Hydrogen Utopia’s Irish Deal And That Mitsubishi Problem

Trade Hydrogen Utopia Shares Your Capital Is At Risk
Tim Worstall
Updated: 27 Apr 2022

Key points:

Hydrogen Utopia (LON: HUI) has announced a deal for a facility in Ireland. This will work with waste plastic to produce the hydrogen which the green revolution will require. There will also be side products of wax and so on.

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We also need to consider the effect of this on Powerhouse Energy. To do that, we need to understand the basic business arrangement here. Powerhouse develops the technology which can be used to process waste plastics into hydrogen, those waxes and so on. This is clearly a business with an interesting future. We in the rich countries have largely banned the simplest method of disposing of plastic waste – incineration – and are rapidly trying to do the same to the next option, exporting to poor countries. So, a method of domestic processing is desired. This is what Powerhouse say they have.

On the other hand Powerhouse doesn’t want to actually run the plants. The business reason here is that setting up the local collection networks to provide the feedstock is something that requires local knowledge. So, better to partner up with people in each location. The site or the local network is run locally, using Powerhouse’s technology and paying a royalty for doing so.

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Which is where Hydrogen Utopia comes in, they’re the spin-off from Powerhouse making these more direct deals. The local plants become adventures between HUI and the local waste processor, paying royalties back up to Powerhouse.

Assuming that the local deals can be made, then that’s a perfectly sensible business structure. The proof of any such structure coming from whether it, in fact, works, rather than whether it looks like it will on paper.

This is where a certain amount of care has to be taken of course. Because the success of any such local plant is going to depend upon the quality of the local partner, their knowledge, waste collection network and so on. That’s just the price of using partnerships to expand rapidly, a reliance on the quality of the partners.

It’s possible to think that perhaps Hydrogen Utopia isn’t quite selective enough on this. Back a bit PHE jumped on the announcement of a Mitsubishi/Powerhouse deal, done through HUI. We later found out that this was actually discussion with a bloke who had been hanging around the Mitsubishi stand at a trade show. Mitsubishi themselves had nothing to do with it and knew nothing about it.

So, while announcements of HUI deals to build plants are a validation of that basic business approach, exactly what is needed to make it work, there’s a certain market insistence on seeing the details of such things now. We’ve rather moved into a Jerry Maguire world of “Show me the money” perhaps. Everyone agrees that mistakes both can and will be made in business. But having made this particular one it might be useful to expect both Hydrogen Utopia and Powerhouse Energy shares to move on actual cashflows and plants, not news of deals that might lead to them.

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