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Air Products wants more of a premium

Air Products’ equity multiple has compressed over the last 15 months, but CEO Seifi Ghasemi said he is focused on extracting the highest price for the products that his clean hydrogen projects will be providing.

Air Products CEO Seifi Ghasemi defended his company’s project development strategy against concerns over the apparent lack of offtake for large clean hydrogen projects the company is pursuing – concerns that have manifested in Air Products’ equity trading multiple.

Ghasemi was asked on the first quarter earnings call multiple times about prospects for offtake from its NOEM Green Hydrogen project in Saudi Arabia, which has already taken FID, and from its Louisiana Clean Energy Complex, a blue hydrogen project that would send the molecule into its Gulf Coast hydrogen pipeline and into global ammonia markets.

The executive noted that neither project had offtake contracts that were ready to be announced, but emphatically said there is demand for the products, which he expects will increase when European and other regulations take effect. 

“We have a product that is going to come onstream that people are going to need,” Ghasemi said, citing low-carbon mandates and carbon border taxes that will go into effect in coming years. 

“So what is the price for that? The price for that is not calculated on the basis that this is my capital, this is the return and therefore, we do that. When you have something that people need, you extract the maximum price.”

Another company executive, Samir Serhan, said later in the call that the company already has “three major on-site blue hydrogen contracts for 15-plus years with a premium for the blue product.”

Air Products’ equity multiple has compressed over the last 15 months amid concerns over the capital commitments and the lack of offtake, but Ghasemi said his company should still be among the most valuable in the sector.

“Having taken the risk and losing a lot of our market value because we have taken the risk, we deserve a better return on these projects than running around and trying to panic about the fact that our multiple is, instead of being a 30x EPS, it is 20x EPS,” Ghasemi said. “But the value of the company hasn’t changed.”

He added: “And if it was just a matter of saying, ‘This is my investment and this is a 10% return and this is the price,’ then you don’t need to pay somebody $15m to be CEO of Air Products.”

Asked where Air Products will sell its ammonia amid concerns about sufficient demand in end markets in the near term, Ghasemi noted they were talking to four sectors for green hydrogen: steelmaking, refineries, shipping, and mobility. For blue ammonia, the company is additionally exploring replacing coal in power plants and to decarbonize refining and chemical operations in the Gulf Coast.

“We have always said that it is going to go mainly for decarbonization of the power plants in Japan and in Korea,” he said. “But another significant demand that is being developed and I think there are significant signs that, that is real, is ammonia as a fuel for ships.”

Starting in 2025, ships to Europe will have to pay a tax on carbon emissions when entering European ports, he said.

“We believe this will generate significant amounts of interest in ammonia as a direct fuel for ships,” he added. “And you can check that people have already ordered ships that will use ammonia as a fuel and some of them will actually be on the water in 2026.”

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Advent Technologies purchases 10m shares of common stock

The Boston firm previously announced intentions to collaborate on deployment of methanol-based fuel cells and green methanol generation development.

Advent Technologies, the Boston-based fuel cell and hydrogen tech firm, has entered into securities purchase agreements with investors to purchase 10m shares of common stock in a registered direct offering at a per share purchase price of $0.20, according to a news release.

The transaction, generating gross proceeds of $2m, is expected to close before the end of the year. Joseph Gunnar & Co. is acting as the exclusive placement agent for the offering.

In September Advent entered an MOU with Emergent Waste for deployment of methanol-based fuel cells and development of large-scale green methanol generation plants.

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Apollo invests in hydrogen and CNG storage and transportation solutions provider

Apollo funds have acquired a majority interest in a manufacturer of cylinders that facilitate the use of natural gas and hydrogen.

Apollo-managed funds have acquired a majority interest in Composite Advanced Technologies, Inc, a provider of compressed natural gas (CNG), renewable natural gas (RNG) and hydrogen transportation and storage solutions in the United States, according to a news release.

CATEC’s products and services help its customers transition away from carbon-intensive fossil fuels towards cleaner alternatives. Founded in 2014 and based in Houston, CATEC manufactures large format Type IV cylinders that facilitate the use of natural gas and hydrogen across a wide variety of industry applications when mounted on mobile trailers or used in stationary applications.

TerraNova Capital served as financial advisor and Baker Botts L.L.P. acted as legal counsel to CATEC. Vinson & Elkins LLP acted as legal counsel to the Apollo Funds. Financial terms were not disclosed.

