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CF Industries fills in blue ammonia demand picture

CF Industries executives detailed the demand picture for clean ammonia products and clarified the project participation among Mitsui and JERA Co. for a US-based blue ammonia project.

CF Industries expects at least 2 million tons of demand for clean ammonia for co-firing in Japanese power plants by 2030, likely representing the largest source of near-term demand for the clean molecule.

There are five power stations in Japan that have been approved for conversion to co-fire ammonia, including two from JERA Co. and three others, CEO Tony Will said this morning on an investor call.

“And so the assessment of the volume of ammonia that would go into those applications, assuming only a 20% dosage rate, is about 2 million tons a year,” he said, a sizeable increase in demand that he expects would be online by 2030.

The company additionally sees demand developing for ammonia as a marine fuel, as well as for decarbonized fertilizer in agricultural applications, including in the development of a traceable sustainable aviation fuel from ethanol, and ethanol that will meet California’s low-carbon fuel standard.

Executives also clarified that they would seek to align JERA Co. and Mitsui to aggregate demand under a single project. CF recently signed a joint development agreement with JERA under which the Japanese power company would take a 48% stake in the facility and offtake 500,000 tons of ammonia annually. It previously made an arrangement with Mitsui to jointly develop a blue ammonia plant under similar terms.

“Initially [the partnerships] were different based on technology, but certainly it’s our hope that we can find a way to have all of our partners participate in the same project […] so that we have a home for more rather than fewer of the tons we have coming from that project,” Will said.

Will went on to detail possible ownership structures and capital commitments, saying that the facility would likely cost around $3bn not including the potential for flue gas capture, and that CF’s cash outlays for the project would depend on ownership, but would take place over four years.

Further detailing the demand picture, executives noted that the 500,000 tons of prospective offtake from JERA Co. is just for one coal plant, and the Japanese firm is looking to convert multiple units.

“In addition to that, as you look at what’s going on with the JERA test right now, which is performing to expectations, you could see other areas JERA has within Asia also converting to a 20% ammonia injection into the coal, along with some other additional players that are looking at it,” COO Chris Bohn said on the call.

“So I think we’re just on the first few innings of where that demand side goes, but I would say that we’re very encouraged that we have a large portion of it already taken,” he added.

CF is also near to commissioning a green ammonia facility at its Donaldsonville, Louisiana complex, producing 20,000 tons per year, which could find applications in Europe or with US agricultural partners.

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OCI Global hires advisors for strategic review

Dutch chemicals producer OCI Global has hired advisors to explore potential asset monetizations. It is also in talks with offtakers that could take an equity stake in its Texas blue ammonia project, with strong demand spurring the company to evaluate an expansion at the site.

OCI Global has retained advisors as part of its strategic review to explore potential asset monetizations, CEO Ahmed El-Hoshy said today.

The aim of the asset sale exploration is to bridge the gap between the combined value of the individual assets in the company’s portfolio and the discount on holding company shares, El-Hoshy said.

The decision to pursue the asset sales came after “constructive dialog” with Inclusive Capital, he said, an activist shareholder that has been pushing for the dispositions.

OCI CFO Hassan Badrawi added that he expected to provide an additional update before the end of the year, and that there was “strong interest in the active discussions.”

In the meantime, OCI is exploring adding a second line at its Texas blue ammonia project, a 1.1 mtpa facility under construction in Beaumont, Texas. 

“We’re currently in advanced discussions regarding long-term offtake and potential equity participation, reflecting strong commercial interest and an increasing appetite from strategics to pay a premium to secure long-term low-carbon ammonia, given regulatory scores,” El-Hoshy said.

Any further expansion at the site will benefit from enhanced project economics, with cost benefits deriving from an early-mover advantage, as well as the ability to leverage existing infrastructure and utilities, El-Hoshy added.

“With this in mind – and against the backdrop of a positively evolving regulatory environment – we are prudently evaluating a second line at the site to capitalize upon anticipated demand,” he said, noting that the expansion would bring its clean fuels capacity in total to 2.8 million tons.

“With the incentives that are being provided for the utility space and the power space in Japan and Korea, there is, for many of the offtakers, a requirement to have an equity participation in the low-carbon ammonia,” El-Hoshy said.

The strategic investors could come with lower return requirements, allowing for a higher premium for the transfer of equity in the project, he said.

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FirstElement receives grant to expand manufacturing capacity

A $7.7m grant from the California Energy Commission is meant to help increase the output of the Santa Ana components manufacturing facility tenfold.

FirstElement Fuel has received a $7.7m grant from the California Energy Commission to increase the Company’s Santa Ana, CA manufacturing facility output by more than 10 times, according to a news release.

The California-based company is currently operating the world’s largest network of hydrogen refueling stations comprised of 85 dispensers across 40 station locations and serving hydrogen-powered vehicles across California.

