The patented gasification technology replaces traditional incineration. Instead of burning, gasification vaporises waste almost instantly into a gas. This prevents the creation of smoke and exhaust gases, instead producing a synthesis gas.

What’s behind Monday’s jump?

EQTEC shares soared on Monday after the company said that full-year revenue for 2021 grew fourfold compared to last year. Management noted that the company was experiencing significantly increased demand due to macro conditions.

Chief executive David Palumbo said that from “post-Covid challenges to COP26 to more recent geopolitical events, we have experienced more demand than ever and are taking our place as a leading technology innovator for fossil fuel replacements.”

The Cork-headquartered firm said it was planning further new and innovative projects to “raise its visibility and range of propositions.”

In its statement, the firm reported unaudited revenues of €9.2m for the year ending December 31, up from €2.2m in 2020. EQTEC also reduced the loss in underlying earnings to €4.7m from €5.8m in 2020. Net assets rose to €43.4m.

The company also completed a £16m fundraiser. The funds will be used towards market, project and capability growth, according to the statement.

Should I buy?

Growth stocks aren’t in vogue right now amid high levels of inflation and rising interest rates. Higher interest rates can cause companies to put their growth plans on hold as the cost of borrowing increases. It can also cause investors to change their approach and look for stocks offering near-term returns in the form of dividends, rather than long-term share price growth. So, that’s one reason why I’d be concerned about EQTEC’s ability to continue growing.

However, the waste-to-energy sector is definitely an area receiving plenty of attention. EQTEC is now active in seven markets, and it currently has three additional plants under construction and 12 projects under development. In addition to the seven markets, it also established formal legal entities in Greece and Croatia, with two more developments expected in 2022. The firm is also intending to enhance its strategic partnerships with Toyota Motors, among others.

It is worth noting that despite Monday’s jump, the stock is trading far below 2021 levels.

However, I think this is quite a speculative pick. Yes, it could take off. But I think it will face difficulties in encouraging wider adoption of its waste-to-energy products. EQTEC is still a very small company too, and one that has not turned a profit in the last five years. I will put this on my watchlist but I do not think I will be buying this stock any time soon.

I feel UK renewable energy companies can benefit tremendously given recent trends. Here are three shares I’m looking at in this space that could explode in 2022.

EVs take off

If I had to pick one industry that grew enormously in 2021, it has to be electric vehicles (EVs). Car giants are increasing their EV offerings and global markets are opening up infrastructure possibilities that could enable the long-needed switch. And this is where firms like Nexus Infrastructure (LSE: NEX) stand to benefit.

The company’s primary focus is civil engineering and outfitting new homes with utilities. But it also specialises in installing EV charging ports in homes. Last year, the government passed legislation that made EV ports mandatory in all new homes in the country from 2022. This is great news for Nexus because it already works with established builders like Persimmon and Taylor Wimpey. EV ports can be an auxiliary service the company provides, which already gives it a large market share in an emerging space.

It should be noted that a lockdown remains possible given the Omicron spread. And Nexus’s primary business, civil engineering, could be affected given rising construction material shortages and inflation. This could eat into revenue and cause its share price to fall. And Nexus shares already look slightly expensive at 222p, at a forward price-to-earnings ratio of 34 times. But I’m watching this renewable energy stock closely to try and find the optimal entry point for 2022 and beyond.

Future power?

Eqtec (LSE:EQT) is a waste-to-energy company that has patented gasification tech to solve two separate environmental issues. The company uses waste to produce gas fuel to power industries. But this innovative tech is a risky pick that has high potential. And a lot of its future revenue rides on massive adoption.

Its share price has remained dormant for nearly a decade now, falling below 10p in 2015 and never recovering. But a new three-year deal with Toyota Motors and two new power plants could breathe life into this renewable energy stock. The company could build recent developments and work towards wider adoption, which is why it is on my watchlist. However, this remains a speculative pick for my portfolio. 

The next company on my list is ITM Power (LSE:ITM). The hydrogen electrolysis machines the company makes separate hydrogen from water and use clean hydrogen as fuel. This process has zero carbon by-products, which is vital. Hydrogen as a fuel source is still in its infancy, in terms of adoption. This makes me optimistic about ITM’s future potential.

Despite impressive tech, the energy firm was plagued by a massive debt pile in 2021, which led to a poor showing last year. The loss-making company expects a 31% increase in projected revenue which could plug the £250m debt hole. And right now, the company is at a crucial point in the market and could take off in 2022, which is why it is on my watchlist.

Has this recent share price weakness presented me with a buying opportunity?

Eqtec’s business  

The firm offers gasification technology solutions for the waste-to-energy sector, which has the potential to reduce waste and meet the growing demand for clean energy.