CATEC’s high capacity, lightweight trailers and storage solutions help end-customers decarbonize, while making lower carbon energy sources more accessible and affordable. Gaseous fuels are one important solution for reducing carbon emissions in certain ‘hard-to-abate’ sectors. As penetration of natural gas continues and the hydrogen economy grows, logistics are expected be a constraint and CATEC is an early mover in providing safe and efficient solutions for a wide range of end uses.

Apollo Funds intend to invest further capital behind the company, seeking to establish a leading gaseous equipment manufacturing and services platform with enhanced capabilities and customer offerings to support expansion in the high-growth hydrogen transport and storage market, the release states.

Apollo Partner Scott Browning said, “CATEC’s proprietary manufacturing capabilities are critical to supporting the growing market demand to reduce carbon emissions in ‘hard-to-decarbonize’ industries. The CATEC team has built an impressive business, which we believe can scale to become a one-stop-shop platform for serving the equipment needs of the compressed gas value chain through various expansion initiatives. We look forward to helping accelerate the Company’s growth trajectory in support of the broader energy transition.”

Alberto Chiesara, Co-Founder and President of CATEC, added, “We are pleased to join forces with Apollo Funds to help expand our capabilities and better support the growing adoption of low-carbon fuel solutions such as hydrogen, RNG and CNG. Apollo’s track record in energy transition investing, industry experience and significant resources make them an ideal partner for CATEC as we scale and embark on our next phase of growth.”

Co-Founder of CATEC Ryan Comerford said, “It has been a privilege to help lead the team, and I’m confident new management, with the backing of Apollo Funds, will position the Company for further growth and success.”

The transaction underscores Apollo’s commitment to driving a more sustainable future and long track record of investing in or lending to companies supporting the energy transition. Last year, Apollo launched its Sustainable Investing Platform, which targets to deploy $50 in clean energy and climate capital by 2027 and sees the opportunity to deploy more than $100bn by 2030. Over the last five years, Apollo Funds have deployed over $23bn into energy transition and sustainability-related investments, supporting companies and projects across clean energy and infrastructure, including offshore and onshore wind, solar, storage, renewable fuels, electric vehicles as well as a wide range of technologies to facilitate decarbonization.

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Air Products consortium completes $8.5bn financing for Saudi green hydrogen project

Senior and mezzanine debt along with equity raised on a non-recourse basis will support the construction of 4 GW of renewables powering production of 600 tons of hydrogen per day.

Pennsylvania-based Air Products along with ACWA Power and NEOM Company have finalized and signed an $8.5bn financing agreement for a green hydrogen project in Saudi Arabia.

To be funded by a combination of long-term debt and equity, the project JV, NEOM Green Hydrogen Project, will build 4 GW of renewables powering production of up to 600 tons per day of hydrogen.

The total financing consists of $5.852bn of senior debt and $475m of mezzanine debt facilities, both arranged on a non-recourse project finance basis, as follows:

– $1,500 million from National Development Fund (NDF) on behalf of National Infrastructure Fund (NIF), under foundation.

– $1,250 million is in the form of SAR denominated financing from Saudi Industrial Development Fund (SIDF),

The balance is from a consortium of financiers, structured as a combination of long term uncovered tranches and a Euler Hermes covered tranche, comprising, in no particular order, First Abu Dhabi Bank, HSBC, Standard Chartered Bank, Mitsubishi UFJ Financial Group, BNP Paribas, Abu Dhabi Commercial Bank, Natixis, Saudi British Bank, Sumitomo Mitsui Banking Corporation, Saudi National Bank, KFW, Riyad Bank, Norinchukin Bank, Mizuho Bank, Banque Saudi Fransi, Alinma Bank, APICORP, JP Morgan, DZ Bank, Korea Development Bank and Credit Agricole.

Air Products, which is the sole offtaker for the project, recently disclosed that the cost of the facility has climbed to $8.5bn compared to an original capital estimate of $5bn.

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Exclusive: CO2-to-X firm seeking platform and project capital

A CO2-to-X development company with proprietary CO2 utilization technology is seeking to raise capital from potential strategic partners that would utilize its product, which can decarbonize industrial emitters while producing hydrogen and carbon monoxide. For methanol production, the company says it can reduce the amount of natural gas required per ton of methanol to 27 MMBtu, compared to the typical 35 MMBtu, “a massive change in a commodity market,” a company executive said in an interview.

HYCO1, a founder-owned CO2-to-X development company with proprietary CO2 utilization technology, is seeking partners to invest at both the platform and project level as it advances a series of commercial proposals.

Based in Houston and owned by its three founders, the firm is developing and commercializing technology that utilizes waste CO2 and methane to produce high purity hydrogen and carbon monoxide, which can then be used to make low-carbon syngas, fuels, chemicals, and solid carbon products.

