Metgasco (ASX:MEL) has executed a binding term sheet with private Australian hydrogen counterpart Patriot Hydrogen to acquire the latter across a staged process—sending Metgasco shares up 10%.
Patriot Hydrogen is set to commission later this year a hydrogen manufacturing asset in the Kimberley region, on behalf of Kimberley Clean Energy Pty Ltd (KCE), set for initial pre-development work in the fourth quarter of 2022.
Underpinning that facility are numerous exclusivity agreements towards the production of hydrogen using Patriot’s biomass-to-hydrogen technology.
In July last year, Patriot Hydrogen—owned by renewables investment entity Liberty Energy Capital Pty Ltd—began seeking to expand into the Biochar market with its then-named Patriot 2 Hydrogen (‘P2H’) units.
Its portable hydrogen generator units, separate from the biomass-to-hydrogen gasifier being sent to KCE under today's agreement, are also slated for delivery to the latter.
Under an existing MOU, Patriot is to send up to 75 of those units to KCE to decarbonise its operations, on top of the industrial biomass gasifier underpinning today's stage one agreements.
Metgasco has minted the deal at the same time it is set to commence production from the east coast Vali gas field, also during Q4 of 2022—calling the acquisition part of a diversification strategy.
Between the lines, it is clear Metgasco is seeking to boost its ESG credentials, and take advantage of the portable hydrogen technology which has the potential to become a serious commercial asset.
Under the binding term sheet executed today, the acquisition process looks like this:
Metgasco will deliver its first gasifier unit to KCE with the provision of logistics and financial support (including a “modest” loan) providing for delivery
Metgasco will invest $0.75m into Patriot as the first stage of an option to acquire 100% of Patriot
Metgasco then retains the right to purchase 100% of Patriot via an all-scrip acquisition for $5.9m
The following key conditions are listed:
Meeting of all project deadlines over a six month period, including a profitable transition from diesel fired power delivery
Patriot Hydrogen confirms “to Metgasco’s satisfaction” a power purchase agreement and feedstock contracts for a second energy project by Metgasco
Metgasco shareholders approving the acquisition during the 2022 AGM
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