Gasification is a process that replaces traditional incineration. Instead of burning, gasification vaporises waste almost instantly into a gas. This prevents the creation of smoke and exhaust gases, instead producing a ‘synthesis gas ‘(syngas). Now, syngas can be used for fuel or converted into other forms of energy.

Gasification may then have an important role to play as we move away from fossil fuels. It also helps by optimising waste management and reducing the need for landfill sites.

Eqtec’s Advanced Gasification Technology is patented. There’s one fully operational gasification plant in Movialsa, Spain, of 5.9 MWe (megawatts electric). There are another nine projects in development or construction.

Company financials 

That’s all very well, but the company only generated £2.2m in revenue over 12 months to December 2020. Yet this is forecast to grow to an impressive £15.6m in 2021. However next year, revenue is forecast to grow again, by a huge 274%, to £58.3m. Growth like this might be hard to achieve, though management sounded confident in the interim results back in September.

The company has been loss-making up to now. After a recent equity raise, there should be enough cash on the balance sheet to see it through to profitability. The risk is that if growth does not continue, and the company needs to raise cash again, then shareholders may be diluted further.

Institutional backing

Another good sign is the institutional backing Eqtec has from Amati Global Investors. Amati is a specialist fund management business focusing on small and mid-sized companies. The fund managers say it’s the only company they’ve found that has provided commercial scale gasification with 90% up time for more than six years. The executive team and board members of Eqtec also own shares, which I think shows confidence in the business.

Time to buy?

I think this is a potentially exciting penny stock with huge growth potential in the ESG space. Amati Global Investors speak highly about the technology, and forecasts for revenue this year and next are impressive.

However, I see a lot of execution risk in the development and construction of the future gasification plants. With only one in operation today, there’s a lot depending on the success of these developments. Any delay could seriously impact growth forecasts.

For now, I’m happy placing the stock on my watchlist and seeing how these projects develop. I might miss out on some of the upside, but I think it will improve my risk/reward ratio if I wait a little longer before buying.

Last week, the firm released its interim earnings report, which showed some promising signs of progress. So, is the stock about to make a comeback? And should I consider adding it to my portfolio? Let’s take a look.

The fall of the Eqtec share price

I’ve explored this company before. But as a quick reminder, Eqtec is a waste-to-energy business that has developed a proprietary gasification technology. This system takes in waste plastic as well as biomass and converts it into a clean synthetic gas that can be used as an alternative fuel for gas turbine power plants.

Given that the UK government recently unveiled its plan to eliminate carbon emissions by 2050, it’s easy to see the allure of this business to investors. Even more so when considering that the waste-to-energy market is expected to grow by 80% over the next six years.

But this excitement from investors ultimately translated into a runaway valuation, with the Eqtec share price pushing the business’s market capitalisation to as high as around £270m. By comparison, revenue generated in 2020 came in at a mere €2.23m (£1.91m). With that in mind, it’s pretty clear that the stock was being heavily inflated by unrealistic expectations. So, seeing the Eqtec share price fall throughout 2021 is hardly surprising.

Growth on the horizon

Regardless of how Eqtec’s stock has been performing, the underlying business is making good progress. In its latest interim results, it said the construction of its power plants in California and Greece continued to stay on schedule. Meanwhile, planning permission has been granted for its flagship Billingham project. Once constructed, this facility is estimated to generate enough electricity to power 50,000 homes in the UK. And more recently, the business has signed a new three-year collaboration agreement with Toyota Motors to explore a waste-to-energy solution for its car manufacturing plant in Deeside.

Assuming ongoing contracts are completed on time this year, the firm is set to generate total revenue of €15m (£12.84m) by the end of 2021. That’s about a 580% increase compared to a year ago. Needless to say, if the firm can continue delivering triple-digit growth moving forward, the Eqtec share price could quickly start rising again.

The bottom line

Overall, my views on this business have improved since the last time I looked at it back in April. The progress made during the previous six months is quite encouraging. However, there remains a long road ahead. And even after this year’s decline, the Eqtec share price continues to look too expensive for me. Therefore, I’m still keeping this penny stock on my watchlist.

And that’s the consensus view from analysts because only two institutions appear to be following the company.

This penny stock has low analyst coverage

I’m not surprised by the low coverage from analysts because Eqtec is a small enterprise. At 1.38p, the penny stock has a market capitalisation of around £106m. So, it’s not an absolute tiddler.

But it’s small enough to fly under the radar of many large investment organisations. And low institutional following can sometimes produce opportunities for private investors. That’s especially true if the situation leads to low valuations.