The founders went “all in” on the technology and funded the first $10m for development themselves, and have since raised an additional $10m from two different ethanol producers that are planning to use the product, called HYCO1 CUBE, at their ethanol plants.

“We’re in the process of raising between $20m – $30m this year, with one or more strategics in investment sizes of $10m or more,” HYCO1 co-founder and CFO Jeffrey Brimhall said in an interview.

Beyond that, Brimhall says the firm plans to close on project financing for various projects in development, “which will spin development capital, license fees, and revenue back to HYCO1.”

HYCO1 is having direct conversations for the platform capital with the investment teams from potential strategic partners – like further ethanol producers, or specialty chemical producers and other operators of steam methane reformers.

Using the technology, the company hopes to qualify for tax credit incentives under 45V for the hydrogen produced utilizing recycled CO2 as a feedstock, as reflected in comments made last week to the IRS.

Projects in development

Meanwhile, HYCO1 is advancing a first three projects to maturity: a $175m green carbon syngas project on the US Gulf Coast; a $400m green methanol project on the Gulf Coast; and a $1.2bn green carbon synthetics project at an existing ethanol plant in Lyons, Kansas.

For the Kansas ethanol project, HYCO1 is having conversations with the “top five banks,” Brimhall said, about a project finance deal. 

“We’re starting offtake discussions for both methanol and synthetics,” he said. “And as those offtake discussions firm up, we know for a fact that big intermediaries are going to want to come in and we’re likely going to work with those who have discretionary capital that they can invest on their own account and then pull in others with them.”

The company recently entered into a 20-year carbon dioxide supply agreement with Kansas Ethanol for the project. It will be co-located with Kansas Ethanol and utilize all 800 tons per day of CO2 emitted by the plant to produce approximately 60 million gallons per year of low-carbon and zero-carbon products.

HYCO1 is working to reach FID on the Kansas project by 1Q25, but its critical path depends on getting in the pipeline of an ISODEWAXING provider, such as Chevron or Johnson Matthey, said Kurt Dieker, another HYCO1 co-founder and its chief development officer.

“Assuming a conservative schedule, assuming they get engaged in the next 10 weeks, that would put us in 1Q of next year” for FID, said Dieker, who has deep experience in the ethanol industry, having worked for ICM, the technology behind 70% of the ethanol gallons produced in the US today.

The CUBE

HYCO1’s CUBE technology essentially works as a conversion catalyst applying heat to CO2 and methane to create hydrogen and carbon monoxide, the building blocks of virtually all petrochemical and carbon-based downstream products.

The company built a pilot facility in Houston two years ago, and has been characterizing the catalyst with 10,000 hours of uptime operation and data on how it works, Brimhall said.

As it was advancing the CUBE characterization process, the founders found they could shape the syngas ratio on the fly, moving it from 1-to-1 to above 3-to-1, he added.

“And because we’ve done the 1-to-1 all the way up to 3.5+-to-1, we also know we can produce pure CO by essentially taking the hydrogen off and using it as part of the endotherm that we need to make the reaction work,” he said. “So we could produce anywhere from pure CO to effectively pure hydrogen.”

That level of flexibility with a “single plant, single process, single catalyst” has never been done before, according to Brimhall, and it gives the company “immense capabilities to go into virtually any situation and solve for decarbonization and at the same time make high value products downstream.”

He added, “When we talk to people that really know the space and know industrial gases, they’re like, ‘Wait a minute, you can do that?’”

Methanol efficiencies

HYCO1 is currently in talks with six super major methanol producers about using the company’s technology for methanol supply, Brimhall said.

“Every one of them immediately went to diligence on our technology,” he said, noting that HYCO1 has promised to make natural gas-based methanol production more efficient, requiring only 27 MMBtu of natural gas per ton of methanol versus the typical 35 MMBtu of natural gas. 

“The difference between 35 MMBtu and 27 or 25 is a massive change in a commodity market,” Brimand said, “and whoever owns that technology is going to have a competitive advantage.

The methanol majors are evaluating how to use the technology to their benefit, which, according to Brimhall, might require them to make an investment in HYCO1 along with the first plant. 

“We’ve spent the last three or four months driving the technical diligence part with a team of 15 engineer PhDs to basically come back and say to them, ‘Here’s the proof, here’s the number.’”

HYCO1 plans to offer it concurrently to all of the methanol producers in order to extract the best terms on the first projects, he said.

Project developer or licensor?

HYCO1’s business model comes down to whether they are a project developer or a licensor of technology. According to Brimhall, they are a project developer first and a technology licensor second.

