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“The basic principle of investment is that you have a spread of risk,” BPH Energy chief David Breeze told The Market Online in a recent conversation about the unique structure of BPH Energy (ASX:BPH).
You may know BPH Energy as the company that owns a stake in the PEP-11 gas exploration licenceoffshore NSW – an exploration permit that has caused quite a stir in recent years.
Not only because the permit has become the subject of celebrity-led environmental activist campaigns; not only because BPH effectively initiated legal action to sue Scott Morrison, and not only because it’s drawn ire from both Canberra and NSW lawmakers.
There’s also the fact PEP-11 currently stands in approvals limbo waiting a Federal thumbs up or thumbs down at the same time Australian regulator AEMO continues to outline that our proud nation is heading for a potentially crippling market-wide gas shortage.
And you’d be right to point out BPH Energy is thus exposed to risk: uncertain regulatory decisions coming from Australian lawmakers; risk from the messaging of questionable environmental activist campaigns, and, even if PEP-11 is approved, then the risk of energy market volatility.
So, is there a way BPH investors can hedge their bets in the company?
After all, every single Superannuation Fund in Australia effectively invests its members’ money into a series of investments where hedges are fundamentally part of value assessments.
Therein lies the unique value proposition potential of BPH Energy.
The company inherently boasts a diversified portfolio opportunity for investors, making it a unique creature far apart from its peers in the market.
What does that mean?
The short answer: BPH Energy offers investors exposure to natural gas exploration; the emerging ESG-facing hydrogen market, and finally – a world away – world-leading medical technology (‘Medtech’.)
Let’s stick with the energy thematic and discuss the company’s hydrogen investment before we go into the world of healthcare.
Alongside Advent Energy, in which BPH Energy holds a stake (and for which BPH chief David Breeze is a director,) the company effectively holds a 19.5% stake in US-headquartered Clean Hydrogen Technologies (CHT), a Delaware-based company transforming its pilot and commercially proven hydrogen and carbon manufacturing capabilities to large scale industrial.
In short, the company is seeking to make what hydrogen market watchers call ‘turquoise hydrogen’ – that made from natural gas.
The production of hydrogen from natural gas is typically done via the steam reformation of hydrocarbons in natural gas. This is referred to as grey hydrogen since it has over 8 tonnes of CO2 emissions for each tonne of grey hydrogen produced.
‘Blue hydrogen’ is the same as grey hydrogen but there is an ensuing process of capture to ameliorate the CO2 emissions – carbon capture storage.
Green hydrogen is the electrolysis of processed water to produce hydrogen, where the energy source is a renewable source – wind and solar.
Where exactly these colour schemes originate is anyone’s guess, but Twiggy Forrest has glued himself onto ‘green hydrogen’ as much as a small handful of producers drilling for natural hydrogen have started calling themselves purveyors of ‘gold hydrogen.’
While this classification scheme may be, overall, odd – its existence (and ever-growing increase of new colours) points towards the ongoing strength of momentum driving forward the nascent hydrogen industry.
BPH Energy points to figures from some analysts that US hydrogen demand could reach 75 million tonnes of the natural gas alternative by 2050.
And the US Government is serious about getting there.
Joe Biden’s game-changing Inflation Reduction Act (IRA) is already in place (bar a Trump election) to supply some US$9.5B in funding to the domestic US hydrogen industry through a series of different funding vehicles, subsidies, and other initiatives.
And with that focus from Washington on new ESG-linked technologies, BPH’s stake in CHT could prove beneficial.
CHT can produce turquoise hydrogen gas from the hydrocarbons in natural gas with no CO2 emissions during the process – and hydrogen isn’t the only marketable product at the end of that process. It also produces a set of carbon products which includes carbon nano fibres, used for their anti-corrosive and conductivity.
CHT has also had a novel concept for the manufacturing of varying carbon nano objects including graphite, carbon nano fibres, carbon nanotubes and graphene – in the same device – accepted by the US patent office for patent submission, according to BPH.
Those carbon products have a vast range of compelling attributes including low resistance for batteries, anti-corrosive, heat tolerant, more flexible, and stronger than steel for a broader range of applications.
The actual manufacturing tech is modular in nature and can be easily scaled up (or down) at either the upstream or downstream end of the hydrogen supply chain.
So, BPH Energy has a 36 % interest in Advent Energy which holds an 85% interest in the PEP-11 licence, and a 19.5% stake in CHT – a company with a process to produce both clean turquoise hydrogen gas, and, a saleable solid set of carbon byproducts – with no CO2 emissions.
But these other investments are still linked to energy volatility. What if hydrogen momentum falls over, like Internet-of-Things (IoT)? What if EV sales slowdown or the market turns back to petrol cars – or public transport – making carbon black less desirable?
BPH Energy has a whole area under its corporate structure entirely unrelated to energy.
It’s not electricity trading, it’s not renewables, and it isn’t hard-rock-mining.
It’s Medtech.
Why is an energy company doing healthcare?
In BPH Energy’s corporate history, the healthcare division came first. So, there’s that.
