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Capstone Green Energy CEO resigns

The resignation is effective August 22 and the board is initiating a search process to fill the position.

Darren Jamison has resigned as President and CEO of the publicly traded Capstone Green Energy Corporation, according to a news release.

The resignation is effective August 22 and the board is initiating a search process to fill the position.

Robert C. Flexon, Capstone Board Chair, was appointed as Executive Chairman of the board effective August 9, and was also appointed to serve as Interim President and CEO, from the effective date of Mr. Jamison’s resignation until a successor is named.

In connection with Mr. Flexon’s transition to Executive Chairman, Denise M. Wilson was appointed Lead Independent Director of the board. John J. Juric, who joined Capstone as Chief Financial Officer in March 2023, will continue to provide financial leadership for the company.

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Baker Botts adds NY project finance partner

Baker Botts has hired has hired Veronica Relea from Pillsbury.

Baker Botts L.L.P., an international energy, technology, and life sciences law firm, has hired Veronica Relea to its Energy, Projects & Transactions Section of the Global Projects Department as a partner in the New York office.

Relea has significant experience representing project developers and lenders in highly structured and complex finance transactions in the U.S. and Latin America. She advises commercial and investment banks, sponsors, developers and private equity firms in the development, construction, operation and financing of energy, oil and gas, and infrastructure projects, including LNG projects, fuel storage facilities, renewable energy assets, and mining assets.

She has developed a robust Latin American practice, advising on a range of complex finance transactions and has been recognized by Latinvex annually since 2017 as one of Latin America’s Top 100 Female Lawyers. She is fluent in Spanish and proficient in Portuguese and French.

Relea is the eighth lateral partner to join Baker Botts since early February. The firm most recently welcomed energy finance partner Matthew Gurch in Washington, D.C., and in December welcomed energy and infrastructure partner Mona Dajani in New York.

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Evercore managing director moves to NextEra

A well-known Evercore managing director has made a career move into hydrogen, taking an executive director position at NextEra.

Sean Morgan, a former public equity market analyst at Evercore who made television appearances on CNBC, has taken a new position within the hydrogen business at NextEra Energy Resources.

Morgan, who as an analyst covered the LNG and clean energy markets, took a role as executive director of hydrogen market analytics at NextEra in August, according to his LinkedIn profile. He ended at Evercore as a managing director.

Prior to joining Evercore, Morgan worked as a portfolio manager at Blue Shores Capital, and also worked on the leveraged credit team at SocGen.

NextEra is evaluating a potential $20bn pipeline of hydrogen projects.

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Schlumberger changes name to SLB, eyes hydrogen opportunities

Schlumberger has changed its name to SLB and is exploring opportunities in the hydrogen sector, among other areas in its New Energy business.

Schlumberger has changed its name to SLB, according to a press release.

The change underscores the company’s commitment to a decarbonized future, the release states.

In 2020, SLB launched its New Energy business to explore partnerships and opportunities in clean technology. Hydrogen is one of five areas SLB is looking to develop through New Energy, along with carbon solutions, geothermal and geoenergy, energy storage and critical minerals.

This includes Genvia, a clean hydrogen technology company formed as a public/private partnership with France’s renewables research agency, CEA, and other partners.

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Exclusive: Appalachian biogas firm seeking project debt

An RNG developer based in Appalachia with projects across the US is seeking project debt financing.

Northern Biogas, the West Virginia-based developer and operator of anaerobic digester and RNG facilities, is independently seeking debt for its project pipeline, according to two sources familiar with the matter.

Backed by HIG Capital, Northern Biogas serves diary, landfill, food waste and municipal projects. The company has raised some $200m in debt with assistance from alternative energy finance provider Pathward National Association, one source said. Project debt has typically been raised in tranches of $20m to $30m for individual projects.

Northern Biogas’ portfolio includes five dairy farm projects under construction in Wisconsin and one in Michigan, according to the company’s website. The company has a presence in Texas and Colorado as well.

Representatives of the company did not respond to requests for comment.
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Exclusive: World Energy GH2 targeting early 2025 FID

World Energy GH2 is aiming to reach FID early next year – and advancing project financing discussions with a pair of advisors – on the $5bn phase 1 green ammonia development in Newfoundland and Labrador known as Project Nujio’qonik. We spoke to Managing Director and CEO Sean Leet in detail about the project.

