Nel ASA, Klimat X Developments, BYD - Green business: The Success Factor of Climate Neutrality

Nel ASA - Valuation still high

In a world that is constantly looking for environmentally friendly energy solutions, Nel ASA is considered one of the pioneers in hydrogen technology. With its visionary focus on renewable energies, the Company can significantly contribute to climate neutrality. Nel specializes in electrolysers that have been developed for the production of green hydrogen. The aim is to replace fossil fuels and thereby reduce global CO2 emissions. This energy conversion and storage can be used in industry, transportation and other areas.

Despite these promising prospects, Nel ASA faces practical problems. Hurdles include technological challenges that impact cost and production efficiency, as well as a yet-to-be-developed global hydrogen infrastructure. These factors are currently limiting the speed at which Nel can scale its products in the market. As a result, the Company is not making money and cash is dwindling. Due to the hype in 2021, the Company was significantly overvalued, and in times of rising interest rates, it will be challenging to find new financing. In addition, no significant orders have been acquired in recent months.

Worse still, an order for 40 megawatts of electrolysers was even cancelled. It is, therefore, not surprising that analysts are increasingly lowering their thumbs. In principle, the prospects for hydrogen are good, and governments are also promoting this technology, but the companies must also operate profitably. Otherwise, increasing the share price in the long term will be difficult. On the one hand, there is the immense potential to make a significant contribution to the global energy transition. On the other hand, investors want to see profits, which are currently not in sight at Nel ASA. At the current share price of NOK 5.23, the Company has a market capitalization of NOK 8.7 billion, equivalent to EUR 766 million. That is high for a company that is not yet making a profit.

Klimat X Developments - New financing partner

Klimat X Developments focuses on the development of nature-based solutions to combat climate change. Contracted lands are either newly afforested or reforested, generating CO2 offset credits through the carbon sequestration of plants. These CO2 certificates are sold to companies that want to improve their carbon footprint. Many large companies are even aiming for carbon neutrality. According to a research report by Trove, renaturation projects generate around 63% more revenue than other projects. While carbon prices were between USD 11 and USD 16 per ton at the end of 2023, the EU, the IMF and the WTO want them to rise to USD 85 per ton by 2030.

This demonstrates that Klimat X can generate high recurring revenues with its projects. The attractiveness of the business model is also reflected in the announcement on December 18, when the Company was able to secure its first financing partner for a forest restoration project in Sierra Leone with the British BP Carbon Trading Limited (BP). The USD 2.5 million from the financing will be used to plant and rehabilitate 5,000 hectares, generating around 1.9 million tons of emission certificates over the duration of the project. This will also benefit small farmers, who will be compensated for leasing the land. A total of 50,000 hectares of rainforest are to be reforested, 20,000 hectares of which belong to smallholders.

On January 8, the Company announced the completion of all milestones for the third payout under a pre-sale agreement with a Fortune 100 company. In the past year, 1,000 hectares were planted**, and the project plan was submitted to an independent validation company for final approval. The planting work has already been carried out according to the new Verra remediation protocol in order to obtain the highest quality carbon credits. Interested investors should make a note of February 21. On this day, the CEO James Tansey will present the Company live and answer questions at the 10th International Investment Forum. The share, which reached a high of CAD 0.245 last year, is currently trading at just CAD 0.085.

BYD - Takeover of a lithium company?

BYD has not only established itself as a leading electric car manufacturer, but also as an important symbol of the global transformation towards zero-emission mobility. As the world recognizes the urgent need to reduce CO2 emissions to combat climate change, BYD plays a vital role in this ecological race with its extensive range of electric vehicles. The Company, which has its origins as a battery producer, is doing many things differently from the well-known car manufacturers. For example, they have control over their supply chain as they produce not only batteries for their vehicles but also semiconductor chips, which were scarce a year ago.

According to the Financial Times, the Company is considering a takeover of the Brazilian company Sigma Lithium to secure the supply of lithium for battery production. Given the expected increase in demand for electric vehicles and the fall in lithium prices, this could be a good moment. It is unclear whether it will be a takeover; a collaboration or a supply agreement are also on the table. Securing the supply of sufficient lithium makes sense in light of the fact that BYD is planning to build a factory in Brazil.

The Company hosted its BYD "Dream Day" on January 16. The new driver assistance systems were presented to the public, which could provide the share with new impetus. On January 17, the share came under pressure as economic growth lagged slightly behind experts' expectations. The Hang Seng Index, which includes BYD, was particularly affected by this, with a drop of around 6%. The Company has been the largest manufacturer of electric vehicles since the last quarter. The share plummeted with the Index and is currently trading at EUR 22.94.

Pursuing a zero-emission future is a collective endeavour that requires global collaboration and innovation. It also includes hydrogen technology. However, Nel ASA is currently still overvalued and not profitable. The situation is better for Klimat X Developments, which has recently proven once again that it can find partners to finance its business model. Their market capitalization of CAD 7.4 million is still relatively small. The market for carbon credits is poised for significant growth. BYD is committed to environmentally conscious mobility with its electric vehicles since traffic is responsible for a large proportion of emissions.