The facility in Santa Ana produces components and systems for hydrogen refueling stations, including liquid hydrogen cryopump systems. FistElement will also contribute at least $14m to the project.

The manufacturing expansion project will extend through March 2026. FistElement will also increase its pump testing capability at its hydrogen logistics hub and field-testing facility  in Livermore, California as part of the project.

Quantron US and FirstElement recently announced that Quantron will be one of the first to take advantage of FirstElement’s network of hydrogen stations designed for hydrogen fuel-cell electric trucks.

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DOE awards $130m for CCUS projects

The US DOE has announced $131m for 33 research and development projects to advance the wide-scale deployment of carbon management.

The U.S. Department of Energy (DOE) has announced $131m for 33 research and development projects to advance the wide-scale deployment of carbon management technologies to reduce carbon dioxide (CO2) pollution, according to a news release yesterday.

The projects will address technical challenges of capturing CO2 from power plants and industrial facilities or directly from the atmosphere and assess potential CO2 storage sites, increasing the number of sites progressing toward commercial operations. Expanding commercial CO2 storage capacity and related carbon management industries will provide economic opportunities for communities and workers, helping to deliver on President Biden’s goal of equitably achieving net-zero greenhouse gas emissions by 2050.

DOE is investing $38m in 22 projects awarded under the “Carbon Management” funding opportunity that will develop technologies to capture CO2 from utility and industrial sources or directly from the atmosphere and transport it either for permanent geologic storage or for conversion into valuable products such as fuels and chemicals. Projects will examine commercial viability and technical gaps, while also examining environmental and community impacts of the technologies.  Selected carbon dioxide removal projects will support the cost and performance goals of DOE’s Carbon Negative Shot initiative, which calls for innovation in pathways that will capture CO2 from the atmosphere and permanently store it at meaningful scales for less than $100/net metric ton of CO2-equivalent. CO2 storage projects announced today under this FOA will look specifically at assessing potential resources for mineral carbon storage—where the CO2 becomes permanently stored as a solid mineral through a chemical reaction. A detailed list of the selected carbon management projects can be found here.

DOE is investing $93m in 11 projects awarded under the “CarbonSAFE: Phase II – Storage Complex Feasibility” funding opportunity that will improve procedures to safely, efficiently, and affordably assess onshore and offshore CO2 project sites within a storage complex at a commercial scale. Projects were selected under DOE’s Carbon Storage Assurance Facility Enterprise (CarbonSAFE) initiative, which focuses on developing geologic storage sites with potential to cumulatively store 50 or more million metric tons of CO2. A detailed list of the selected CarbonSAFE projects announced today can be found here.

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Exclusive: California IPP considering hydrogen options for gas generation portfolio

A California-based IPP is considering burning hydrogen in the thermal plants it acquires, as well as in a portfolio of gas peaking assets it is developing in Texas and the western US.

Nightpeak Energy, the Oakland-based IPP backed by Energy Spectrum Capital, is planning to have wide optionality to burn hydrogen in the gas plants it acquires, as well as in quick-start peaking natural gas assets it is developing in Texas and the western US, CEO Paris Hays said in an interview.

“There’s just not a lot of places in this country where you can procure enough hydrogen at a reasonable price to actually serve wholesale electricity customers,” Hays said of the existing hydrogen landscape.

Still, OEMs are figuring out in real time which of their deployed fleet can burn hydrogen, he said. Studies on blending seem to be yielding positive results.

“That’s great news for a business like ours, because we can have optionality,” Hays said. When interacting with equipment providers, conversion to hydrogen is an important, if expensive, discussion point.

“We want to be in a position to be able to do that for our customers,” Hays said. “We can offer a premium product, which is kind of rare in our business.”

Nightpeak recently purchased Saguaro Power Co., which owns a 90 MW combined cycle power plant in Nevada. That facility is a candidate for hydrogen repowering, Hays said, though that’s just one option for an asset that is currently cash-flowing well.

The Nevada facility is close to California, which notably is a market with a demonstrated appetite for paying green premiums, Hays said.

“We wouldn’t manufacture hydrogen ourselves, we would be a buyer,” he said. “This is one path that any plants we own or develop could take in the future.”

Nightpeak has yet to announce any greenfield projects. But Hays said the company is developing a portfolio of “quick-start” natural gas generation projects in ERCOT and WECC. Those assets, 100 MW or more, are to be developed with the concept of hydrogen conversion or blending in mind.

Proposition 7, which recently passed in Texas, could present an opportunity for Nightpeak as the legislation’s significant provisions for natural gas development has pundits and some lawmakers calling for the assets to be hydrogen-ready.

Investor interest in being able to convert gas assets to burn hydrogen reflect an important decision-making process for Nightpeak, Hays said.