World Energy GH2, the developer of a green ammonia export project in Newfoundland and Labrador, Canada, is aiming to reach FID in early 2025 on phase 1 of Project Nujio’qonik, Managing Director and CEO Sean Leet said in an interview.

Phase 1 of the project entails the construction of a 1 GW wind facility and 600 MW of electrolysis for an estimated cost of $5bn, Leet said. Once complete, the first phase of Project Nujio’qonik is expected to produce approximately 400,000 tonnes of green ammonia for export.

The developer is working with Green Giraffe and RBC Capital Markets to advance a project financing deal, the same advisors that assisted World Energy GH2 on a $95m loan from Export Development Canada, announced last week.

The debt-to-equity split for the $5bn capital raise is still being iterated as the company looks at financing options with the available government subsidies and potential support from export agencies, Leet said. The company has not yet lined up an arranger for debt financing and expects to make a decision on that role at a later date, he added.

A schedule update is in progress as part of the project’s FEED readiness assessment. This update, considering factors such as long lead item availability and offtaker delivery requirements, is a required step before the start of FEED and is expected to be released around April 15. 

The FEED readiness assessment, Leet said, “is a process that we’ve undertaken with some value engineering due to some learnings from the pre-FEED deliverables and some other aspects of just making sure we’re well prepared for FEED so we can execute flawlessly on that.”

Leet expects the FEED process will take between nine and 12 months, setting the developer up for an FID in early 2025. As part of a competitive bidding process, World Energy GH2 was awarded four different Crown land sites, each capable of producing 1 GW of wind power, allowing for additional phases up to 4 GW of renewables.

Newfoundland, the distant Canadian island where Project Nujio’qonik is located, has become a hotbed of green ammonia project activity due to its exceptional wind resource, with as many eight major projects springing up (see, and zoom, on map).

Investment outlook

The Canadian government has promulgated a clean hydrogen investment tax credit of up to 40% on certain expenses, available until 2035. And in its most recent budget, the government floated the idea of providing contracts for difference to help de-risk emission-reducing projects. 

Leet believes that the CfD arrangement, which will be administered by the Canada Growth Fund, will be tied to the Canada-Germany Hydrogen Alliance, an agreement that promotes clean hydrogen trade ties between the two nations. Canadian Prime Minister Justin Trudeau and German Chancellor Olaf Scholz signed the accord at World Energy GH2’s site in Stephenville, with the aim of shipping hydrogen or ammonia by 2025 – a timeline that looks increasingly stretched. And World Energy GH2 earlier this year became the first North American member of Germany’s Port of Wilhelmshaven's energy hub.

“Those details haven’t been announced yet but we’re hopeful that the CfD mechanism is there to work alongside the ITC,” Leet said.

Additional financing could come from more export credit agencies “in the countries you would expect” that would support local companies providing equipment to Project Nujio’qonik. “That will be a very likely piece of our financing arrangement.”

World Energy GH2 is in discussions with various offtakers, but will be able to engage in greater detail once the ITC and CfD subsidies are clarified, and once the project receives its environmental permit, Leets said. 

World Energy GH2 was set up as a standalone Canadian company with the sole purpose of executing on Project Nujio’qonik. It is owned by its founders along with SK ecoplant, the environment and energy arm of Korea’s SK Group, which took a 20% stake in the company – and also the project – for $50m.

Gene Gebolys, the founder and CEO of World Energy LLC, a provider of low-carbon fuels, is also a founder of Project Nujio’qonik. And John Risley, another partner of the Canadian project, is a co-owner of World Energy LLC.

Support from existing investors along with the Export Development Canada facility announced last week make the project entity well capitalized to move “expeditiously” through FEED to FID, Leet said.

Canada to Europe

World Energy GH2 is talking to the major ammonia players about a scale-up of import capacity on European shores.

Leet noted specifically that the Antwerp-Bruges port has plans to scale up to handle the increased amounts of ammonia imports, for use in the various industries located in Belgium and potentially on to Germany from there.

Three companies – Fluxys, Advario Stolthaven Antwerp, and Advario Gas Terminal – have said they are considering constructing an open-access ammonia import terminal at the port of Antwerp-Bruges. Air Liquide also said it will build an ammonia cracking facility there.

The Port of Wilhelmshaven, Germany, where World Energy GH2 is a member of the energy hub, has similar plans to scale up, with various companies evaluating ammonia import terminals and cracking facilities.

Meanwhile, Leet said the ammonia product that it ships to Europe, in addition to benefiting from Canadian subsidies and tax credits, will also comply with the EU’s RFNBO standards.

