Heavily-discounted HydrogenOne Capital Growth (HGEN ) has enjoyed a stable first quarter after a challenging 2024 which included a manager takeover.

A quarterly update from the £29m portfolio stated that the board and manager are ‘considering a wide range of options to deliver shareholder value, with confidential discussions underway with third parties’. This forms part of their ongoing efforts to get the fund back on course. It currently trades at a painful 74% discount to net asset value (NAV) after it was hit by the collapse of German green hydrogen developer HH2E last year.

There has already been plenty of change underway at the trust, as manager HydrogenOne Capital agreed to sell its business to Cordiant Capital, manager of Cordiant Digital Infrastructure (CORD ) in December. Fund managers Richard Hulf and JJ Traynor remain in charge of the portfolio, which will be renamed Cordiant HydrogenOne when the acquisition completes.

The UK’s only listed hydrogen fund had a relatively stable quarter. Its NAV stood at 89.2p at the end of March, down slightly from 90.3p at the end of December.

Over the year to the end of March, the portfolio (which invests in private clean hydrogen growth technologies and industrial companies) delivered a 21% jump in revenues to £92m year-on-year.

Hulf and Traynor believe there is momentum in the companies they are backing. For example, German industrial electrolyser producer Sunfire completed a €200m (£168m) refinancing, Netherlands-based hydrogen pipeline company Strohm secured a new order from Saudi Aramco, and UK hydrogen flight innovator Cranfield Aerospace Solutions was selected in the next stage of the UK Civil Aviation Authority’s hydrogen challenge.

Other positives over the quarter included increased valuations at Cranfield Aerospace and Bramble Energy, a UK-based fuel cell and portable power solutions group, alongside a lower discount rate, which is used to value future cash flows generated by the assets.

However, these were offset by reductions in the valuations of other companies and fund expenses.

The fund has had a tough time since it launched in 2021. Over the past three years, the NAV is down 5.7%, while the shares have lost 78% of their value.

Nevertheless, Traynor and Hulf remain confident in the prospects for hydrogen. In their annual ‘Hydrogen Handbook’, which was published alongside first quarter results, they said they expect to see continued strong growth in the sector, despite headwinds from financial markets and political uncertainty as a result of new US policies.

The hydrogen sector continues to be driven by air quality and energy security, with global ‘grey’ hydrogen – produced from fossil fuels – worth £175bn a year. However, it produces double the total greenhouse emissions of the UK.

‘Reducing these emissions is the major demand pull for clean hydrogen today, and an imperative for global regulators and heavy industry,’ they said.

The ‘clean’ hydrogen that the fund invests in has ‘a broad range of uses in replacing today’s fossil fuel system, especially for ships, trains, HGV, and power generation’.

Optimism around clean energy that was prevalent post-Covid has been buffeted by supply chain shortages, inflation, high interest rates, and the Russia-Ukraine war, creating a more ‘complex picture’, admitted Hulf and Traynor.

The sharp reversal in the energy transition of the US under Donald Trump’s administration and policy implementation delays in Europe and the UK have also added to the sector’s woes.

However, the managers have more than doubled their projections for clean hydrogen supply by 2027. They said growth is ‘gathering pace’, with $69bn (£51bn) of investment committed to the sector.

Over the past three years, the fund’s shares are down 75.2% which compares to 25.6% by the AIC’s renewable energy infrastructure sector.