March 15, 2021
Hi and welcome to this week’s JMP Report
On the equity front, we had an exciting week with announcements from BSP, KAM and CPL to the Port Moresby Stock Exchange;
BSP – Bank of South Pacific Limited (BSP) gives notice of its intention to convene a special meeting of shareholders to seek approval for changes to its constitution to enable an application to be made for BSP to be included in the Official List of the Australian Securities Exchange (ASX), in order to achieve dual listing in addition to the existing PNGX listing. The notice of meeting is currently subject to advice and approvals, which are expected to be finalised during March 2021.
KAM – The Board of Kina Asset Management Limited are pleased to announce a dividend of 4 toea per share for the full year ended 31 December 2020
CPL – The Chairman of City Pharmacy Limited (CPL) and its Group of Companies, Mr Stan Joyce, today announced an interim dividend of 1.33 toea per share for the year ending 31st December 2020.
Stocks trading last week were BSP and CCP. BSP saw 85,000 shares trade unchanged at K12.00 while CPL saw 10,000 shares trade unchanged at K0.50. Refer details below;
WEEKLY MARKET REPORT 08.03.21 – 12.03.21
On the interest rate front is has been much the same as the last few months with BPNG offering up good supply in the 364 day TBills. Again, we don’t see too much change in this end of the yield curve until we see supply of Government Bonds (GIS).
No change to the yield curve with;
364 day paper at 7.20%
1yr depo rates with Fincorp at 5.50%
2yrs – 7.54%
8yr – 10.72%
10yr – 11.92%
What we have been reading this week
A New Way To Invest In The $11 Trillion Hydrogen Boom
By Alex Kimani – Mar 14, 2021
After decades of stagnation and multiple false dawns, the hydrogen economy is now ready for prime time. Investments in hydrogen technologies have skyrocketed over the past two years, with hydrogen being touted as the ‘fuel of the future.’ Meanwhile, industry experts predict that hydrogen could become a globally traded energy source, just like oil and gas, while Bank of America says the industry is at a tipping point and set to explode into an $11 trillion marketplace.
Investors who wanted to gain exposure to the hydrogen have had to mostly rely on fuel-cell makers such as Plug Power Inc. (NASDAQ:PLUG), Bloom Energy Corporation (NASDAQ:BE), and Ballard Power Systems (NASDAQ:BLDP).
That is, until now. Defiance ETFs, the creator of a line of next-generation exchange-traded funds (ETFs), has just launched the first-ever hydrogen ETF, Next Gen H2 Fund (HDRO).
HDRO ETF mainly focuses mainly on pure-play hydrogen companies generating half or more of their revenues from the hydrogen-based energy and fuel cell space. The fund comes with a relatively low expense ratio of 0.30%, considerably lower than the 0.46% expense ratio by iShares S&P Global Clean Energy Index ETF(ICLN); 0.68% by the Global X Autonomous & Electric Vehicles ETF(DRIV), and 0.69% by the Invesco Solar Portfolio ETF (TAN).
The HYDRO Methodology
Although HYDRO will mainly focus on pure-play hydrogen technology companies, the fund’s underlying index, the BlueStar Hydrogen & NextGen Fuel Cell Index, can include up to a 15% weight in non-pure plays. However, vehicle manufacturers will not be included.
To be eligible, companies must meet certain size and liquidity requirements, and can come from either developed or developing markets. Most stocks will be drawn from the United States, the United Kingdom, and South Korea.
In total, HYDRO will hold 25 securities and reconstitutes quarterly.
As you might expect, the fund’s top holdings will be leading fuel-cell names such as Plug Power, FuelCell Energy, and Ballard Power Systems.
$11 Trillion Economy
Sylvia Jablonski, Defiance ETFs’ Chief Investment Officer, has reiterated Bank of America’s estimate that the hydrogen fuel market will have $11 trillion in investments by 2050, and generate $2.5 trillion in direct revenues. That represents 7,300% growth for a market currently valued at ~$150 billion.
Jablonski notes that hydrogen’s biggest attraction lies in its ability to be a 100% green fuel.
For a sector that has been vilified for so long, those bullish projections can appear like a bad case of blue-sky thinking. Yet, they are beginning to take shape right under our noses.
