steel and cement production technologies that are entering the market (mostly through demonstration plants, but some at commercial scale) — a first 'tranche' of technologies is emerging while the more nascent technologies are seeing more venture support.”
Cleantech Group's take on the “tranches” of green steel and green cement development.
Chart via Cleantech Group.
For example, Brimstone received a US$189 million federal investment to build a new plant to deploy its decarbonized process for producing cement, and Sublime Systems was selected to receive US$87 million to accelerate the construction of a cement factory in Massachusetts. It will reduce carbon emissions by replacing limestone with calcium silicate, thereby producing industry-standard cement with electrochemical reactions instead of applying heat.
DeOrsey also mentioned Skyven Technologies, a California-based startup company that has received US$145 million to deploy steam-generating wind pumps to manufacturing facilities worldwide.
Overseas, H2 Green Steel and Boston Metal have recently made significant advancements in this area. Stockholm-based H2 Green Steel secured 6.5 billion euros to build the world’s first large-scale green steel plant in Europe, with contributions from institutional investors such as the Microsoft Climate Innovation Fund, Mubea and Siemens Financial Services, along with a 250 million euro grant from the EU Innovation Fund. Meanwhile, Boston Metal raised US$20 million in Series C2 funding from Marunouchi Innovation Partners, bringing the total to US$282 million, to expand its presence in Asia and further develop its platform for decarbonized steelmaking using molten oxide electrolysis.
EV market faces challenges and opportunities
The first quarter of 2024 saw notable developments in the electric vehicle (EV) industry unfold.
Tesla (NASDAQ:TSLA), facing backlash from investors after reporting Q1 sales figures that were 8.5 percent lower than the previous year, opened its North American Superchargers to Ford (NYSE:F) EVs. To improve profit margins, Tesla also chose to raise the price of its Model Y EVs by 2,000 euros in Europe and by US$1,000 in the US.
In China, EV sales growth has slowed in recent months. However, in March, Chinese EV manufacturer BYD (HKEX:1211) debuted an affordable EV model priced below US$10,000. It is currently not sold in the US, but reportedly has attracted attention from American carmakers. BYD has set an ambitious target to increase its annual sales by 20 percent, aiming to sell 3.6 million units in 2024. The company is aiming for half a million of those sales to be overseas.
Meanwhile, Waymo, a subsidiary of Alphabet (NASDAQ:GOOGL), made progress in the autonomous vehicle sector by securing approval to operate its self-driving cars at speeds of up to 65 miles per hour on highways and local streets in specific areas of Los Angeles and the Bay Area. For its part, newcomer Fisker (OTC Pink:FSRN), which launched its first EV in 2023, has encountered substantial difficulties, as demonstrated by the company’s decision to reduce the price of its Ocean SUV by 39 percent. The company was also forced to halt production, is facing a potential bankruptcy and was delisted from the New York Stock Exchange on April 22. These developments highlight the varied experiences and challenges faced by different players in the evolving EV and autonomous vehicle markets.
“An interesting pull-through effect of global EV rollout has been the opportunities it is creating for innovation and growth of new technologies in EV charging — Europe has seen consistent venture activity in this regard over the past few years,” said DeOrsey about trends he's noted in this part of the cleantech sector.
What factors will move the cleantech market in 2024?
Enhanced geothermal gaining steam
As the year continues, where should cleantech investors direct their attention?
“A space to watch is enhanced geothermal,” said DeOrsey. “Despite having significant potential to provide 24/7 firm clean power, challenging project economics have remained a barrier. New technologies in drilling and closed-loop systems have shown promise to better access the latent power potential in hot, dry rock geothermal deposits.”
Recent developments in this space include a US$17 million Series A funding round led by Chesapeake Energy (NASDAQ:CHK) to develop EarthStore, Sage Geosystems’ first commercial geopressured geothermal systems facility, in Houston in Q4 of this year. Also, geothermal energy startup Fervo Energy raised US$244 million in February to further operations at a project in Utah that is aiming to bring 400 megawatts of clean electricity to the grid by 2026.
Quaise Energy, identified by DeOrsey as another geothermal energy company to watch, raised US$21 million in a Series A1 funding round, with new investors Mitsubishi (TSE:8058) and Standard Investments joining Prelude Ventures and Safar Partners. Quaise is developing terawatt-scale geothermal energy by vaporizing rock with MIT-researched techniques that use millimeter-wave microwaves to dig deep geothermal wells.
