Investor risk aversion may be driving shares in HydrogenOne Capital Growth (HGEN ) into the ground but that isn’t stopping the UK’s only listed hydrogen fund from continuing to back blue-sky ventures. 

Following a £7m investment in Cranfield Aerospace Solutions (CAeS) a year ago, HGEN has added a further £5m as part of a consortium backing Cranfield’s merger with plane manufacturer Britten-Norman to create a UK champion in small zero-emissions aircraft. 

By joining forces the companies hope to forge the world’s first hydrogen-powered planes ready for take-off in 2026.

CAeS has created a hydrogen-electric fuel cell propulsion system, which can be applied to Britten-Norman’s existing aircraft technology – its Islander is one of the best-selling planes in Europe and has been in continuous production since 1965.

HGEN chairman Simon Hogan said that the £125m investment trust was proud to have led the £10m funding round that could create a new UK leader in green aircraft manufacturing.

‘Our commitment to investing in clean hydrogen for a positive environmental impact is central to this investment that will contribute towards moving global aviation towards zero-emissions operations,’ Hogan said.

Other CAeS investors include Safran Corporate Ventures and UAE-based venture capital firm Strategic Development Fund.

‘While this merger does not represent an exit event, the merger should progress the speed and probability of the current prototypes being successfully brought to market, an event which in turn should provide a significant re-rating of the newly formed business,’ said Liberum analyst Shonil Chande. 

HGEN’s own shares have de-rated in the growth selloff that began four months after its flotation in July 2021. The stock has halved to 49p to trail at a 49% discount to net asset value. This year has been particularly painful with the price falling 37% even as many heavily-sold technology stocks have bounced back. 

At the end of March, the board of the closed-end fund stated it was not aware of any reason for the share price slump that month, causing the stock to jump 22% on one day.