The secret to achieving net-zero aviation emissions
21st April 2022 |
US President Joe Biden is targeting net-zero carbon emissions by 2050.
Whether this objective is met or not could be down to the decarbonisation of the aviation sector.
In the US, aircraft account for 10% of all greenhouse-gas emissions produced in transportation.
In a speech made on 12 April, President Biden stated that the decarbonisation of the aviation sector would be impossible without the use of sustainable aviation fuel (SAF).
SAF is aircraft fuel produced from feedstocks, rather than from petroleum.
To speed up the decarbonisation of aviation, Biden is pushing for new tax incentives to encourage SAF production.
It’s not clear what the new incentives will be. However, we could see an extension on the $1.50-$2 per gallon credit on SAF introduced in September 2021.
In addition, President Biden is taking to action to increase the production of SAF in the United States to three billion gallons per year versus 4.5 million gallons per year currently. This is a huge, 750-fold increase, and shows the untapped potential of the SAF market, which is starting to gain more commercial recognition.
In fact, major US airlines such as Southwest, American and United have pledged to help “build the nascent market for SAF” in light of Biden’s talks.
In our view, this gives a strong investment case for Velocys (LSE: VLS).
Velocys is a provider of SAF. Specifically, the company uses its Fischer-Tropsch technology to convert biomass and forest residue into aircraft fuel.
What’s interesting is that Velocys has a 15-year commercial contract with Southwest Airlines in the pipeline. The deal will provide Southwest Airlines with 575 million gallons of Velocys’ SAF, starting in 2026.
In light of Biden’s talks, we think Velocys may receive increased commercial attention from US airlines in the weeks to come.
That’s not the only good news for Velocys right now.
On 19 April, the company announced an agreement with British Airways (BA) to extend both the UK Altalto project joint development agreement and the option agreement for BA to acquire 50% of Altalto by one year to 31 March 2023.
The original option was signed on 12 May 2020 and initially extended on 30 March 2021.
The Altalto project, based in Lincolnshire in the UK, is a collaboration between Velocys and BA to create SAF from waste materials.
The vested interest among big industry players such as BA underscores SAF’s potential and could be vital in helping Velocys commercialise its fuels.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
Buy list update
Immotion Group (LSE: IMMO)
Immotion is a provider of home- and location-based virtual-reality (VR) entertainment.
The company is realising its growth potential.
Over the past year, it has added another string to its bow with the introduction of home-based entertainment services.
This includes the arrival of its “Let’s Explore Ocean Products,” which provides an immersive, ocean-based VR experience.
However, its roots as a VR provider to tourist attractions is in our view, where the company’s real strength lies.
On 11 April, Immotion announced that it has opened attractions or started operations across four new locations:
- A six-seat installation developed at Akron Zoo, Ohio, in the United States, opened on 16 April
- Operations were started at the Seattle Aquarium, Washington, in the United States, in March
- A six-seat installation has been built at Sea Life, Manchester, in the UK
- A six-seat mini theatre, with operations to begin later this month, has been installed at a new aquarium site in the United States. (Its name cannot be disclosed until state certification is received.)
In addition, Immotion has increased the number of seats on its mini-theatre installation at Sea Life in London in the UK to 16, which is double the capacity achieved last year.
As a result of these installations, the company now has operations in 49 sites across the world.
What’s more, the company claims it is in “advanced negotiations with a number of major zoos” for its Gorilla Trek virtual reality technology.
This commercial success reaffirms our positive long-term view on Immotion as it shapes up to be a frontrunner in the provision of VR technology.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
The Frontier Tech Investor “Top Three”
Sometimes, it’s hard to decide 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: it’s just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Team17 (LSE: TM17) – Team17 is a video-game publisher. It has a large collection of games that contains some of the most popular products of the gaming world. One of these is Worms, the enthralling last-man-standing survival game born out of the nineties gaming boom. Team17 is keeping up with the times and offers its games across a number of contemporary technology platforms. It has even flirted with the idea of NFTs, a megatrend that could revolutionise the gaming industry. At a time where sceptics think online gaming will come off the boil following the easing of lockdown restrictions, Team17 keeps gamers coming back for more. You can find the original recommendation here.
Aura Energy (LSE: AURA) – Aura Energy is an early-stage mining company focused on the exploration and production of uranium, a key ingredient in the generation of nuclear energy. The company is showing signs of a shift from uranium explorer to producer, after uncovering water deposits at its Tiris mining project in Mauritania. Water deposits are essential for a smooth mining process. Aura estimates that its Tiris project will produce 12.4 million lbs of uranium over the next 15 years. Aura should be a key player in the nuclear future. You can find the original recommendation here.
Yellow Cake (LSE: YCA) – Yellow Cake is a hoarder of uranium oxide, which is used to generate nuclear power. In this, it offers direct exposure to the spot price of uranium to investors, removing geopolitical and processing risks associated with mining. In fact, it currently has a bumper contract with the world’s largest uranium producer, Kazatomprom, which supplies it with $100 million worth of uranium every year (up until 2027). In total, Yellow Cake stores 8,527 tonnes of uranium oxide in storage facilities, meaning that the uranium is currently worth more than $1 billion. This is a lot more than the current market capitalisation. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Junior Analyst, Frontier Tech Investor