“Does it makes sense to just buy a turbine that only burns natural gas and may be a stranded asset at some point, or would we rather pay and select a turbine that already has the optionality?” Hays said. “Putting price aside, you’re always going to go for optionality.”

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exclusive

US salt cavern developer selling hydrogen storage project

A US-based developer of salt cavern projects for hydrogen storage has retained a financial advisor to sell its first project and is informally seeking an equity investor.

Phoenix Hydrogen, a salt cavern storage developer based in Berkeley, California, has hired a financial advisor to run a sale of its primary project in Arizona, according to two sources familiar with the matter.

Scotiabank is leading the process, which will launch next week, the sources said. The sale is for 100% of the company’s first project near Kingman, Arizona. The project is expected to reach FID in the next 18 months.

Phoenix CEO Shawn Drost said in an interview that the company is informally seeking a platform equity investment as well but is only willing to take on a minority partner. An equity sale would need to raise an amount in the “low-tens” of millions, he said. It’s a difficult proposition, as equity providers in the space tend to demand majority positions.

The company wants to bankroll projects from beginning to end as an owner operator, he said, but requires capital to do so.

Phoenix, a six-person team, has a relationship with GHD Group for EPC, he said. The company is seeking relationships with production-side developers to sign site and storage leases.

Scotiabank did not respond to requests for comment.

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Exclusive: Green hydrogen developer planning capital raises for distributed portfolio

A developer of US green hydrogen projects will need to access the project equity, debt and tax equity markets in the near term for a pipeline of distributed assets nationwide.

NovoHydrogen, the Colorado-based renewable hydrogen developer, will be in the market for project financing for a portfolio of distributed green hydrogen projects in 2024, CEO Matt McMonagle said.

The company, which recently agreed to a $20m capital raise with Modern Energy, is aiming to attract additional private equity and infrastructure investors for the projects it is developing, the executive said.

“The opportunity is really there for attractive risk-adjusted returns at the project level based on how we’re structuring these projects with long-term contracted revenue,” he said.

The company plans to bring its first projects online in late 2024 or 2025.

“We don’t have the project financing set at the point that we can announce, but that’s something myself and my team have done in our careers,” McMonagle said, adding that he’s focused on bankability since founding the company. “We wanted to be as easy for the lenders to underwrite as possible.”

No financial advisors have been attached to the project financings, McMonagle said. A recently announced Series A, first reported by ReSource in February, gave the company exposure to investors that want to participate in project financings, he said.

“We’ll really be ramping that process up, likely after the new year,” McMonagle added, declining to say how much the company would need to raise in 2024.

NovoHydrogen doesn’t have a timeline on a Series B, he said.

Distributed pipeline

The company looks to do onsite projects adjacent to consumption, McMonagle said. The first projects that will go online will be 10 MW and smaller.

“Typically the permitting is straightforward in that we’re adding equipment to an already impacted industrial site,” McMonagle said. He declined to elaborate on where these projects are located or what customers they will serve.

The company also has off-site, or near-site projects, where production is decoupled from consumption. But the company still calls those distributed because they are being developed with a targeted customer in mind.

“We want to be as close as possible to that customer,” he said. Those off-site projects typically are larger and will begin coming online in 2026 and 2027.  

In Texas NovoHydrogen has two large-scale green hydrogen developments in production, co-located with greenfield renewables projects, McMonagle said. Partners, including EPC, are in place for those efforts. The company also has projects in West Virginia, Pennsylvania, New Jersey and along the west coast.

“Where can we add the most value and have the biggest competitive advantage?” McMonagle said of the company’s geographic strategy. “We have very specific go-to-markets in each of those regions which we feel play to our strengths.”

NovoHydrogen is a member of the Pacific Northwest Hydrogen Hub and is involved with the Appalachian Regional Clean Hydrogen Hub (ARCH2), though not in line to receive DOE funding through that hub.

Post-IRA, green hydrogen projects will look much like renewables deals from the equity, tax equity and debt perspectives, he said.

“We’re structuring and setting up our projects to take advantage of that existing infrastructure and knowledge base of how to finance deals,” he said. New options on transferability will enable additional financing options as well.

No flipping

NovoHydrogen does not plan to flip projects before COD, McMonagle said.

“We are planning to deploy hundreds of millions if not billions of dollars in capex for these projects, and we’ll certainly need to partner with folks to deploy that capital,” McMonagle said. “But we will remain in deals with our customers because that relationship is really the fundamental value that we bring in our business.”

Hydrogen projects are different from renewables in that the customers need greater assurances of resiliency, security of supply and performance, than in a space like solar, he said.

Flipping projects before COD would be inconsistent with the trust required to attract offtakers.

“We don’t believe doing a flip reflects that level of importance and support and, frankly, incentive, behavioral incentive, that we have to show to our customers,” he said.

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