Longspur Research has raised its central valuation for Provaris Energy Ltd to A$0.13 per share, listing factors such as the company’s transition to a capital-light model and the inclusion of a carbon dioxide (CO₂) transport project as key value drivers.
“Modelling the new business model for Provaris and including a CO2 project gives a new central case valuation of A$0.13 up from A$0.07,” Longspur head of research Adam Forsyth wrote.
Less capital intensive
“The model requires less capital to achieve its potential and has more diversity thanks to the addition of CO2.
“The central case is based on just three projects with further upside possible as more projects are added."
The report notes that Provaris “has now put in place many of the building blocks to build a hydrogen and CO2 transport solution.”
Most notable of these building blocks is the agreement with Uniper and Norwegian Hydrogen for a 42,000 tpa hydrogen supply chain and a second MoU collaboration supply chain from Norway for 30,000 tpa to a German utility.
The company has been able to pull off the delivery of its big projects without haemorrhaging capital, using a capital-light model whereby it will be pulling in licence and origination fees without the maintenance and expense of funding vessels.
This seems to be part of the company’s reimagined strategy, which targets revenue through technology licence fees and free-carried interests in hydrogen and carbon shipping projects and moves away from a proprietary model.
Longspur notes that this approach significantly reduces capital requirements while maintaining upside potential.
Updated business model
Under the updated model, Provaris will earn a 5% licence fee on the capital expenditure of its H2Neo hydrogen carrier and H2Leo barge, providing upfront income during vessel construction.
Upon commissioning, the company will also seek a 5% free-carried equity stake in project economics.
For a standard project involving two H2Neo carriers and one H2Leo barge, Longspur estimates Provaris could generate up to US$34.5 million, with a net present value of US$22.3 million at final investment decision.
The research report also highlights the strategic value of Provaris’ collaboration with Yinson Production Offshore on liquid CO₂ storage and transport solutions.
The company’s joint development agreement with Yinson sets the scene for a CO2 transport solution, including a 5mtpa project by the end of the decade.
Longspur sees this as a credible second revenue stream, supported by the development of the 5 million tonnes per annum Havstjerne CO₂ storage field on the Norwegian Continental Shelf, with operations expected by 2028–2029.
Valuation scenarios range from A$0.06 in a low case to A$0.15 in a high case, depending on project execution and expansion.
The analysts conclude in their report that the diversified model and lower capital intensity will improve visibility and deliverability of returns.