And the Eqtec business looks like it’s on the cusp of producing positive and potentially fast-growing profits in the years ahead. The company says its gasification technology is “at the heart of leading-edge” waste-to-energy plants in Europe and North America with “emerging opportunities” in Asia and the Middle East.

Eqtec designs and builds plants with end-to-end gasification processes, control systems and equipment. And the firm’s projects aim to convert waste into clean energy from municipal solid waste, and from plant, agriculture and forestry wood biomass.

The directors reckon the company’s proprietary and patented advanced gasification technology “sets the global standard.”  And the syngas produced from waste products can be used to generate energy sources at a commercial scale, such as electricity, heat, biofuels, synthetic natural gas and green hydrogen.

The company is confident about its technology and “high-quality” syngas and reckons the business is “disrupting and decarbonising the waste-to-energy industry.”

There’s no doubting the scale of the company’s ambition. And it’s certainly operating in an industry highly relevant to the needs of the modern era.

Meanwhile, July’s trading update outlined progress with several projects. And the company also pointed to an increase in pipeline opportunities that are moving into project development.

Earnings could lag revenue progress

However, despite strong operational progress, to me, the financial performance of the business looks some way behind the share price. Eqtec expects to achieve revenue of around €15m in 2021. And that means the current market capitalisation is just over eight times revenue.

Nevertheless, the company expects to achieve its first year of profitability in 2021. But I reckon earnings will likely be tiny when compared to today’s share price.

On 28 May, the company completed a placing raising a gross £16m to be used to accelerate the growth strategy. And City analysts expect revenue to shoot up to around €55m in 2022.

If achieved, an increase like that would suggest the business is growing very fast. But it’s unclear whether earnings will ramp at a similar pace. My suspicion is that earnings will likely lag behind advancing revenue.

As such, I’d classify the opportunity today with Eqtec as speculative. After all, the share price has risen by almost 180% since November 2020 and was even higher at the beginning of 2021.

I’m a little more cautious than those analysts calling Eqtec a strong buy. But I do think it’s an interesting opportunity. And I’d be inclined to nibble at the penny stock on dips and down-days to hold for the next few years as the growth story unfolds.

A damning IPCC report out on 9 August said the world should expect more extreme weather events like droughts, hurricanes and rising sea levels. This is “code red for humanity”, one United Nations chief said.

So I’ve identified two UK energy stocks I think could help the world solve the water and energy crises we all now face.

MTI Wireless Edge

AIM-listed Israeli firm MTI Wireless Edge (LSE:MWE) builds and supplies 5G wireless antennas for satellites. So why is it in my UK energy stocks list? Well, its water and irrigation subsidiary Mottech Water Management Systems has expanded in Canada. And it has announced a three-year, £175,000 service contract with a “major Canadian city [which has] one of the largest municipal water irrigations systems in the world”.

With wildfires raging and extreme temperatures becoming more common, I see much greater demand for these products in future.

I’ve owned MTI Wireless Edge myself in the past, and sold it for a decent profit. I think now might be a good time for me to buy back in, given the health of the business and its international expansion. 

Q1 results to 31 March 2021 showed profit before tax was up 25%, with earnings per share up 20%. There are still risks though. MTI will need to keep investing heavily in its irrigation control systems, which will be costly.

UK energy stocks 

One way to spot potential future stars in UK energy stocks is to watch when institutions buy in. Altair Group Investment picked up 146 million shares in EQTEC (LSE:EQT) in June. The venture capital giant now owns around 20% of the company. 

EQTEC’s engineers design and build gasification facilities of up to 30MW. These energy plants can process waste materials like forest wood, vegetation and agricultural waste to produce synthetic natural gas or biofuels. 

In May, the company said it had acquired a plant in Italy that could turn waste products into energy with no hazardous emissions. If successful, such energy sources will be critical for the planet in the coming decades. 

The downside

Rich investors in venture capital take on big risks by investing in early stage UK energy stocks. An investment here could just as easily go to zero as anywhere else. And the company has raised money from the market recently, diluting early shareholders. This is a business with costly R&D, so it may well happen again. 

On a brighter note, the £109m company says it expects to become profitable for the first time with FY2021 results. Revenues should grow from €2.2m to €15.5m with a net profit of €3.2m. For FY2022 the business has set even more ambitious revenue and profit targets of €54.9m and €8.25m

Still, if the company fails to reach this high bar, the share price could collapse. 

Benjamin Franklin said nothing is certain in life, except death and taxes. To that aphorism I think we should add climate change. Investing in UK energy stocks could help insulate me and my loved ones against the worst of what’s to come, and help the planet too.

