Member Info for Valuation-it-is

Hi Tame2017
Thanks for the tip - off.
No I am not in the Telegram group - How does that work? I am fairly new to LSE , and am getting up to speed with PHE.

I have been a bit slow in finding this,so you may be aware of it but if not, don't miss it, it certainly is exciting.
https://www.proactiveinvestors.co.uk/companies/news/311347/powerhouse-in-partnership-talks-with-toyota-tsusho-in-japan-11347.html
Towards the end Allaum says that PHE could afford to give Hydrogen away (free) in Japan because the payments to deal with plastic waste are so high.
It is not difficult to imagine the excitement that would generate in the BoDs of Fuel Cell vehicle manufacturers.
This is where PHE shareholders should perhaps consider pumping a lot more capital into the company, so it can set up in Japan and do it, rather than collecting a much smaller profit , but v high return on tiny capital .
e.g Would you rather have a 50% return on £100m or 25% return on £2bn. ( That conundrum is normally answered by considering how many alternative investment on has returning over 25%.) This is an example only, not suggesting these are figures for PHE, but I hope you get the idea.
My inclination would be for PHE to go big and seek loan funding from UK/ Japan Governmental sources

Thanks Dr A, much appreciated.

Does anyone know if PHE hasever mentioned talks with Hyundai or Honda?

Vii

Happy New Year Kenny.
Peel seems Northern biased. Do you have any idea about the geographical spread of the 100 sites they are considering?
I wonder if they have a plan for DMG in the South?

Thanks Tame2017.

Do you have any links to articles about the talks with Toyota?

Thanks Flying Horse.
Could you expand on your comment that the US move will come sooner?

Many thanks Xedos.
That is a shame. Existing shareholders can therefore be diluted by placings made by the board at discount share prices.
In fairness to the company, I suppose it is only recently that the market in shares has become attractive for rights issues.
Let us hope that at the next AGM, the resolution is voted down. Boards sometimes seem to forget who their companies belong to.

" Let's hope that the board of PHE believe in pre-emption rights............." follow up below.
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30/9/2020 AGM proposed.....
Resolution 10 is to authorise the directors to allot securities for cash subject to statutory pre-emption rights in favour of shareholders and to dis-apply statutory pre-emption rights on the allotment of a limited number of equity securities (including new ordinary shares). This authority will permit the directors to allot:(a)shares up to approximately two-thirds of the Company’s issued ordinary share capital on an offer to existing shareholders on a pre-emptive basis. However, unless the shares are allotted pursuant to a rights issue (rather than an open offer), the directors may only allot shares up to approximately one-third of the Company’s issued ordinary share capital; and(b)shares up to a maximum nominal amount of £6,151,427suchamount equating to 35 per cent. of the aggregate nominal value of the issued ordinary share capital of the Company at the date of this notice.
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However the record of the voting on that resolution appears not to have been placed on the company website yet, despite the passing of 3 months. It is therefore not clear whether it was passed or not.
Can anyone who was a shareholder at that time and went to the AGM, help?

The Special resolution at the August 2019 AGM dis-applied statutory pre-emption rights passed with 98+% of the votes cast.

If Toyota are interested they may feel they have to move quickly as PHE's market cap ( therefore cost of bid) is rising rapidly.
One approach might be to offer a JV to roll out the DMG system in Toyota's main markets and take a stake in PHE.
But PHE doesn't need the extra cash, and perhaps has a choice of potential partners. Let's hope that the board of PHE believe in pre-emption rights. I wonder if they were disallowed at the last AGM? Anybody go to the last AGM?

Following on from - "So thinking of potential for a takeover, the current market cap, £364m is chicken feed for big motor manufacturers who can currently borrow at or near zero per cent. " -

What about Toyota? Market cap $250bn, producer of the Mirai..............
https://www.toyota.co.uk/world-of-toyota/environment/fuel-cell-vehicle
i.e. a company that is 750 x the size of PHE, but dependent for the success of its FC cars on getting hydrogen distribution going. PHE has a low cost method of achieving that........

NFALT... You originally asked how small could the technology get with a view to understanding if it could be sited on forecaourts. I was going through the EQTec (ETQ) site and found this.....
"Our advanced gasification technology is also modular in scale, sized from 1MWe to 25MWe. This gives us the flexibility to offer a range of on-site applications when it comes to location and output. "

You are on to something.

Following on from the calculations in "2021 mission".....................
The main problem for big FC vehicle manufacturers, is persuading customers that hydrogen re-fuelling stations are soon to arrive. One way of making that happen, would be to invest in DMG units or even invest in/take over PHE. Thinking of what Tesla has done, control over fuel supply - and possibly the lowest cost version of that supply- might be critical in winning customers and making profits. I think it is quite likely that PHE has found the cheapest way of making hydrogen. Comparing gasification with electrolysis for instance, and thinking of the big input costs, the former results in DMG receiving money for taking in plastic, whereas the best that electrolysis can hope for is that the electricity is free.
PHE facilitates a steep step down the cost curve of running a FC vehicle. PHE's site states:- One can work with the rule of thumb that a 25 tonne per day DMG® System will cost approximately £8M for a greenfield site. So to put 100 hydrogen making and re-fuelling sites around the country would cost around £800m. It would probably create a very profitable business in its own right , but it would also facilitate the sale of FC vehicles around the country as well.
So thinking of potential for a takeover, the current market cap, £364m is chicken feed for big motor manufacturers who can currently borrow at or near zero per cent.
My conclusion is that PHE could be worth £billions and be attractive to any motor manufacturer wishing to sell FC vehicles.
For investors in PHE, I think the calculation is going to move on very quickly from considering how many units Peel and others abroad will open and in what time, to the bigger picture, who will want to invest in/take over the company.
I hope shareholders will shun any takeover approaches, as the value that PHE can add if it is able to supply all hydrogen vehicles, rather than just one make, would be much greater still. What that needs is significant funding.