Last year, the European Union set out its new hydrogen strategy as part of its goal to achieve carbon neutrality for all its industries by 2050 that will see the regional bloc develop a minimum of 40 gigawatts of electrolyzers within its borders and a similar amount of green hydrogen capacity in neighboring countries that can export to the EU by the same date.
And now the private sector is looking to give the EU a serious run for its money.
The world’s green hydrogen leaders have joined hands with an ambitious goal to drive a 50-fold scale-up in green hydrogen production over the next six years.
The Green Hydrogen Catapult Initiative is a brainchild of founding partners Saudi clean energy group ACWA Power, Australian project developer CWP Renewables, European energy giants Iberdrola and Ørsted, Chinese wind turbine manufacturer Envision, Italian gas group Snam, and Yara, a Norwegian fertilizer producer.
The companies hope to drive 25GW of green hydrogen production by 2026, a scale that could significantly drive down hydrogen costs to below $2/kg thus making the fuel source competitive with fossil fuels in power generation.
Green hydrogen is produced using renewables as an energy source in the electrolysis of water.
High costs are the biggest reason why the hydrogen marketplace has been lagging at a time when the renewable energy sector is booming.
Indeed, it’s a big reason why EVs are quickly going mainstream while hydrogen fuel cell vehicles (FCEVs) remain a niche market.
For instance, consider that fueling a hydrogen fuel cell vehicle (FCEV) in California costs around $16.50 per kilogram compared to $3.182 per gallon of regular petrol in the same state. Light-duty FCEVs are typically 2.5x more fuel-efficient than comparable gasoline-powered vehicles, which means that achieving price parity with gasoline would require that 1 kilogram of hydrogen sells for not more than $8.08.
The economics for EVs are much better.
The average EV driver in the U.S. is currently paying $1.23 for an eGallon compared to $2.16 for a gallon of regular gasoline for an ICE motorist.
The push to take hydrogen costs below $2/kg is, therefore, a potential game-changer for the entire hydrogen ecosystem because it could mean that, for the first time ever, hydrogen becomes cheaper than gas.
In fact, a recent analysis by the Hydrogen Council suggests that $2/kg as the tipping point required to make green hydrogen and its derivative fuels competitive in power generation, steel and fertilizer production, and long-range shipping. Green ammonia, which is made from green hydrogen, and being tested in the marine industry and also as a possible replacement for fossil fuels in thermal power generation. Compared to its grey brethren, green ammonia produces zero carbon when burned; boasts an energy density 80% higher than hydrogen, and is much safer than hydrogen.
The icing on the cake: the consortium of green hydrogen producers says we can expect to see $2/kg hydrogen in just four years’ time.
“From an industry perspective, we see no technical barriers to achieving this, so it’s time to get on with the virtuous cycle of cost reduction through scale up. Having led the race to deliver photovoltaic energy at well-below US$2 cents per kilowatt-hour, in certain geographies, we believe the collective ingenuity and entrepreneurship of the private sector can deliver green hydrogen at less than US$2 per kilogram within four years,”” Paddy Padmanathan, CEO of ACWA Power, has declared.
Suddenly, seemingly overvalued hydrogen stocks such as Plug Power Inc. (NASDAQ:PLUG), Bloom Energy Corporation (NASDAQ:BE) and Ballard Power Systems (NASDAQ:BLDP) actually look like bargains.
Like most clean energy sectors, hydrogen stocks have gone into correction mode after last year’s wild runup. Still, they remain in the green with PLUG up 42% YTD; BE has gained 4.4% while BLDP has rallied 11.7% in the timeframe.
By Alex Kimani for Oilprice.com
OPEC bullish on H2 oil recovery as it seeks tighter market
Author: Claudia Carpenter
Vaccination rollouts support demand in second half of 2021
Non-OPEC supply to bounce back by 950,000 b/d
OECD stockpiles at 92.2 mil barrels above 5-year average
Dubai — Global oil demand will rebound strongly in the second half of 2021, but the call on OPEC crude will be lower than previously expected, the producer group’s latest analysis showed, providing some backing for Saudi Arabia’s decision not to relax its output cuts through April.
In its closely watched Monthly Oil Market Report released March 11, OPEC revised up its forecast of 2021 oil demand by 220,000 b/d to 96.27 million b/d, but said the recovery would be backloaded in the second half of the year, after disappointing data in Q1.
Estimates for Q3 and Q4 were raised by 400,000 b/d and 970,000 b/d, respectively, while Q1 and Q2 were lowered by 180,000 b/d and 310,000 b/d.
