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FINSUM

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Over the past 12 months, FuelCell Energy, a global leader in "green" fuel cell technology, reached a number of milestones that testify to the ongoing growth and potential of the hydrogen fuel market. In May 2020, the company announced its production and delivery of over 10 million megawatt hours (MWH) since the first commercial installation.

Towards the end of the year, this was followed by the successful sale of an extra 39,696,320 shares of common stock, in order to raise capital for further expansion. The offering generated aggregate gross proceeds of $162.5 million for the company and its stock price is up over 600% compared to six months ago[1].

The achievement of 10 million MWH reflects the growing desire for green alternatives to fossil fuels. The increase in serious natural events caused by climate change, such as wildfires, avalanches, hurricanes, drought, and heatwaves, are driving global demand for environmentally-friendly fuels that will reduce carbon emissions. National governments and international organizations have expressed support for clean energy through both policy-making and financial investments.

A number of world leaders set carbon-zero targets through accords like the Paris Climate Agreement, and need to act quickly to meet those commitments. Although there is a number of green energy alternatives, such as solar power, wind power, biomass energy, and electrification, they aren't able to provide power on a sufficient, cost-effective, and reliable enough basis to replace fossil fuels in a large-scale manner. Additionally, certain use cases like industrial manufacturing require molecule-based fuels and can't be converted to electric power. It's estimated that carbon emissions could be cut by up to 30% by replacing these fuel sources with green hydrogen[2] .

Hydrogen fuel can meet these needs. Hydrogen is energy-dense, offering long-duration discharge cycles and the ability to meet peak demand. Hydrogen molecules are available in abundance across the planet, but they usually appear in a compound with other elements. Fuel producers like FuelCell Energy use electrolysis to release hydrogen molecules from their compound. The molecules are denser than air, so they are stored and transported in pressurized containers until they are compressed into fuel cells which can transfer the energy as fuel. When the power for electrolysis comes from renewable energy sources, like those used by FuelCell Energy, the hydrogen is "green hydrogen" and is considered to produce barely any carbon emissions.

FuelCell Energy's 10 million MWH milestone is testimony to both the efficacy of and the demand for green hydrogen. The company supplies clean energy to a number of customers, including hospitals, municipalities, utilities companies, large-scale microgrids, industrial applications, pharmacology research facilities, and more, through SureSource™ fuel cell power platforms installed across 3 continents. These clients appreciate the consistency of FuelCell Energy's green energy supply, the price, and the knowledge that their power consumption has had close to zero impact on the environment. It's estimated that FuelCell Energy's 10 million MWH prevented the release of the equivalent of 1.5 million tons of CO2 and 5,000 tons of nitrogen oxides.

The speed with which FuelCell Energy's extra stock was purchased in December 2020 is further proof of public confidence in the opportunity a fuel cell ETF may offer, and a general awareness of the value of more efficient and clean energy sources. “The unique attributes of the SureSource™ platforms enable improvements in energy efficiency while simultaneously reducing emissions and costs for our customers,” said Jason Few, CEO of FuelCell Energy. “Higher efficiency drives better economics and environmental stewardship, supporting both social responsibility goals and public policy objectives while providing a lower carbon footprint[3].

Founded in 1969 in the US, FuelCell Energy has spent 5 decades developing its SureSource™ power plants, which are currently operating across the world, including in South Korea, the US, Germany, and Switzerland. FuelCell Energy runs the world's largest fuel cell park in South Korea, which provides 59 megawatts of electricity and district heating to a number of customers, as well as the US' largest fuel cell park in Connecticut.

The company installs, operates, and maintains power platforms for leading utility companies, municipalities, industrial enterprises, and global commercial organizations that need trustworthy and resilient power, including on-site power, utility grid support, distributed hydrogen fuel cells, and micro-grid and multi-megawatt applications. Its turnkey solution makes it easy for organizations and enterprises to switch to a more environmentally-friendly energy alternative without hassle, and without risking gaps in its power supply.

The company also offers SureSource™ Recovery plants for natural gas pipeline applications, to harness "free" energy from the pressure-reduction process of natural gas and use it to generate extra power without extra emissions. Another product is the SureSource™ Capture solution, which separates and concentrates CO2 emissions from the flue gases of power plants that use biomass, coal, or natural gas. SureSource™ Capture destroys approximately 70% of the pollutants released by the plant, while using the flue gases to produce efficient power.

Recently, the company signed an $8 million contract with the US Department of Energy (DoE) to extend the lifecycle of America's aging nuclear power plants. FuelCell energy will work together with the DoE to explore whether the nuclear plants can divert excess electricity and heat into fuel cells during periods of low demand, and return it to users as electricity when needed.