Step forward HMG in January?

DYOR

T'man, following on from your correction....................With 4.9 million tonnes of waste plastic produced in the UK every year if all of that was to be fed into DMG units to produce hydrogen there would be 280,000 tonnes or 280m kg of hydrogen produced. Multiplying by 65 would give the number of miles that fuel cell cars could go on that amount, namely 18.2 billion miles. In 2019, the average car in the UK drove 7,400 miles, so that is enough to power over 2.4 million cars. In other words just recycling our plastic would make a very significant dent in our need for diesel and petrol.
And how many DMG units would be needed to recycle all the plastic waste?
If one unit can process 35 tonnes of waste a day for say 300 days a year, i.e. process 10,500 tonnes, then the UK would need 457 DMG units to process all the waste.
Although these are hypothetical maximum figures, it seems to me that there is scope for many more units than are initially planned by Peel.
I can imagine the Government wishing to accelerate the introduction of DMG, as it cuts pollution/CO2, cuts landfill, cuts imports, creates jobs, cuts litter.landfill and is likely to be highly exportable.
Hold on to your........................................... hat!

The lead time in any project depends on the complexity of the application required by the customer, the feedstock, and the existing infrastructure. There is a bespoke engineering, construction, and commissioning component of the delivery of any DMG® System ordered. Our current estimate is approximately 9-12 months from payment of deposit to completion of commissioning and handing the operating plant over to the Owner/Operator.
Source Q&A on PHE wesite investor section.
This gives an idea of how long the Polish and Protos plants may take to get up and running.

Thanks, T'man. If I remember correctly, about ten years ago it was involved in gasification of coal, so I guess DMG is a development of that.
It is interesting to see that DMG has bespoke elements so tuning for the customers waste profile appears possible.
Judging by what happens in my woodburner behind the glass, it looks as if the heat releases gases from the wood. So I guess a similar process is going on there too.
Best wishes and good luck in 2021.

Thanks telephoneman for your correction - its better than I thought.
I came across this when looking for the total plastic waste produced in the UK.

BMW (biodegradable municipal waste is the fraction of municipal waste that will decompose within a landfill to produce methane, a potent greenhouse gas. Amongst other materials it will include food waste, green waste, cardboard and paper. Within the Landfill Directive the UK has three targets to meet, measured as a percentage of the tonnage of BMW generated in 1995 (‘the 1995 baseline’).These require the tonnage of BMW to landfill to be:?No greater than 75%of the 1995 baseline by 2010?No greater than 50%of the 1995 baseline by 2013?No greater than 35%of the 1995 baseline by 2020"

Source page 5 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/918270/UK_Statistics_on_Waste_statistical_notice_March_2020_accessible_FINAL_updated_size_12.pdf

My view_ In other words there is a Governmental desire to cut Methane producing waste, and gasification of plastic can play a part in that. So less landfill - more raw material and income for DMG.

"My other thought is how Powerhouse could fill a potential gap between Hydrogen infrastructure and the need for early adoption to drive. It's going to take a number of years before the Electrolyser industry is up to providing the necessary output of Hydrogen. 1 DMG unit producing 2t of road-ready hydrogen - is effectively more output in the UK than the combined Hydrogen market in its infancy. With the right planning, we could bridge the gap, and transform the game."

I see it even more positively. Electroluyser kit is expensive and requires an input (electricity) which will not be free.
Hydrogen from DMG has the huge advantage that the necessary input provides an income stream rather than a cost, through gate fees. Plus the other income streams - electricity output and heat. The concept is very compelling.
If one calculates how much plastic waste there is, if there were enough DMG units a significant proportion of UK motoring miles could be fuelled with DMG hydrogen. The waste figures per annum are huge. Given only 35 tonnes of waste, enough hydrogen can be producd EVERY DAY by a DMG unit to fuel 60,000 mile of (car) motoring. Given the links to Government that Kenny100 has pointed out, it would be surprising if this does not arouse Governmental interest.

Best wishes for 2021.

Valuation

Good info - thanks.
This looks like the answer for how to get hydrogen to fuel cell cars/buses/lorries all around the country, and being paid to do it, as opposed to having a distribution cost. Distribution has already been achieved by taking product in plastic packaging around the UK.

All the ducks are lining up nicely!

This transformative technology is currently being developed in the north-west of England as a commercial solution for the regeneration of non-recyclable plastic waste for the production of hydrogen at competitive prices. However, to drive the early introduction of this new technology in the UK and maximise the value of the potential of hydrogen from waste (HfW), government support and encouragement is needed. (Source DR)

Roll on the Government Hydrogen statement due early 2021 !