“Oil demand in 2H21 is adjusted higher, reflecting expectations for a stronger economic recovery with the positive impact of vaccination rollouts,” OPEC said in the report. “Oil requirements in 1H21 are adjusted lower, mainly due to extended measures to control COVID-19 in many key parts of Europe. In addition, elevated unemployment rates in the US slowed the recovery process.”
With non-OPEC supply forecast to bounce back by 950,000 b/d in 2021 to 63.8 million b/d, OPEC lowered the estimated demand for its crude by 240,000 b/d to 27.26 million b/d.
The report was released a week after OPEC and its allies decided to mostly rollover their production cuts through April, despite warnings from some analysts and consuming countries that the market was overtightening and prices were rising too quickly, while the world is still recovering from the coronavirus pandemic.
Saudi Energy Minister Prince Abdulaziz bin Salman prevailed on his counterparts to maintain production discipline, with seasonal refinery maintenance ahead and global oil inventories still elevated compared to the 2015-2019 average that the alliance is aiming for.
OECD commercial oil inventories in January declined to 3.052 billion barrels, or 92.2 million barrels above the five-year average, the lowest since May 2020, the OPEC report showed.
OPEC pumped an average of 24.85 million b/d in February, according to secondary sources used by the organization to track output.
Keeping production below the call will help OPEC and its allies induce draws from storage.
According to the agreement, the OPEC+ alliance will largely maintain its quotas, with Russia allowed a 130,000 b/d increase and Kazakhstan a 20,000 b/d rise, while Saudi Arabia said it would continue implementing its voluntary cut of 1 million b/d through April.
The kingdom, which is the largest member of OPEC, fulfilled almost all of its pledge, self-reporting February crude production of 8.147 million b/d, while secondary sources estimated 8.15 million b/d. That is about 970,000 b/d below its quota.
Can Carbon Capture Make Clean Oil Production A Reality?
By Felicity Bradstock – Mar 12, 2021
As governments and regulators push for a lower carbon future, the race is on to develop carbon capture technology. Even Elon Musk has joined the race, launching a $100 million carbon capture competition.
Exxon Mobil has stated this week that there could be a $2 trillion market for carbon capture by 2040. This comes as the company announces a $3 billion investment in carbon capture as well as carbon storage projects over the next five years.
Recent investments in new carbon capture technologies by European majors, including BP and Shell, have gained praise from the media and environmental organizations who believe it is a step towards greater sustainability for the oil and gas sector.
Oil companies acknowledge that they will be pumping oil and gas for decades to come. However, they are looking for ways to reduce carbon emissions to ensure that production is less harmful to the environment, while also investing in renewable energy research and development.
Many of these aims go hand-in-hand with the goals of the Paris Agreement, which was signed by 194 states around the globe by November 2020. As governments attempt to bring their national policies in line with the agreement, the oil and gas industry must follow suit.
Carbon capture is positive news for everyone, as President Biden seeks to encourage greater efforts to manage climate change without hurting oil-dependent states. To this end, Congress recently approved legislation on the continued research and development of carbon capture through 2025 by the Department of Energy.
Biden is not the only one encouraging carbon capture, use, and storage (CCUS). This year, the UN announced the goal of net-zero emissions, calling on governments and companies to invest in capturing CO2 emissions from coal and gas power plants, and from heavy industry, for deep underground storage or re-use.
The UN has just produced a report on CCUS, outlining the current practices around the world as well as state-specific CCUS projects. The report aims to encourage other member states to invest in CCUS in order to reduce carbon emissions over the next decade.
However, investment in CCUS should not be taken lightly, with Europe needing an anticipated €320 billion to achieve successful CCUS deployment by 2050, as well as a further €50 billion for transport infrastructure.
At present, CCUS technologies do not have the capacity needed to remove enough CO2 to achieve carbon neutrality. This means that companies must look at other ways to become more carbon-friendly, as well as investing heavily in the improvement of CCUS mechanisms.
The UAE announced this week that it is seeking new partnerships in CCUS and emissions-cutting as oil prices soar after a difficult year. Brent hit $70 as the OPEC+ states refused to bring more oil production online.
