Uncovered is our exploration of the companies that don’t receive as much media attention or analyst coverage. We believe every company has an interesting story and we want to hear them.
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If you’re interested in the energy transition and decarbonisation, you’ve likely read about hydrogen.
However, the story of hydrogen starts well before the energy transition. It has a long history and an established market. Today, the market for hydrogen is valued at over US$150bn and the gas is predominantly used in oil refining as well as in the production of ammonia and fertiliser. Almost all of this hydrogen is produced by a process called steam methane reforming which produces hydrogen, but also carbon dioxide. Unfortunately, it actually produces 11 times the amount of carbon dioxide as hydrogen.
The exciting thing about the renewed focus on hydrogen is that new technologies are emerging that are cleaner and that produce less carbon dioxide. The most widely discussed is electrolysis, that can utilise renewable energy to split water into its atomic parts – 2 parts hydrogen and 1 part oxygen – and is seen as a possible solution to one of the biggest challenges of decarbonisation: storing and transporting clean energy.
When the world generates excess clean energy, converting it into hydrogen is a way to ensure that energy isn’t lost and can be used to generate electricity at a later date.
When it comes to hydrogen, it is classified into different colours:
- Brown hydrogen: Produced using coal
- Grey hydrogen: Produced using natural gas
- Blue hydrogen: Produced using fossil fuels but captures the CO2 emissions
- Purple / pink hydrogen: Produced using nuclear power
- Green hydrogen: Produced using renewable energy like solar or wind
This was what piqued our interest when we came across Hazer Group and their new technology, creating a new colour: turquoise hydrogen.
While many hydrogen electrolysis processes are focused on splitting water into its chemical parts – remember: 2 parts hydrogen and 1 part oxygen – Hazer’s technology is focused on a different gas: methane.
The company has built a plant next to a water treatment plant in Western Australia and are taking the plant’s waste methane – 1 part carbon and 4 parts hydrogen – and separating out the hydrogen.
This was such a fascinating technology story coming out of Australia that we had to dig in further.
Introducing Hazer Group
Hazer Group’s technology was first developed at the University of Western Australia. The technology uses natural gas (which is predominately methane) as a feedstock and running it through the HAZER Process which involves unprocessed iron ore, separating the natural gas into hydrogen and solid carbon (graphite).
Both of these products then have commercial utility. Hydrogen is a key fuel source for the global energy transition and the HAZER Process turns the carbon from the methane gas into graphite (which is chemically just carbon in its solid form) which is an important component in lithium-ion batteries.
The HAZER Process is estimated to produce hydrogen with at least 50% emission reduction over alternative fossil-fuel based hydrogen production like Steam Methane Reforming (SMR). The graphite they produce also offers a greener alternative to naturally mined graphite and doesn’t use the harsh chemicals currently required to produce synthetic graphite.
Based on the success of the development at the University of Western Australia, Hazer Group was founded in 2010 to commercialise the technology. Five years later, in December 2015, it listed on the ASX (ticker: HZR).
Moving from research to production
For many new and exciting cutting-edge technologies, the challenge comes in taking a process or technology that works in a university or research lab and scaling it to work at much larger scales, and then, ideally, finding a way to do it profitability. That has been the downfall of many exciting technologies over time.
This slide from Hazer Group’s recent presentation at the ASX Small & Mid Cap Conference tells that story:
Starting from a 1g batch in 2007, to a 100g batch, to a 1kg batch and then on to a pilot plant that processed 2kg/hour, and ultimately to a plant operating to produce 60kg of hydrogen per hour, you can see the way that Hazer Group have scaled their technology over time.
To get a better sense of how Hazer Group’s pilot plant operated, we came across this short video walkthrough.
Where to next for Hazer Group?
Hazer Group is now working to take their technology to the world. The company has inked deals with a number of large industrial and energy companies to explore the use of their technology and the HAZER Process.
In an update to the market in February 2024, Hazer Group pointed to France, Japan and Canada as the countries where their partnerships are most developed.
However, investor attention should remain closer to home at their Commercial Demonstration Plant in Western Australia.
In the same February 2024 update, the company celebrated that in January 2024 the plant had generated its first hydrogen and graphite production. The plant ran continuously for 36 hours with hydrogen and graphite production in line with expectations. Good first steps for Hazer Group.
Finances and balance sheet
The technology story is an exciting one, so the attention turns to the financial picture. The big question for investors is: can Hazer Group generate the money needed – either as revenue or as investment – to scale their technology and get the company to profitability?
First of all, we looked at their income statement and can see that the company isn’t profitable. Not surprising for a company working to develop and scale their technology.
The next thing we review is the money on their balance sheet, where we can see that the company had $9 million in cash at the end of the last financial year (June 2023). Which suggests it needed to raise money from investors.
The company has just completed a ~$9m capital raise and a share placement plan with current shareholders which raised another $5.3m, bringing the total raised to $14.3 million. According to their February 2024 presentation this will help them significantly progress their work in Australia, as well as partnerships in Canada, France and Japan.
It is important for investors to understand that this may not be the last capital raise Hazer Group has to conduct as it works towards scale and profitability. Company management will be hoping that by achieving these milestones, any future capital raises would be at higher share prices.
Our final thoughts on Hazer Group
There is no doubt that hydrogen will play an important role in our future energy mix. Countries like Australia have put significant resources into driving the hydrogen transition and it is exciting to see new and innovative technologies emerge from Australian universities and Australian companies.
Hazer Group’s technology could allow us to take waste gas – for example the methane being generated next to their demonstration plant in Western Australia – and turn it into an economically useful commodity. More than that, producing a crucial commodity for our energy transition.
The challenge for Hazer Group is to get to commercial scale and to generate revenue, while keeping the market engaged to help fund the further development of their technology. We, for one, are hoping they succeed. The scale of the challenge with the global energy transition is enormous, and we’re going to need all the help we can get.