HydrogenOne Capital Growth (HGEN), the UK’s first closed-end fund investing in the nascent clean hydrogen sector, has raised £107.4m, scraping over the £100m minimum hurdle which had been set but launching with well under half its £250m target.
Its shares will start trading tomorrow at 100p.
The modest raise was helped over the line by a cornerstone investment from Ineos. The UK chemicals giant, which is majority-owned by billionaire Jim Ratcliffe, agreed to invest £25m in exchange for the right to co-investment in projects with HGEN, meaning Ineos will own just over 23% of the shares at launch.
‘This [initial public offering] marks the start for the first London listed fund dedicated to the clean hydrogen sector,’ said Simon Hogan, the trust’s chair.
‘HydrogenOne is for energy investors who want to move beyond net zero now, not later, and deploy substantial growth capital into the solutions underpinning the energy transition.’
Laith Khalaf, financial analyst at online broker AJ Bell, said he was ‘not hugely surprised HydrogenOne just got off the ground’ after Liontrust’s recent failure to launch a broader ESG trust investing with sustainable principles.
‘This is a much more niche investment and was fortunate to have picked up £25 million from Ineos as a cornerstone investor,’ he said.
‘Looking forward clearly the trust’s fortunes are tied into the prospects for the clean hydrogen sector, and as with any technological innovation, investors should ensure they are not over-exposed lest the sector suffers from lack of take up or obsolescence.’
Some investors may have been put off by its relatively high charges. On private equity investments, which will make up half of the portfolio, HGEN will pay a 1.5% annual fee to fund manager HydrogenOne Capital with a 15% performance fee on annual returns above 8%.
HydrogenOne Capital is led by two oil and gas industry veterans. Richard Hulf, a former Artemis Global Energy fund manager who previously worked at Exxon, will run the portfolio with JJ Traynor, who had a long spell at Shell (RDSB) and latterly at Sound Energy (SOU).
Hulf told Citywire Investment Trust Insider that investors like Bill Gates and Amazon had also been flooding into private businesses in the sector recently, suggesting the exciting opportunity.
The unlisted investments will be in areas like fuel cells and electrolyser manufacturing, which support hydrogen’s growing role in the transition to a low-carbon economy.
The other half of the portfolio will be invested in building projects, such as electrolysers, which create hydrogen for industrial use.
Lastly, longer term about 10% of trust will be in listed hydrogen stocks, though this will be higher initially as the managers deploy the funds.
Corporate broker Panmure Gordon was the company’s financial adviser and ran the fund-raising with the help of Kepler Cheuvreux.
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