Sultan Al Jaber, the Minister of Industry and Advanced Technology and CEO of Abu Dhabi National Oil Company (ADNOC) stated, “There is no credible way of reaching global climate goals without seriously advancing and ensuring the widespread adoption of carbon capture and storage”.
So far, ADNOC has partnered with Total to advance its CCUS technologies, as part of its aim to reduce its carbon intensity by 25 percent over the next decade. Its aim is to capture 800,000 tons of CO2 via its Al Reyadah facility, as oil production steadily increases. The UAE expects to capture 5 million tons annually by 2030.
Both oil majors and states around the world are in the race to produce the more effective carbon capture technologies to bring oil and gas production in line with net-zero aims over the next decade. Greater investment and collaboration between governments and industry could prove effective in making sustainable oil production a real possibility.
By Felicity Bradstock for Oilprice.com
Modern Alchemists Turn Airborne CO2 into Diamonds
Each carat removes 20 tons of greenhouse gas from the sky, entrepreneurs say
The dawn of the Biden administration and its focus on climate change is attracting more industries to a solution that was, until recently, thought to be more trouble than it’s worth: the direct removal of carbon dioxide from the atmosphere.
The idea of collecting CO2 from the sky and trapping it in valuable products before it can warm the Earth is a seductive marketing strategy. Especially for an industry that sells precious items that last “forever.”
That, in a nutshell, describes the global diamond trade.
Composed of gem companies valued at roughly $76 billion, the industry has weathered a turbulent 150-year history rife with allegations of environmental and human degradation.
Now, two companies are selling diamonds made in a laboratory from CO2 that once circled the Earth.
The sales pitch can be stunning. As Ryan Shearman, the founder and CEO of a New York-based company called Aether, recently explained to a reporter for Vogue magazine: Each carat of a diamond removes 20 tons of CO2. That, he said, is more invisible gas than the average person produces in a year.
With the purchase of a 2-carat diamond, Shearman pointed out, “you’re essentially offsetting 2 ½ years of your life.”
It can take Mother Nature as long as a billion years to make diamonds, which are formed in rocks. But as Shearman explained in an interview with E&E News, he has developed a patent-pending process that can make a batch of diamonds in a laboratory in four weeks.
Unlike other laboratory-made diamonds, his process starts with CO2 removed from the air. The gas undergoes a chemical reaction where it is subjected to high pressure and extremely high temperatures. All of this is created using solar, wind or hydraulic power.
Or, as Shearman sometimes puts it, “we’re committed to the unprecedented modern alchemy of turning air pollution into precious stones.”
Aether has been selling its diamonds since the beginning of the year at prices ranging from $7,000 for a ring to around $40,000 for earrings with sparkling stone arrangements.
“We have quite a large waitlist now,” he said.
Aether has a competitor, a British company called Skydiamond founded by Dale Vince, an entrepreneur and self-styled environmentalist who says he spent five years researching how to make what he calls the world’s first “zero-impact diamonds.”
Vince takes frequent potshots at the traditional diamond industry, noting that it has a history of using child labor and underpaid women. He also points to diamond mines that have scarred the Earth and damaged wildlife. He argues that a lack of regulations has fostered civil wars in Africa that can be funded by smuggled stones sometimes called “conflict diamonds” or “blood diamonds.”
Charges like this may stun people in some businesses, but they have been ricocheting around the natural diamond industry for a long time.
THE BIG HOLE
The traditional industry began in Kimberley, South Africa, in 1871, when a gem discovery in the rocks of a nearby farm triggered a “diamond rush.” During the 1880s, the area attracted entrepreneurs and, according to historians, 50,000 miners, including women and children. The great majority of them were Black, poorly paid and inexperienced.
They lived in cramped quarters and were put to work using shovels and picks to hand-dig what became known as “the Big Hole.” It covered 42 acres and reached depths of 790 feet. It is still big enough to be seen from space and was rich enough to produce 13.6 million carats of diamonds. (A carat weighs 0.007 of an ounce.)
From the mine sprang De Beers Consolidated Mines Ltd., which grew into a global monopoly. It once controlled an estimated 80% to 85% of the diamond market. The downside of the business included mining accidents and widespread pneumonia, tuberculosis and other diseases at Kimberley that are estimated to have caused 5,000 deaths over the first five years.
The Big Hole was later explored by geologists who concluded that before the site was discovered by people, the steam, debris and pressure from volcanic eruptions deep underground created slim chimneys they called “Kimberley pipes.” Carbon dioxide escaping from magma through these pipes was absorbed into the area’s peculiar rocks and formed into diamonds over millions of years.