“We have to be project development oriented in our minds across multiple verticals in order to get traction and proof, viability, efficacy,” he said. “So we’re acting in a kind of a super-project developer mode to ultimately get the attention of big offtakers, strategic partners, and potential licensors downstream.”

However, a large licensor will not likely step in to provide a multi-project license until they see the product working at scale given the breakthrough nature of the technology, Brimhall said, and the economics that flow from it.

Take syngas for example, a market dominated by a few large players like Air Liquide, Air Products, and Linde. HYCO1 wants to position its first project in that sector and then start having licensing discussions with those big firms, or additional engineering firms like Technip, Fleur, or Bechtel.

The large firms could provide an initial “bolus” of capital to HYCO1 for having developed the technology “and getting a license that means something, whether it’s geographic or it’s exclusive worldwide or it’s bi-vertical,” Brimhall said.

“There’s an initial payment that commensurates with what the market opportunity is. And then there’s a minimum they’re going to have to step up to in order to keep us satisfied that they’re really a licensor that is going to ultimately realize value to the Topco or HYCO1 as a TechCo.”

“So it’s really project development first, licensing second kind of business model,” he added. “And it’s on multiple verticals. That’s what happens when you have, you know, potent technology.”

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exclusive

Illinois ethanol company seeking offtaker for SAF project

Seeking to diversify into new markets, Marquis, a family-owned ethanol producer based in Illinois, is looking for an offtaker for its first sustainable aviation fuel plant.

Marquis, a family-owned ethanol producer based in Illinois, is seeking an offtaker for its first sustainable aviation fuel plant.

The company, which is developing the plant in partnership with LanzaJet, an SAF firm, recently completed a feasibility study for the project, and is looking for airlines or users of renewable diesel as offtakers, Dr. Jennifer Aurandt Pilgrim, the company’s director of innovation, said in an interview.

Marquis owns and operates a 400 million gallon per year ethanol plant – the largest dry-grind ethanol plant in the world – which produces sustainable ethanol for fuel and chemicals as well as a feed for the aquaculture and poultry industries.

The company will divert roughly 200 million of those gallons to make 120 million gallons per year of SAF and renewable diesel, Aurandt said, noting that Marquis is looking to branch into new markets where ethanol is a feedstock.

“As more electric vehicles come on, there will be about a 3 billion gallon demand destruction for ethanol, and SAF is one of the great markets that we can diversify into,” she said.

Aurandt said financing for the SAF facility will ultimately depend on who the offtaker is.

Use cases

United Airlines, Tallgrass, and Green Plains Inc. recently formed a joint venture – Blue Blade Energy – to develop and then commercialize SAF technology that uses ethanol as its feedstock.

SAF using corn as a feedstock does not currently qualify for incentives in the Inflation Reduction Act, which uses standards laid out by the International Civil Aviation Organization that effectively exclude corn-based SAF from qualifying.

Marquis and other ethanol producers are pushing for the adoption of a lifecycle greenhouse gas model, known as GREET, developed by the Argonne National Laboratory, that would allow corn-based feedstock to qualify, said Dustin Marquis, the company’s director of government relations.

The company is also looking to attract partners to set up operations in the Marquis Industrial Complex, which is touted as a 3,300-acre industrial site with natural gas lines, access to multiple forms of transportation, and carbon sequestration on-site.

“We’re looking for other businesses where there would be either vertical integration or business synergies between the two organizations,” Marquis said.

Marquis said in a news release it would develop two 600 ton per day blue hydrogen and blue ammonia facilities along with manufacturing for carbon neutral bio-based chemicals and plastics.

CO2 utilization

In its production process, Marquis makes 1.2 million tons of biogenic CO2 per year, and has applied for an EPA Class IV permit for sequestration.

“We like to say it’s direct air capture with the corn plant,” Aurandt said, adding that the CO2 is purified via fermentation to 99.9% pure, and will be injected into a formation that sits beneath the Marquis Industrial Complex.

The company is additionally developing a CO2 utilization project with LanzaTech, which would augment ethanol production using CO2 as a feedstock. The project was recently awarded an $8.54m grant from the US Department of Energy, the largest award in the category of corn ethanol emission reduction.

“We can increase the amount of ethanol that we produce here by 50%,” Aurandt said. “So we could make 200 million gallons of ethanol per year” from CO2, she added, noting that the pilot demonstration will be the largest CO2 utilization project in North America. It is expected to be operational in late 2024.

The SAF plant and the CO2 utilization project will use hydrogen for refining and as an energy source, respectively, Aurandt said.

Gas Liquid Engineering is the EPC for the CO2 unit, and Marquis will use compressors from Swedish multinational Atlas Copco.

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