Chariot Ltd. (CHAR:AIM) is acquiring ENEO Water in an all-share consideration of US$0.5 million and a possible US$0.5 million milestone payment due on the financial close of further water projects, reported Auctus Advisors analyst Stephane Foucaud in a Jan. 30 research note.
ENEO Water produces desalinated water using a solar-powered, reverse osmosis technology, Foucaud noted. Currently, the company is developing a proof of concept at a wind farm, under construction, on the Red Sea in Djibouti. The goal is to provide local communities access to potable water for the next two decades. The project, only requiring a few hundred thousand U.S. dollars of capex, should be profitable, the analyst wrote.
"Bringing water desalination capabilities in-house is important for [Chariot's] green hydrogen business," wrote Foucaud. Along with green hydrogen, oil, and gas explorer Chariot is developing transitional gas and transitional power projects in Africa.
Desalination Ability Needed
There are two key benefits to Chariot of having water desalination ability, Foucaud pointed out.
"Chariot continues to be a value story with very near-term catalysts," Foucaud wrote.
One, the capability will derisk its green hydrogen projects, such as the 10-gigawatt Project Nour in Mauritania. Because in this and other African countries' access to freshwater is problematic, and green hydrogen projects need large amounts of it, seawater will have to be desalinated and used instead.
Two, having proven water desalination experience could also advantage Chariot when competing for development projects, wrote Foucaud.
Near-Term Catalysts
Auctus has a £0.55 per share target price on Chariot. This implies a potential 244% return for investors, given the stock is currently trading at about £0.16 per share.
"Chariot continues to be a value story with very near-term catalysts," Foucaud wrote.
Potential stock-moving events include Chariot finalizing gas sales agreements, securing debt funding, and taking a final investment decision (FID) at its Anchois gas project in Morocco. Others are the energy company taking FID on the South Africa, Zambia, and Zimbabwe power projects.
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Disclosures For Auctus Advisors, Chariot Ltd., January 30, 2023
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