In 1954, an American chemist, Tracy Hall, invented an alternative to natural stones: the first diamonds made in a laboratory. He worked for General Electric Co. and used a reactor combined with a press to subject powdered carbon to high temperatures and pressures.
The result was diamond crystals made within a few weeks. It eventually led to a new industry that manufactured “laboratory diamonds” using two competing methods. Both required a lot of energy.
The global market is estimated to be worth $280 million, only a small fraction of the “natural diamond” industry, but it’s credited for driving reforms by creating competitive and ethical pressures on the broader industry.
In 2000, a coalition of industry trade groups held a historic two-day meeting at Kimberley near the symbolic—but now exhausted—Big Hole. They agreed to adopt a set of ethical standards that included human rights, labor and environmental regulations. An industry watchdog, the World Diamond Council, was established.
The so-called Kimberley Process was endorsed by the United Nations and approved by companies in 77 countries. The result, according to the diamond industry, is that 99.8% of the world’s diamonds are now certified as “conflict-free.”
But in June, Stephane Fischler, the outgoing head of the World Diamond Council, gave a speech suggesting that some nations were not properly enforcing the Kimberley Process.
“For far too long, many have considered mining countries simply as places that are rich in minerals, without seeing their people and their communities,” he asserted.
“This ‘grab and get rich’ mentality must change,” he added. “We must find a way to positively link financial reward with ensuring the grassroots communities truly benefit from the natural resources with which they are blessed.”
BLING WITHOUT STING
Those concerns led to marketing opportunities for diamonds that sparkle with the promise of addressing climate change.
“The way the market has been built up, it has so many different players that it’s quite easy to lose track of where the diamonds come from,” said Shearman, the CEO of Aether, during his interview with E&E News.
“The major challenge for the [natural diamond] industry is that our manufacturing process completely sidesteps this process. We get our carbon from the air,” he said.
Shearman’s competitor, Vince of Skydiamond, sums it up like this in his ads: “All the bling … none of the sting.”
Climeworks, a Zurich-based company that extracts CO2 from the air using waste heat from a small town’s incinerator, says it sells some gas to Aether.
According to Shearman, the CO2 is sent to a facility in Europe where it is converted into methane. That is sent to a reactor in Chicago, where pressure and heat fueled by renewable energy convert it into diamonds.
Climeworks has gone on to make a business out of accepting donations of CO2 from various sources and, for a fee, injecting it into a rock formation near a power plant in Iceland. Once it’s underground, the gas is mixed with water, and it will turn into stone in two years. The company is building a pilot plant called Orca that is designed to bury 4,000 tons of CO2 each year.
So far, over 3,000 companies and individuals from 52 countries have made contributions in exchange for a certificate showing that they have permanently stored CO2 underground (Climatewire, Jan. 5).
In January, De Beers, the company that pioneered the global explosion of the diamond business, bought a substantial advertisement in The New York Times suggesting it might “reset” the industry by adopting 12 new sustainability and ethics goals.
One of the goals is capturing more CO2 emissions.
De Beers has a new program called “CarbonVault,” which will use the plentiful supply of rocks in the mines it owns around Kimberley to store CO2. The company—still large, but no longer the monopoly it once was—has formed a new task force to figure out how to use “physical, chemical and biological methods to accelerate” the rock-forming process. It aims to have “an industrial impact.”
The project is now heading toward field testing, Alison Shaw, a senior geochemist leading the project for De Beers, explained in an advertisement.
Forests of trees that store carbon can burn in wildfires, and underground reservoirs used to dispose of trapped carbon might leak, she said. But “we know that carbonate minerals are stable over hundreds of thousands of years.”
Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2021. E&E News provides essential news for energy and environment professionals.
Our order book starts the week off with orders on both sides of BSP. We also nett buyers of bonds so if you are looking to for an early redemption of your bonds, please give me a call to discuss.
I hope you enjoyed the read from this week’s report. If you would like to discuss the report or your investment needs, please do feel free to reach out.
Have a great week,
Head, Fixed Interest and Superannuation
Level 1, Harbourside West, Stanley Esplanade
Port Moresby, Papua New Guinea
Mobile (PNG): +675 72319913
Mobile (Int): +61 414529814