As companies like FuelCell demonstrate the promise of clean energy, we believe it's a good time to invest in the disruptive and innovative potential of green hydrogen stocks. In order to reduce the risk of overexposure to a single nascent green energy stock, it may be prudent for those seeking participation to invest in a diversified hydrogen ETF, like HDRO, recently launched by Defiance ETF. HDRO is the first US-listed clean energy ETF that diversifies investment in the burgeoning clean energy sector. The ETF track the rules-based BlueStar Global Hydrogen & Next Gen Fuel Cell Index, spreading investment across a number of promising fuel cell stocks and enabling investors to support green energy and a cleaner planet, while tapping into the possibility of potential growth.

n.b. This content was composed and paid-for by Defiance ETFs and is not FINSUM editorial.

Citations:

  1. FuelCell Energy, Inc. (FCEL) , Historical Data, Yahoo Finance. https://finance.yahoo.com/quote/FCEL/history?period1=1599609600&period2=1615248000&interval=1mo&filter=history&frequency=1mo&includeAdjustedClose=true
  2. BNEF, California Fuel Cell Partnership, BofA Global Research
  3. "FuelCell Energy Celebrates Significant 10 Million MWH Milestone; Provides Clean, Resilient, Secure Power across Multiple Applications" Press release, May 4, 2020. https://investor.fce.com/press-releases/press-release-details/2020/FuelCell-Energy-Celebrates-Significant-10-Million-MWH-Milestone-Provides-Clean-Resilient-Secure-Power-across-Multiple-Applications/default.aspx

The Funds’ investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company. Please read it carefully before investing. A hard copy of the prospectus can be requested by calling 833.333.9383.

Investing involves risk. Principal loss is possible. As an ETF, the fund may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund is not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index. A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. Specifically, the Index (and as a result, the Fund) is expected to be concentrated in hydrogen and fuel cell companies. Such companies may depend largely on the availability of hydrogen gas, certain third-party key suppliers for components in their products, and a small number of customers for a significant portion of their business. The Fund is considered to be non-diversified, so it may invest more of its assets in the securities of a single issuer or a smaller number of issuers. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability. This risk is magnified in emerging markets. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies.

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Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. Click here for current holdings information.

HDRO is distributed by Foreside Fund Services, LLC.

(New York)

Some analysts think that investment grade (IG) bonds might see some very rough times ahead. In fact, one analyst from Pavilion Global Markets says that IG bonds have “virtually no value proposition under any given economic scenario”. Think about the following package of information taken as a whole: 1. iShares iBoxx $ Investment Grade Corporate Bond ETF has lost 6.6% this year; 2. IG yields are well below 6.6%; 3. Investors have been pouring money in IG bond mutual funds and ETFs. So IG bonds are losing value much more quickly than they are yielding, which spells a recipe for disaster to some. According to the same analyst “be mindful of the potential for significant outflows in the days to come”.


FINSUM: We can’t say we agree here. While fixed income as a whole looks fragile right now, the losses have provided room for IG bonds to appreciate as the economy and earnings improve. We do not think it will be all bad news.

(Chicago)

There is a very large, but little-discussed issue when going independent. When you move from being an employee advisor to an independent, your health insurance situation can be difficult. Not only is there the issue of keeping your health insurance intact immediately following your departure, but you also need to establish a significant health insurance plan with an insurer that can support your current and future employees. So it is good news to hear that the Financial Services Institute has launched a new program aimed at helping advisors with this transition. Not only will the FSI help with transitioning, but they can also provide cost savings.


FINSUM: This seems like a very good idea. This is an issue for everyone transitioning to owning a small business, not just advisors. Learn more here

(Washington)

This week was a big one for infrastructure stocks. After years of discussion, Biden took action and put forth an eye-opening $3 tn package (in two parts) for American infrastructure. The package would focus on infrastructure, education, work force development, and fighting climate change. The aim is to make the economy more productive. However, for the stock market, one of the immediate benefits is how such government dollars would affect infrastructure stocks. Most specifically, look at the following sectors: machines, construction, and materials stocks.


FINSUM: $3 tn is a great deal of money, and a lot of it will likely flow into the private sector to fulfil these mandates. Time to dig in and pick winners. We will continue coverage on this in the coming week.

Wednesday, 24 March 2021 17:30

ESG Grows and Branches into New Territory

(New York)

The Pandemic has shifted the paradigm for many investors as they look to environmental, social, and governance (ESG) to make up a larger share of their portfolio. ESG will shape the future of investing but there is a new way to invest in green companies with a new twist. Sustainably linked bonds (SLB) allow firms to receive money for green energy initiatives but rather they will pay a penalty if they don’t meet expectations. Marilyn Ceci head of ESG development at JP Morgan expects SLB to hit $120-150 billion despite issuance since inception being only around $20 billion. SLB isn’t a threat to ESG as the industry is expected to grow from $270 billion last year to over $400 billion this year, but rather a compliment to the growing industry. ESG's ability to withstand the full business cycle is a testament to its future. FINSUM: SLB’s offer many companies a way to a greener future without an explicit plan, and are a reflection of how large ESG is growing. Other companies need a way to keep up with this burgeoning bond market.

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