Other cleantech developments to watch
As the EV market evolves, Tesla is facing a potentially difficult year, with analysts anticipating decreased sales. However, the success of emerging competitors like Xiaomi (HKEX:1810), whose debut of the SU7 model resulted in a 16 percent surge in share value, demonstrates that the EV landscape remains dynamic.
“The subsidies to Chinese EV manufacturers are very significant and (have) allowed for a rapid scaling of EV production and sales, both within China and Chinese-produced vehicles for export,” DeOrsey told INN.
“There is already a high 27.5 percent import tariff on Chinese-built vehicles in the US,” he continued. “The onus will now be on US manufacturers to slash costs through learning effects and use of technology."
In DeOrsey's view, western EV producers should look to leverage new technology in order to reduce expenses. While there are many variables at play, Cleantech Group sees innovation reducing cathode costs for batteries.
He is monitoring Ascend Elements’ US$162 million funding round, which will go toward the construction of North America’s first sustainable cathode precursor manufacturing facility, set to open in early 2025.
Aside from that, a recent partnership between Canada’s Heliene and Georgia-based Suniva marks an important development for US solar project developers, as it enables them to take advantage of a new federal subsidy offered under the Inflation Reduction Act. By joining forces, Heliene and Suniva will produce "Made in USA" solar panels, incorporating Suniva's US-made solar cells into Heliene's US-made solar modules.
Finally, if GE Verona (NYSE:GEV), a spinoff of General Electric (NYSE:GE) that encompasses GE Renewable Energy, GE Power and GE Digital, continues to demonstrate a strong performance on the New York Stock Exchange, it could serve as an indicator of investor confidence in the renewable energy and power sectors.
Investor takeaway
As the world increasingly embraces cleantech, investors can strategically allocate their resources by staying informed on recent and emerging trends, policies and partnerships that are shaping the renewable energy landscape.
Don’t forget to follow us @INN_Technology or real time updates!
Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Frontier Shortlists Preferred Banks as Waroona Debt Financing Process Moves into Phase Two
HIGHLIGHTS
- Frontier has commenced Phase Two of the debt financing process, shortlisting preferred banks ahead of additional due diligence to enable submission of binding, credit approved terms
- The Company anticipates credit approved terms to be provided during the next 8 to 12 weeks, assuming successful completion of due diligence
- Phase One of the Debt Financing Process generated strong interest from Australian and international banks, confirming:
- Interest in providing senior debt financing which aligns with the Definitive Feasibility Study (DFS) assumptions1
- Acceptance of the selected original equipment manufacturers
- Key due diligence requirements and the proposed third-party service providers to undertake the work to meet those requirements
- Ability of potential financiers to meet the proposed timetable
- The DFS set out the maximum debt carrying capacity and included assumptions regarding amortisation periods and interest rates
- Targeted maximum debt carrying capacity in the DFS was between 65% to 70%, which equates to a debt facility of $200 million to $225 million
- The strategic equity investor process is ongoing, with NDAs in place with a number of Australian and international groups
CEO Adam Kiley commented: “Key to the initial phase of the debt financing process was confirmation of our major funding assumptions, which assumed gearing levels of between 65% to 70%, equating to between $200 million and $225 million, equipment selection, due diligence requirements and the funding timetable.
Confirmation of these key assumptions in such a short time frame is testament to the key attributes of the Waroona Project being well understood by financiers, predominately due to its simplicity and its executability as well the strong returns it delivers.
We have now moved into the second phase of the debt financing process and will be working closely with shortlisted banks towards credit approved terms and complete due diligence requirements in a timely manner.”
Shortlisting banks for debt financing
Following the release of the DFS for Stage One of the Waroona Project in late February, the Company commenced the Debt Financing Process to assist in meeting the funding required for development at the Waroona Project. Image 1 below provides an outline of the key outcomes and indicative timing for each phase of the process.
Image 1: Waroona Project – Debt Financing Process and indicative timing
As highlighted above, Phase One of the Debt Financing Process involved the Company’s debt advisor, Leeuwin Capital Partners, seeking expressions of interest from financial institutions to participate in the Debt Process.
Click here for the full ASX Release
This article includes content from Frontier Energy, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
Charbone Hydrogen Investor Kit
- Corporate info
- Insights
- Growth strategies
- Upcoming projects