Vulcan share price up on new offtake agreement

Vulcan has signed a new deal…

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Key points

  • Vulcan has announced signing of a new offtake agreement
  • However, the lithium developer hasn't signed away any future lithium
  • The agreement is for heat from its geothermal wells

The Vulcan Energy Resources Ltd (ASX: VUL) share price is pushing higher on Wednesday morning.

At the time of writing, the lithium developer's shares are up 3% to $10.50.

Why is the Vulcan share price rising?

Investors have been bidding the Vulcan share price higher today following the announcement of a new offtake agreement.

However, this offtake agreement isn't for lithium as you might expect. Rather, it is for renewable heat from its geothermal wells.

According to the release, Vulcan and MVV Energie AG have executed a 20-year binding purchase agreement for at least 240 gigawatt hours per year of renewable heat.

MVV is the largest municipal energy supplier in Germany and generates an annual revenue of 4.1 billion euros.

The agreement with MVV commences in 2025 and includes the supply of a minimum of 240,000MWh per year to a maximum of 350,000MWh per year to households in Mannheim, outside of Frankfurt, Germany.

Vulcan advised that this heat will be supplied from the company's planned geothermal wells in the area surrounding the City of Mannheim. Heat will be transferred via heating grids and a series of underground pipes that deliver hot water or steam to buildings in the local community.

Vulcan is developing its Mannheim licence as part of a planned larger Phase 2 of the Zero Carbon Lithium Project.

Management commentary

Vulcan's Managing Director, Dr Francis Wedin, was pleased with the agreement and believes it will help Germany transition away from Russian gas. He commented:

"Vulcan is committed to playing a leading role in Germany's "Wärmewende", or heat transition as the country looks to reduce its reliance on Russian energy. This agreement represents a real and immediate step taken by a German energy utility to achieve energy security whilst not compromising on climate goals.

"We believe that Geothermal renewable energy on a mass scale, combined with lithium extraction from the same deep geothermal source, can and will play an important part in achieving Europe and Germany's energy security and independence. We are proud to partner with MVV, a leader in German energy supply, dedicated to making a lasting and sustainable contribution to the local community through the provision of renewable energy and heat.

Our binding offtake agreement for regional geothermal energy positions MVV to deliver secure, sustainable, economical and environmentally friendly heating for its industrial, commercial and private household customers. Vulcan intends to build several further distributed geothermal renewable energy plants across the Upper Rhine Valley region and we are in discussions with other regional communities regarding additional heat offtake agreements."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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