Hydrogen Utopia And Powerhouse Energy – Don’t Believe The Gossip

Trade PHE Shares Your Capital Is At Risk
Tim Worstall
Updated: 13 May 2022

Key points:

Both Hydrogen Utopia (AQSE: HUI) and Powerhouse Energy (LON: PHE) have made information releases concerning market gossip. Apparently, a trading board out there has the information that the two are to have a joint venture in Ireland. As the two announcements point out, this is a little premature. HUI is definitely looking for a partner in such an adventure, PHE has the right sort of technology to be that partner, they’re talking to each other. But no deal has been agreed as of yet.

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The irredeemably cynical among us might ponder that the Powerhouse announcement was fully two days before the Hydrogen Utopia one. Which might be – only by the truly cynical – taken as evidence about who would like the story to be true more.

The background to this is Hydrogen’s announced tie-up with Trifol Resources. That is in Ireland, that is a waste to hydrogen project and it is the sort of thing that could well use Powehouse’s technology. But that does not – as the stock market notes from both companies show – mean that it’s a done deal as yet. Nor is any other such deal sorted.

Also Read: Hydrogen Utopia’s Irish Deal And That Mitsubishi Problem

As to whether a deal will be done, well, it looks reasonable if it is. Powerhouse Energy sees itself as a technology developer which then gets licenced to other companies to deploy. This enables market expansion at much higher speed and lower capital cost at the expense, of course, of giving up some of the potential profit. Hydrogen Utopia sees itself as a builder and runner of such plants. It’s also an offshoot of Powerhouse recently floated separately. So we might think that a deal could be done.

But for Powerhouse it’s not true that any deal is good enough. Yes, near any deal is revenue to cover the costs of the tech development – marginal revenue with zero costs does feed straight through to the bottom line. But there’s also an opportunity cost. Licencing on bad terms for an area means that this kills the opportunity to licence to another, for the same area, on better terms. HUI would of course like the very finest terms it can gain, PHE will be insistent on gaining better than it thinks it can gain from anyone else.

That’s the tension within the negotiations. This isn’t insuperable, this just makes it exactly the same as every other commercial negotiation – each side ending up willing to settle for the least bad deal it can get.

The real point of this story though is that we shouldn’t believe everything we read on trading boards. Markets are always full of gossip because they’re full of human beings. HUI and PHE are talking to each other but there is no done deal.

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