Shares of waste plastic to energy group Powerhouse Energy have been enjoying a renaissance, along with many companies in the renewable energy space, since the Covid-19 pandemic started. Investors, who were already on the ethical investing / ESG bandwagon, have become even more environmentally conscious as concerns over air pollution have led to an acceleration in all things Green. As far as the particular journey of Powerhouse is concerned of late, one could add a couple of well-worn clichés into the mix to describe where it stands currently – Crossing the Rubicon, and Tip of the Iceberg.
In terms of the Rubicon, 2020, and the merger with project developer Waste2tricity, has consolidated the group’s technology offering and made it a standalone and rounded entity. This means it can receive both a royalty for its DMG technology, but also via Waste2tricity, fees for engineering services associated with the building of plants.
For the tip of the iceberg we can look not only to the latest RNS from Powerhouse which mentions the building of 11 agreed plastic to hydrogen projects, but also the news release from Peel L&P Environmental, where the figure is 70. The take away here of course is that given Powerhouse stands to make £500,000 per plant per year, we are looking at a healthy recurring revenue model, one which the market has not fully factored even, despite the strong run up in the stock since the Spring. A figure of 70 plants of course adds up to £35m in the UK alone to start off with.
Indeed, there is much to look forward to given the way that it may not be that the UK’s take up of plastic to hydrogen plants is the main driver for Powerhouse Energy. The opportunity has always been greatest in the Far East, especially South East Asia. Here, not only is the ongoing plastic waste crisis there much more intense than the West – we have been exporting our waste to parts of this region, there are mountains of inadequately dumped plastic waste to clean up, something which would required hundreds, if not thousands of plants. It also helps that Japan is much further down the line most in appreciating the attractions of Hydrogen as a fuel, with its use for public transport being something of a priority.
Therefore, while Powerhouse Energy shares have bounced back today from below 3p, it is evident that we are looking at a “buy the dip” situation for the stock, especially as are in the run up to the commencement of the first plant build, by the last quarter of 2020, and the market catches up with the revenue implications of both its unique technology and the plant rollout over the next few years.
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