The project has existing grid and water connections already at the Port of Stephenville, since the hydrogen plant will be built on top of a former paper mill which consumed both water and electricity. 

“So we're fortunate to have that grid connection available to us and the power in the Newfoundland grid is well over 90% existing hydro,” Leet said. “So between that and our wind power, we will have no issue meeting the standard set by the EU for green hydrogen and it will be 100% RFNBO compliant.”

The company is working on regulatory certification with multiple bodies but has not finalized a provider.

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Of CfDs and RFNBOs: Untangling the global hydrogen policy web

US ammonia and hydrogen project developers are increasingly looking to Japan and South Korea as target markets under the belief that new rules for clean hydrogen and its derivatives in Europe are too onerous.

Much fuss has been made about the importance of pending guidance for the clean hydrogen industry from US regulators. Zoom out further and major demand centers like the European Union, Japan, and South Korea have similarly under-articulated or novel subsidy regimes, leaving US clean fuels project developers in a dizzying global tangle of red tape. 

But in the emerging global market for hydrogen and ammonia offtake, several themes are turning up. One is that US project developers are increasingly looking to South Korea and Japan as buyers, turning away from Europe following the implementation of rules that are viewed as too onerous for green hydrogen producers.

The other is that beneath the regulatory tangle lies a deep market, helping to answer one of the crucial outstanding questions that has been dogging the nascent ammonia and hydrogen industry: where is the offtake? 

Many projects are proceeding towards definitive offtake agreements and final investment decisions despite the risks embedded in potential changes in policy, according to multiple project finance lawyers. In most cases, reaching final agreements for offtake would not be prudent given the raft of un-issued guidance in these major markets, said the lawyers, who acknowledge a robust offtake market but may advise their clients against signing final contracts.

The European Union rules for green hydrogen and its derivatives became law in June, and included several provisions that are proving challenging for developers and their lawyers to structure around: prohibiting state-subsidized electricity in the production of green hydrogen, and the requirement that power for green hydrogen be purchased directly from a renewable energy supplier. 

Taken together, the policy developments have pushed many US project developers away from Europe and toward Japan and South Korea, where demand for low-carbon fuels is robust and regulations are viewed as less burdensome, if still undefined, experts say.

Developers are carefully choosing jurisdictions for their target offtake markets, “limiting their focus to North Asian rather than European buyers, with the expectation that certain standards and regulations will be less strict, at least in the near term,” said Allen & Overy Partners Hitomi Komachi and Henry Sohn, who are based in Japan and Korea, respectively.

Trade association Hydrogen Europe lambasted the new European rules last year while they were still in formation, saying they would cause a “mass exodus” of the continent’s green hydrogen industry to the US.

Make or break

US policymakers delivered a shock blow with last year’s approval of the Inflation Reduction Act – but its full benefits have yet to flow into the clean fuels sector due to outstanding guidance on additionality, regionality, and matching requirements. 

At the same time, the 45V tax credit for clean hydrogen has been called potentially the most complex tax credit the US market has ever seen, requiring a multi-layered analysis to ensure compliance. The US policy uncertainty is coated on top of an already-complex development landscape facing developers of first-of-kind hydrogen and ammonia projects using electrolyzer or carbon capture technologies. 

“Even though folks are moving forward with projects, the lack of guidance impacts parties’ willingness to sign definitive documents, because depending on the guidance, for some projects, it could break the economics,” said Marcia Hook, a partner at Kirkland & Ellis in Washington DC.

Now, US developers seeking access to international markets are contending with potential misalignment of local and international rules, with Europe’s recently enacted guidelines serving as a major example of poorly arrayed schemes. 

Some US developers have already decided it may be challenging to meet the EU’s more rigorous standards, according Hook, who added that, beyond the perceived regulatory flexibility, developers appear to be garnering more offtake interest from potential buyers in Asia.

Projects that depend on outstanding guidance in Asia are also moving ahead, a fact that, according to Alan Alexander, a Houston-based partner at Vinson & Elkins, “represents a little bit of the optimism and excitement around low-carbon hydrogen and ammonia,” particularly in Japan and Korea.

“Projects are going forward but with conditions that these schemes get worked out in a way that’s bankable for the project,” he added. “It’s not optimal, but you can build it in,” he said, referencing a Korean contract where conditions precedent require that a national clean hydrogen portfolio standard gets published and the offtaker is successful in one of the  Korean power auctions.

