Will the Powerhouse Energy share price resume its rally?

Powerhouse Energy has struggled this year thanks to greater-than-expected losses amid challenging economic conditions and board upheaval, but a recent update on its landmark SPV have boosted investor confidence.

The Powerhouse Energy [PHE.L] share price surged 122.9% after announcing that corporate arrangements for the company’s landmark Protos Plastics Park were progressing well on 13 October (through 18 October). Powerhouse Energy close to finalising the special purpose company that will develop and operate the site.

The hydrogen-from-waste energy producer’s stock has since lost 17.9% of those gains but has pared back some of the value gained during the spike. Despite the recent surge, shares in Powerhouse Energy are down 63.6% year-to-date.

While the deal comes as good news, the company is facing other headwinds, including the impending resignation of interim chair and acting CEO Keith Riley. And while investors seemed buoyed by the news of progress towards the Protos facility, earlier announcements of joint ventures have been met with less positivity. News in August that an agreement with Hydrogen Utopia for a joint venture in Poland had been reached saw the stock fall 4.17%.

Powerhouse formalises Plastics-to-Hydrogen

A statement released on 13 October read that the agreements formalising Powerhouse’s ownership of the company that will develop and own the Plastics-to-Hydrogen project on the Protos Plastics Park are progressing. The deal is expected to be finalised “later this quarter”.

Plastics-to-Hydrogen No 1 is a special purpose vehicle (SPV), or a subsidiary legal entity, launched with Peel NRE. According to a statement in August, Powerhouse will have a 50% shareholding in the SPV.

The park is a key venture for Powerhouse Energy because it has the potential to prove the company’s waste-to-hydrogen production model can work at industrial scale.

Powerhouse Energy is also entering discussions over the location of its HQ, “due to development plans of the Thornton site by the University of Chester.” The company aims to consolidate the relocation with its plans for a Global Technology and Innovation Centre, enabling “a multi-purpose, functional centre that will allow for its technology to be both demonstrated and developed,” according to the 13 October statement.

The company promised an update on progress “in due course” once investigations for the new site’s location had progressed.

Interim chair Keith Riley to step down

The statement also confirmed that Powerhouse Energy’s interim chair and acting CEO Keith Riley plans to step down as chairman, although a date for this is yet to be agreed.

In the statement, Riley noted “new additions to the board which we believe will not only significantly strengthen the board but also ensure that the company has the right expertise in place to take the business forward.” Riley will reportedly be stepping down as chairman once a replacement has been secured, and stay on in an executive position thereafter.

Riley has been Powerhouse’s acting CEO since predecessor Paul Drennon-Durose stepped down based on a “personal decision” on 31 August. The company made the announcement on 15 August, and its share price fell 2% on the news. The following day, however, it was back up by 5%, suggesting its performance on the market can withstand future changes in the company’s leadership.

Investors unsure about Hydrogen Utopia partnership

While news regarding the Protos facility has been met with positivity, this hasn’t been the case for all announcements of joint ventures for the company. In August, the announcement that Powerhouse would partner with Hydrogen Utopia sent the stock down by 4.17%.

Investors didn’t then seem convinced that the project represented good value for Powerhouse, while the Protos project is clearly seen as foundational to the company’s future prospects.

On 29 June, the company announced losses of 0.05p per share for the year to 31 December, exceeding analysts’ expectations of 0.03p per share. This underperformance was followed by a share price decline of 5.8% on 30 June. Set against the headwinds of rising energy and materials costs, as well as supply chain disruption, the stock has seen its fair share of struggles this year.

Powerhouse’s Peel NRE relationship

Bulls will, however, hope that the recent news stories from Powerhouse point to significant progress in its long-term strategy. Adam Forsyth, of clean energy investment specialist Longspur Research, previously described developments in the Peel NRE relationship as “helpful to developing both this project and offering a route into the UK market.”

Despite its exciting performance over the past month, analysts seem ambivalent on the future of Powerhouse Energy – but for some investors, that will only emphasise the possibility of its being undervalued. The single analyst tracked by the Financial Times offering a 12-month price forecast for Powerhouse Energy set a 47p target, implying 2,837.5% upside from the latest closing price of 1.60p.

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