These two companies are the Little and Large of the energysector. So which one has the biggest future ahead of it?
Youve got the power
Energy storage and clean-fuel companyITM Power(LSE: ITM)is operating in an exciting but high-risk area, with plenty of potential but also the dangerof going bust on the coin-flip of government policy or technological change. Right now, its going from strength to strength,as it looks to expand its UK hydrogen refuelling stations and contracts. The 49m market cap posted afull-year pre-tax loss of 4.36min Julybut has justsigned two high-profile refuelling contracts this month.
The firstwaswithHyundai Motor UK, for refuelling its iX35 Fuel Cell Vehicle fleet. Hyundai joinsToyota, Commercial Group, Arcola Energy and Arval as fuel customers.ITM currently has 16.85m of projects under contract and a further 4.15m of contracts in the final stages of negotiation, making a total of 21m, up from16.32m in July. Just 10 days later it added Europcar UK to the list,creating whatITM chief executive Dr Graham Cooley called the largest privately owned fleet of hydrogen cars for chauffeur drive and corporate rental.
Bucks fizz
Last week it wasgranted full planning permission from South Bucks District Council to construct a hydrogen refuelling station (HRS) at the Shell filling station, Beaconsfield, to open next spring. It also has full permission for other HRS ops at Shell stations based in Gatwick, Kollam and Cambridge. Jane Lindsay-Green, Shell UK retail future fuels manager, hailed it as another example of Shells commitment to providing low carbon fuels for the future.
ITMs share price has doubled to 24p since hitting a low of 12p in mid-February, leavingit close to its 52-week high. Its increasingly impressive pipeline augurs well for its early-stage technology, but it still has a long and risky road ahead of it.
Unsure of Shell
Youcould say the same about oil giant Royal Dutch Shell (LSE: RDSB) right now, as it continues to feel the pain of the low oil price. Brent Crudeis rising towards $47 a barrel over growing hopes that Saudi Arabia willdrop its pump and dump oil policy, after failing to drownUS shale drillers. The recent discovery of the 20bn barrel Wolfcamp Shale geologic formation in Texas, which alsocontains an estimated 16trn cubic feet of natural gas and 1.6bn barrels of natural gas liquids, suggests supply could remain high whatever Opec decides. So dont expect salvation from this quarter.
Chief executive Ben van Beurden has worked hard to offset falling oil, gas and liquefied natural gas prices by cutting costs and bolting on Februarys acquisition, BG Group, and this helped boost Q3 earnings by 18% to $2.8bn year-on-year, easily beating consensus forecasts. The share price is up 25% over the past year, partly due to Brexit, as its dollar dividend is now worth more to UK investors, but Shell still yields a juicy 5.87%.Net debt of$77.8bn isaworry, and cheap oil could continue to inflict damage. Remarkably, ITM looks to have a smootherpath ahead of it right now.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Royal Dutch Shell B. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
