ERTH - Energy Transition Highlights From Norway: Freyr And Equinor

2023-08-16 00:15:00 ET

Summary

• The energy transition is an increasing part of our lives and an increasing part of our portfolio.
• Freyr is going to be the cheapest and greenest battery made in the world.
• Equinor has unique ability to electrify its oil and gas operations, but it goes so much beyond that.

Back from their trip to Norway, Portfolio Manager Shawn Reynolds and Senior Analyst Antonio DePinho highlight two companies they visited that they believe are well-positioned for the energy transition: battery manufacturer Freyr and energy company Equinor.

Transcript

Shawn Reynolds : The energy transition is an increasing part of our lives and an increasing part of our portfolio. We are really intent on getting out and seeing a lot of these new energy transition technologies and business models and seeing them in person, because great aspirations don't necessarily mean that these are going to be fantastic investments.

Freyr Battery

Recently, we traveled to Norway, made a number of different visits to different companies. And one that we visited was Freyr Battery ( FREY ). This is a new technology that is being developed in Norway, obviously a very green country that's very ambitious with regards to its involvement in the energy transition industry. And Freyr is going to be the cheapest and greenest battery made in the world. It uses a technology that's going to be about 60% cheaper than normal technologies and it's going to have a much, much lower carbon footprint. Part of that is due to the fact that they are generating most of their electricity used in their manufacturing plant that comes from Norway's very, very prominent hydropower industry, but also looking at other ways to really make their carbon footprint much more attractive.

Freyr is headquartered in a town called Mo I Rana in central Norway, really just south of the Arctic Circle. Interesting town in that it's very industrial. It was developed after World War II. Put where it is on the edge of this fjord, very deep port, that can be reached by large ships, large shipping orientation there as well, but it'll be very difficult to get there across the land. But what Freyr is doing in Mo I Rana is right now they have two different plants. They have a customer qualification plant, which sounds kind of small. It's actually quite large. It's not a Gigafactory. And batteries tend to be talked about in terms of gigafactories. This is more or less like a megafactory. And it's a pilot plant, but it's quite large and could stand alone itself.

But they're also building a gigafactory. They call it Giga Arctic. And Giga Arctic is under construction. And it is one of the largest buildings ever built in Norway. In fact, I think it's the third largest building ever. And when it's complete, it will be one of the key sources of batteries in Europe. It will compete with several others in Europe, but as I said before it will be the cheapest and the greenest as far as Norway goes. It'll be one of the most important and have a huge amount of focus with regards to the government as well as the overall economy. They are also building a factory in the U.S., so they're planning to and possibly again in other parts of the Nordic region.

The really interesting thing about being in this town is that, as I said before, it's industrial, but it's also very, very remote. They are attracting huge amounts of talent in terms of intellectual and engineering capabilities, but also with regards to just all the ancillary industries. They are having a boom effect on this town. And you really saw a huge amount of support from the town members, from the town government, as well as from the federal government, and eventually we expect that they will get something similar to an IRA - which is the Inflation Reduction Act incentives that we've had here in the United States. There's going to be something similar to that happening in Norway and it's really quite imminent.

Equinor

Antonio DePinho : Equinor ( EQNR ) has a very unique ability to empower sustainability by integrating their oil and gas operations with renewable energy.

During our trip to Norway, we visited Johan Sverdrup, one of the largest fields in the North Sea, specifically the Norwegian continental shelf. And what makes that field so unique? It's its size, but even more so the fact that Equinor was able to electrify the field by running powers from shore. And by doing so, they were able to reduce the carbon footprint of the field down to 0.67 kilograms of CO2 per barrel and that compares with the global average of 17 kilograms of CO2 per barrel.

But electrifying Johan Sverdrup was not a small task. This is one of the largest fields in Norway, the third largest, currently producing 750,000 barrels of production per day. And the field itself has five platforms. It's 1.2 kilometers from one end to the other across those five platforms.

This field alone will be able to provide to the shareholders and to the Norwegian government approximately $20 billion of revenue per year.

We talked about Equinor's unique ability to electrify their oil and gas operations, but it goes so much beyond that. They have a very unique offshore wind portfolio in the North Sea and the ability to expand that portfolio worldwide. And they also have a leading position in carbon capture, utilization and storage, which we believe those three pillars puts them in a leading role globally to decarbonize their global oil and gas operations.

That is also important because from an international point of view, they will be able to use these three pillars to help other governments decarbonize their oil and gas, to decarbonize their oil and gas industry.

All this is a testimony of Equinor's ability to deliver on projects ahead of schedule and under budget, which is a unique part of their DNA. "One team" is a slogan they use to describe their team, their employees, and everyone that makes all this performance possible. But for me, what I witnessed in those platforms was absolutely incredible. I saw engagement. I saw passion for the company. I saw passion for the assets and the fields they run. I saw passions for the projects they deliver, and that's very unique.

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