Multiple roads (and flightpaths) to green energy
17th February 2022 |
The COP25 summit, which took place in Glasgow in November, brought together governments – and non-government organisations (NGOs) – to talk in general about how to deal with the problem of climate change.
Three months on, particular industries are talking seriously about promotion of green energy and a reduction in carbon emissions.
A good example is the aviation industry, which accounts for around 2.1% of all carbon emissions created globally, and which is big enough on its own to make a difference.
The European aviation industry is looking to go further than its peers in other parts of the world.
Globally, the industry wants to halve carbon emissions (relative to 2005 levels) by 2050. In Europe, the aim is to achieve net zero carbon emissions by that year.
On 4 February 2022, the first ever public-private initiative supporting Europe’s goal to reach net zero carbon emissions by 2050 was delivered under the aegis of France’s Presidency of the Council of the European Union (EU).
The initiative is known as the Toulouse Declaration, and includes aviation stakeholders from 37 European countries, including the UK. Largely, these stakeholders include operators of major airports, such as London Heathrow and London Gatwick.
The declaration seeks to ensure the future sustainability of the European aviation sector.
For example, it reaffirms the commitment of stakeholders to achieving a net zero aviation sector by 2050. It also ensures commitment to delivering greener aircraft technologies, such as sustainable aviation fuels (SAF) and stronger collaboration amongst industry players (airlines, airports and industry figureheads). You can see the full terms of the declaration here.
Although this has had little impact on the share prices of our Frontier Tech Investor holdings, we think that the declaration will accelerate the transition to a greener aviation industry.
Over the medium- and long-term, the declaration could prove to be hugely significant to the progress of Velocys (LSE: VLS).
The company is a provider of sustainable aviation fuel (SAF) and is seeking to bring it into the mainstream. Specifically, Velocys’ Fischer-Tropsch technology uses catalytic conversion to create aircraft fuel from biomass and forest residue.
The key advantage of Velocys’ SAF is that it does not require a complete overhaul of existing aircraft fuelling systems. Rather, the technology can be easily used by aircraft operators with minimum fuss and expense.
Velocys already has notable commercial agreements, including one with major US airline Southwest Airlines (NYSE: LUV). The Toulouse Declaration could help Velocys to find additional allies and partners.
Rolls-Royce Holdings (LSE: RR) and Meggitt (LSE: MGGT) could also be beneficiaries from the growing commitment to decarbonising the aviation industry.
Rolls-Royce is an engineering company, focused mainly on aircraft propulsion systems. It’s decarbonising the aviation industry in its own unique way, having introduced the “Spirit of Innovation” – the world’s fastest, all-electric plane, in September 2021.
Meggitt is also an engineering company, which manufactures sustainable component parts in the aviation, defence and energy storage industries.
Meggitt is expecting its take-over by US conglomerate Parker-Hannifin to be completed in the third quarter of 2022, in a £6.3 billion deal. If you recall, we first discussed the deal in our 5 August 2021 update.
If/when it completes, we expect Meggitt to obtain a larger share of the global aviation market and to deliver increased value to shareholders.
And, whilst on the topic of green energy, there are other industries apart from aviation that are contributing to the transition in its own unique way.
AMTE Power (LSE: AMTE) is a developer of battery technology to the automotive, oil and gas, and energy storage industries.
Our interest with AMTE stems from its involvement in the electric vehicle (EV) industry, where it manufactures lithium-ion batteries.
The UK government is seeking to ban the sale of diesel- and petrol-powered vehicles by 2030, paving the way for EVs to dominate the automotive market.
We believe that AMTE is on the cusp of realising its full commercial potential, as it seeks to develop a new 2GW facility this year. We are eagerly awaiting further updates on this.
And finally, Argo Blockchain (LSE: ARB) is delivering sustainability amongst the crypto industry.
Argo is a miner of cryptocurrencies, including bitcoin.
Traditionally, crypto mining is an energy-guzzling process. In mining, super-computers use vast amounts of energy to solve algorithmic puzzles in adding crypto transactions to a digital ledger, known as blockchain.
However, Argo does this energy-intensive process using renewable power. For example, its mining facility in North America runs solely off wind and hydro power.
Argo’s sustainability makes it a standout in the crypto industry. But what also impresses us is its ambition to become a multi-faceted crypto company that focuses on some of the most exciting areas of the crypto market.
For example, the company has opened a new segment of the business called Argo Labs, which will focus on supporting “early-stage projects” in the decentralised finance (DeFi), non-fungible-token (NFT) and metaverse ecosystems.
In antiquity, all roads led to Rome. Today, many roads (and flightpaths) lead to green energy.
Please remember to stick to our active buy list recommendations, which you can view here.
Buy list update
Trackwise Designs (LSE: TWD)
Trackwise Designs is a manufacturer of printed circuit boards (PCBs). PCBs are an essential component in semiconductors, which are used to operate devices such as mobile phones, computers and even cars.
Subject to audit, Trackwise has reported full-year revenues (for 2021) of £8.08 million. This is up 33.1% from £6.07 million in the previous year (2020).
Operating losses rose to £0.54 million in 2021, from £0.19 million in 2020. We acknowledge the losses, but are currently not perturbed by them.
In fact, we remain very excited by Trackwise’s potential.
In part, this is due to the impressive revenue figures produced by its flagship Improved Harness Technology (IHT) PCB.
IHT revenues increased 140%, from £0.6 million (2020) to £1.43 million (2021).
Clearly, customers across the aerospace and electric vehicle (EV) industries are just starting to realise the potential of IHT, which can produce notable efficiency savings.
For example, Trackwise’s IHT is 75% lighter than traditional wiring systems found in EVs.
In addition, Trackwise currently has an ongoing order with a “UK EV OEM customer” across Q1 and Q2 of 2022, which totals £3.5 million.
As such, we see further growth potential for Trackwise heading into 2022.
We reiterate our HOLD recommendation on the stock. You can find the original recommendation here.
The Frontier Tech Investor “Top Three”
Sometimes it’s hard to decide on which stocks to invest in from our buy list.
Below is our Frontier Tech Investor “Top Three” section showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: this is just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
EQTEC (LSE: EQT) – EQTEC is a unique, green energy company that is setting the standard for sustainable energy production. Its innovative gasification technology can convert up to 50 feedstocks into sustainable energy sources. It plays a pivotal role in reducing methane emissions from rotting waste at landfill sites. This matters because methane can be up to 86 times more potent than carbon dioxide at trapping heat in the atmosphere. As a result, we believe that the company has a key role to play in helping policymakers achieve stringent emissions targets in the face of COP26. You can find the original recommendation here.
MPAC Group (LSE: MPAC) – MPAC is a leading provider of packaging solutions. The company is helping to deliver efficiency gains to customers through its automated processes that harness some of the most powerful technologies of the modern day. This includes augmented reality (AR) and the use of “smart” machinery. With MPAC, it’s the machines telling the human what to do, rather than the other way round, with the result that human error is eradicated and that manufacturing lines are smoother than ever before. You can find the original recommendation here.
Volex (LSE: VLX) – Volex is a global manufacturer of power and connectivity products. This includes power cables, fibre optics and charging plugs. It might sound a little basic, but when you think about it, these are critical mechanisms which are powering some of the key technologies of the modern day. These technologies include electric vehicles (EVs), artificial intelligence (AI) and big data networks. Volex has huge credibility behind it, especially as it does business with some of most widely recognised companies in the world, including Tesla. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Junior Analyst, Frontier Tech Investor
