PRL Signs Binding MoU with Total Eren to Develop Green Hydrogen Project

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Published 22-APR-2021 13:15 P.M.

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5 minute read

Province Resources (ASX:PRL) is aiming to develop Australia’s first truly Zero Carbon Green Hydrogen project.

This week PRL announced an MoU with Total Eren - part of global energy super major Total SA.

The binding MoU will be for both companies to perform a feasibility study in view of the potential development of a major green hydrogen project in the Gascoyne region of Western Australia.

This comes just a few weeks after PRL doubled its land under application, hence doubling its potential energy generation capacity in the future.

Total Eren develops, finances, invests in, builds and operates renewable energy power plants (solar, wind, hydro) worldwide.

It is partly owned and branded by Total SA - one of the biggest global oil/energy supermajors in the world.

We first featured PRL on Wise Owl on February 17th 2021 . While our report was written when PRL was 2.6c, the stock opened that day at 5c as the company released news of its move into Zero Carbon Hydrogen.

According to PRL, "The intention is for Total Eren to fund, own and operate the upstream renewable power facility and the partners (Total Eren & PRL) to own all of the downstream assets (hydrogen production and distribution) 50:50."

So assuming the deal progresses beyond the MoU and initial studies, Total Eren could be funding the entire cost to develop a potential 8GW wind and solar plant.

The scale is large here, and would be developed in two stages - at a total of 8GW, it would be the fourth largest green hydrogen project in the world.

A Deeper Dive on PRL

Province Resources (ASX:PRL) is a natural resources company focused on the green energy market, investigating the world class wind and solar resources of the Gascoyne Region at the HyEnergy ZERO CARBON HYDROGENTM Project.

PRL is targeting development of a Renewable Green Hydrogen project to supply domestic and international markets with hydrogen. With the Gascoyne's climate and wind patterns, renewable energy is an attractive and viable option. This energy will be used to produce a clean, zero carbon gas or liquid hydrogen fuel.

This Week’s Event

The Memorandum of Understanding (MoU) with Total Eren Australia Pty Ltd to develop a major green hydrogen project in the Gascoyne region of Western Australia, follows application for substantial increase in land size that could effectively double energy generation capacity.

Total Eren is a leading France-based renewable Independent Power Producer with over 3.3GW of renewable energy power plants worldwide either operating or under construction (mainly solar and wind).

In Australia, Total Eren has successfully developed, financed and constructed Victoria’s largest solar farm – the 256 MWp Kiamal Solar Farm located north of Ouyen with a team of 20 renewable energy professionals based in Australia.

Strategic significance

The introduction of a partner with high levels of expertise and robust financial backing is a major step in terms of moving the project from the planning phase to the all-important studies and preliminary operational initiatives that need to be taken to move to construction.

Investment Highlights

  • Under the terms of the MoU, PRL and Total Eren will have 50/50 ownership in the hydrogen plant with the development of the integrated hybrid renewable energy capacity led by Total Eren.
  • A scoping study and the execution of definitive agreements could occur in the next four months.
  • Two-stage development with total potential of up to 8GW.
  • The project is situated in reasonable proximity to the existing Dampier Bunbury Natural Gas Pipeline (DBNGP), and Western Australia’s hydrogen strategy is to have a 10% mix of renewable hydrogen in the DBNGP by 2030.
  • Part funding for various projects has already been provided at a government level, including the Australian Government Advancing Hydrogen Fund ($300 million), the Australian Renewable Energy Agency ($70 million) and the Western Australian Renewable Hydrogen Strategy ($10 million).

Barometer

  • Green hydrogen produced from renewable sources, such as wind and solar energy, looks set to play a significant role in navigating society towards a decarbonised future and meeting the global aim of net zero emissions by 2050.
  • On a global scale, $490 billion is estimated to have been sold in ESG bonds (investments pitched at ESG themes including renewable energy).
  • Investors responded positively to news that the company had applied for a further 864 square kilometres in the Gascoyne, an initiative that could potentially double its energy generation capacity in the future.
  • Momentum appears to be with the company with its shares up approximately 780% since the start of February.

Our View

  • We see the alignment with a major global renewable energy group that is 50% owned by global energy giant Total as an endorsement of the project's potential.
  • Given that this is a large scale project being undertaken by a company with a relatively modest market capitalisation, the derisking of the project that comes with Total Eren’s involvement and backing has strengthened its risk/reward profile.
  • The collaboration with Total Eren will provide regulatory bodies, potential corporate backers and financiers with a great deal of confidence when assessing the likes of permit applications, validation of studies, offtake agreements and funding arrangements.

Catalysts

Catalysts for the stock include:

  1. Further evidence that governments and enterprises are investing in the broader green hydrogen sector, particularly in Australia;
  2. The award of regulatory and permitting approvals;
  3. Completion of scoping and feasibility studies;
  4. Offtake agreements (eg: Dampier Bunbury Natural Gas Pipeline; and
  5. Project financing. Should PRL be successful in substantially increasing its landholding via its recent application this could be seen as adding significant value.


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