RED III tape

Unlike the US, the EU has focused on using regulation to create demand for hydrogen and derivative products through setting mandatory RFNBO quotas for the land transport, industry, shipping and aviation sectors, according to Frederick Lazell, a London-based lawyer at King & Spalding.

Lazell called the EU rules “the most fully-developed and broad market-creation interventions that policymakers have imposed anywhere in the world.” As a result, being able to sell RFNBO into Europe to meet these quotas is expected to fetch the highest prices – and therefore potentially the highest premiums to suppliers, he said.

The European guidelines enacted in June introduced several provisions that will make it challenging for US developers to structure projects that meet the EU’s classification for renewable fuels of non-biological origin (RFNBOs).

For one, the European Commission issued guidance that prohibits subsidies for renewable energy generation when it is transmitted via a power purchase agreement through the electrical grid to make RFNBO.

This provision potentially eliminates all green hydrogen-based projects in the US from qualifying as an RFNBO, a managing partner at a US-based investment firm said, given that green hydrogen projects will likely be tied to renewables that are earning tax credits.

“The EC’s decision to include this restriction on State aid makes the EU’s version of additionality more onerous than even the strictest requirements being considered in the US,” lawyers from King & Spalding wrote in a September note, adding that some people in the industry argue that the decision is inexplicable under the RED II framework that authorized the European Commission to define additionality. 

A second challenge of the EU regulations is the mandate that PPAs be contracted between the RFNBO producer and the renewable energy source. Such a requirement is impossible for electricity markets where state entities are mandated to purchase and supply power, a structure that is common in multiple jurisdictions. Moreover, the requirement would remove the possibility of using a utility or other intermediary to deliver power for green hydrogen production.

“These technical issues may be serious enough for some in the industry to consider challenges before the Court of Justice of the European Union,” the King & Spalding lawyers wrote. “However, it is not yet clear whether there is the appetite or ability to turn such suggestions into a formal claim.”

Go East

Although the subsidy regimes in Japan and South Korea are expected to be less stringent in comparison to the EU, the programs are still not completely defined, which leaves some uncertainty in dealmaking as projects move forward.

The traditional energy sector has always dealt with change-in-law risk, but the risk is heightened now since regulations can change more rapidly and, in some cases, impact ongoing negotiations, said Komachi and Sohn, of Allen & Overy, in a joint email response. 

“Certain regulations coming into force may be contingent or related to the funding plan of the project,” they said. As such, clean fuels offtake frameworks need to facilitate not only the tracking and counting of emissions, they added, but also leave sufficient flexibility as regulatory frameworks evolve.

Japan, through its Hydrogen Basic Strategy, set out targets to increase the supply of hydrogen and ammonia in the country while reducing costs, deploying Japanese electrolysis equipment, and increasing investment into its supply chain. Additionally, Japan is contemplating a contracts-for-difference-style regime to support the gap between the price of clean hydrogen or ammonia and corresponding fossil fuels for 15 years.

Still, standards for “clean hydrogen” have not been clarified, though most observers believe the country will follow a carbon emissions lifecycle analysis in line with IPHE criteria, which is proposed at 3.4 kilograms of carbon dioxide per kilogram of hydrogen. Similarly, rules around “stacking” subsidies in Japan with other jurisdictions such as the Inflation Reduction Act have not been defined.

Meanwhile, Korea is considering carbon emissions standards of up to 4 kilograms of CO2 per kilogram of hydrogen. It is pushing for greater use of hydrogen in part through its Amended Hydrogen Act, requiring electric utilities to buy electricity made from hydrogen in a bidding round starting in 2024. The requirement scales up from 1,300 GWh of general hydrogen in 2025 to 5,200 GWh for general hydrogen and 9,5000 GWh for clean hydrogen in 2028.

Both countries are working to incentivize the entire supply chain for hydrogen and ammonia to ensure the separate pieces of infrastructure will be available on investable and bankable terms, with the aim of creating a demand center when the export centers are developed, Komachi and Sohn added.

They also point out that the emerging clean fuels offtake market will operate in the near term in a more spotty fashion in comparison with the more liquid markets for oil and gas.

“Hydrocarbon markets have gradually moved towards portfolio players, trading and optimization,” said Goran Galic, an Australia-based partner at Allen & Overy. “Smaller market size, technological and regulatory considerations mean that clean fuels, at least initially, require more of a point-to-point approach and so building long-term working relationships between the developers and offtakers is a key aspect of offtake strategy.”

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