So, the question is, why has the share price suddenly started rising? And should I consider adding the stock to my portfolio? 

The rising EQTEC share price

EQTEC is a clean energy provider. Using its proprietary gasification technology, the firm converts waste products, such as plastics and biomass, into high-quality synthetic gas. This gas can subsequently be used across a wide range of clean energy generation applications, such as hydrogen turbines and biofuels. Needless to say, this sounds like a promising technology, especially since many governments (the UK included) are seeking to become carbon neutral by 2050. 

In May last year, it provided an update on its projects that began sending the share price on an upward trajectory. It announced 10 new commercial deals for its services that have a potential aggregate value of €120m. Given that revenue in 2019 was a mere €1.69m, this is a pretty substantial opportunity. 

But the real driver behind EQTEC’s rising share price appears to be its Billingham project. This facility, which has yet to be completed, is on track to becoming the UK’s first power plant to use its gasification technology. Once brought on-line, it could convert up to 200,000 tonnes of waste into 25 Megawatts of clean electricity. That’s roughly enough to power 50,000 homes.

Taking a step back

While the progress achieved in 2020 is impressive, there is still a long road ahead. EQTEC has acquired the land and planning permission to begin the construction of the Billingham facility. But it may be several years before it starts producing clean energy.

Its new commercial sales are also exciting, but their total value won’t be received for quite some time. Payments from these sales will be completed based on milestone achievements over the next three years. As such, the current most optimistic forecasts indicate a total revenue of €15m in 2021.

Comparing that to EQTEC’s current market capitalisation of £156m does make it look a tad expensive in my eyes, especially since the firm is currently unprofitable. This may change in the near future. But until it does, the company is reliant on outside funding to keep the lights on. Suppose it is unable to secure a source of cash flow from investors or lenders? In that case, its restricted liquidity would likely start causing problems and the EQTEC share price may begin to suffer for it.

The bottom line

The technology and future potential of EQTEC are undoubtedly alluring. But like many other waste-to-energy businesses, it’s very young in its development cycle and remains largely untested. At least that’s what I think.

To me, the EQTEC share price is almost definitely being propped up by investor expectations, which can lead to significant declines if those expectations are not met. Therefore, I won’t be adding the company to my portfolio today. But I will be watching it closely, especially the progress of its Billingham project.

First and foremost, it’s operating in line with the green revolution — turning waste into clean energy. That’s enough to generate considerable interest. The question is, does it have what it takes to provide growth, value and profitability to shareholders?

A meeting of energy and tech

It’s essentially an energy company that has developed the technology to generate safe, clean energy from 50 varieties of feedstock, including agricultural, industrial waste, biomass and plastics. EQTEC does this through the process of advanced gasification. This includes sourcing waste olive oil or biomass and converting it to green energy. It then licenses and sells its technology to a variety of industries involved in sustainable waste elimination and green energy infrastructure. The company also supplies gasification reactors, equipment and design expertise. Sometimes it invests in projects for an equity return too.

Projects in the pipeline

EQTEC has several projects in the pipeline for the year ahead. Its latest deal is with private Greek construction firm Nobilis Pro Energy to develop waste gasification projects. It will use this small project as a template for future work. And EQTEC’s CEO David Palumbo believes this could be repeated five to 10 times in the next two years.

In the UK, EQTEC operates much bigger projects, namely the Deeside RDF project in Wales, the Southport Hybrid Energy Park Project and the Billingham Energy waste gasification and power plant. These require stakeholder capital and considerable oversight. While these are excellent long-term plays, the company is enjoying pursuing smaller projects abroad. This is because they’re easier to get up and running and give EQTEC an excellent opportunity to prove its ability in a shorter timescale.

To this end, the German project is an excellent win because it can set the ball rolling for more opportunities. EQTEC also operates in the US, where it’s making good progress despite several headwinds.

EQTEC share price volatility

Back in 2013, the share price was at 31p. It’s now below 3p, but 2020 saw it rising 1,423%. It’s fallen 13% in January though.

Boris Johnson has stated his intention to take a firm stance on transforming the UK into a green and sustainable powerhouse. Meanwhile, the Biden administration in the US is also kick-starting a massive green movement. There are several external factors giving weight to this growth stock, and its flourishing pipeline of work is very promising. Biomass gasification across Europe is surging and opportunities abound.

Until EQTEC proves itself, it remains a highly speculative investment with extreme share price volatility. Yet, I think it looks like it’s in the right place at the right time and its share price could see considerable upside in the coming year. I’m tempted to invest a small amount but realise there’s considerable risk in a stock like this. It doesn’t have a history of paying dividends, so this is purely a growth stock and not an income play.