But if you zoom out and look at BPH Energy chief David Breeze’s overall strategy, it starts to become clearer.
“If you look at every major superannuation company across Australia, diversification is exactly what they do,” Breeze told The Market Online.
This goes further towards the philosophy with which Breeze views market opportunities – BPH Energy is so named to reflect its flagship asset, the PEP-11 permit. But on the whole, BPH is a company that looks for value opportunities in multi-billion-dollar markets with unmet needs.
Australia’s gas market is one such billion-dollar market with unmet needs. So is the battery supply chain, and the overall emerging hydrogen market.
And then there’s another multibillion market with unmet needs – MedTech.
And that’s where the company’s stake in Cortical Dynamics comes in. Let’s pivot into the healthcare space.
One of the more complex parts of intensive surgery is, itself, anaesthesia. Patient anxieties around waking up mid-surgery are widespread.
But it’s not just patient anxieties. Somebody waking up halfway through a surgery reflects a huge legal risk for medical centres, hospitals, and individual doctors, should patients awake mid-way through a heart surgery and experience great trauma, both physical and psychological.
Overdosing a patient with anaesthesia can also be a key risk. This increases the time a surgery recovery takes and increases the risk of patient mortality on the operating table.
This, in turn, presents a whole different kind of legal risk for a hospital.
So, what if there was a way to monitor patients’ brain activity while they were under throughout the surgery in real-time?
That’s where BPH Energy’s Cortical Dynamics comes in.
Looking at Cortical Dynamics
Cortical Dynamics is a neurotechnology developer and medical device manufacturer based in Perth that is commercialising its next generation depth of anaesthesia monitor named BARM™ (Brain Anaesthesia Response Monitor).
Depth of anesthesia tools monitor a patient’s EEG (brain activity) and are used by anesthesiologists in operations where a patient is under a general anesthetic to help them determine and administer optimal drug dosages.
With such technology an anaesthetist can monitor brain activity in real time, and based on that data, adjust dosages accordingly. Non-invasive electrodes are placed on a sedated patient’s head picking up EEG waveforms and this data is analysed by the BARM™ to be displayed on the monitor’s screen in the operating room.
BARM™ leverages unique and innovative proprietary techniques, algorithms, and scientific expertise to provide real-time brain activity monitoring during anaesthesia administration.
BARM™ enables personalised anaesthesia and pain management, awareness detection, and recovery assessment, enhancing patient safety and improving anaesthesia care quality – and potential lifesaver on the operating table.
Cortical has an extensive and expanding global patent portfolio and has been awarded grants and industry accolades and is on the pathway to commercialising BARM™.
Two distributors are already in line – Innomed (Benelux ), and Globaluck in South Korea, will offer the BARM™ generation 2 as the commercial product. BARM™ gen 2 is undergoing final development.
BARM™ Generation 1 has secured FDA (510 K) clearance in the USA, as well as TGA, CE and Korean regulatory approvals. Gen 1 has been trialled at range of hospitals and medical centres internationally, including:
- St. Vincent Private Hospitals in NSW & VIC
- Epworth Private Hospitals Richmond & Freemasons
- Cairns Hospital in QLD
- Southampton General Hospital, UK
- Foch Hospital, France
- Waikato Hospital, NZ
Further, BARM tech has been mentioned in or was informed by several existing high-level scientific research papers going back to the late 90’s.
The company also holds an existing licence and cooperation agreement with Dutch multinational Philips Healthcare; as well as a patent portfolio that includes international registration in the US, ANZ region, Japan, China, and the UK – as well as EU countries including Germany, France, and Sweden.
Summarising diversity
To touch back on Hydrogen, CHTs Turquoise hydrogen will compete with grey hydrogen in all sectors on price, using less energy to produce the energy transition gas with no CO2 emissions.
BPH reports their CNF solid carbon compound was recently tested by a CHT client who manufactures vehicle batteries, where 500 grams of the CHT’s CNF (Carbon Nano Fibres) in a 50kg battery compound increased range from 142 km to 155km, which in their view was an extraordinary result.
The company thus concludes CHT has demonstrated it can derive 2 valuable income streams, energy from turquoise hydrogen and a broad set of applications from its solid carbon from hydrocarbons in natural gas rather than just one income stream from burning natural gas.
All in all: this multi-pronged strategy proves BPH Energy is a stock with diversification and hedging literally inbuilt into its corporate structure.
Both the MedTech offering and CH2 offer near near term value uplift opportunity.
”CHT is already producing hydrogen, and the carbon nanotube composite with alumina has a wide range of applications in commerce and industry including paints, high wear industrial components, aerospace uses, and potential inroads to battery supply chains including enhancing battery charge life,” Breeze added.
“As for Cortical, we’re at the phase where we can turn to commercialisation in the next 12 months. We have an excellent team of people and a CEO who has built around him a network of international experts.
“We have a central component — PEP-11 — but in addition to that we have two segments that offer near immediate value propositions in the next 12 to 24 months.”
