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CIP signs MOU with LOTTE Chemical for ammonia projects

CIP and LOTTE aim to finalize offtake agreements from CIP's St. Charles project in Louisiana and its Murchison project in Australia. The two will also evaluate co-development and investment in global low-carbon ammonia projects.

Copenhagen Infrastructure Partners (CIP), through its Energy Transition Fund, has signed a memorandum of understanding with LOTTE Chemical Corporation (LOTTE), one of the world’s largest producers of chemical products, to strengthen collaboration on clean ammonia projects, according to a news release.

The memorandum of understanding between CIP and LOTTE is intended to support collaboration on clean ammonia projects. As part of the agreement, the two companies agree to discuss and finalize agreements for the supply, purchase, and sale of blue ammonia to LOTTE from CIP’s St. Charles Project in Louisiana, U.S., and green ammonia from CIP’s Murchison Project in Australia.

CIP and LOTTE also agree to initiate discussions regarding development of and investment in low carbon ammonia projects on a global basis. The two companies also intend to discuss potential collaboration on projects in infrastructure bunkering and other sectors in connection with low carbon ammonia.

CEO & Head of Hydrogen Business Group of LOTTE Chemical Corporation JinKoo Hwang said, “We are delighted to cooperate with CIP, a global leader in greenfield renewable energy investments. With the Korean government’s strong policy support on energy transition, Korea will be the fastest growing market for clean hydrogen and ammonia. We will take lead in providing sustainable clean ammonia by utilising the strengths and expertise of both companies.”

CIP Partner Søren Toftgaard said, “We believe blue and green ammonia will co-exist for many years, as we gradually transition from fossil-based production. And we continue to see significant opportunities for both in the U.S., Europe, and Asia. We are proud of the new partnership with LOTTE on ammonia projects development and offtake to Korea and consider it an important step that could open further opportunities for our Energy Transition Fund.”

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Australia rail-freight co. gets $5m grant for H2 trucks

Aurizon will put four hydrogen-fueled trucks on the road in Queensland.

Australian rail-freight company Aurizon has received a grant of $5m (AUD) from the government of Queensland.

Queensland Deputy Premier and Minister for State Development Steven Miles said Aurizon were a successful applicant through round two of the $35 million Hydrogen Industry Development Fund.

The announcement comes after the release of the Queensland Energy and Jobs Plan, the Palaszczuk Government’s plan for a bold clean energy future for Queensland including the biggest pumped hydro scheme in the world.

“Aurizon’s project will put four hydrogen-fueled prime movers on the road in Townsville and create more opportunities for other businesses to convert their transport fleets to new technology fuel,” Miles said in a news release.

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CPP Investments to invest in green molecule developer

Toronto-based CPP Investments will invest an initial EUR 130m into Power2X, focused on the development of green hydrogen, methanol, and ammonia.

Canada Pension Plan Investment Board (CPP Investments) and hydrogen project developer Power2X today announced a long-term investment partnership aimed at advancing Amsterdam-based Power2X’s leading role in the global clean energy transition, according to a news release.

The partnership plans to invest an initial €130m to accelerate the growth of Power2X as a development platform and fund green molecule projects. The investment supports Power2X’s mission to become a long-term developer, owner, and operator of next-generation energy assets with a focus on green hydrogen and other clean molecules such as green methanol and ammonia.

Bruce Hogg, managing director, head of sustainable energies, CPP Investments, said: “Investing in Power2X is fully aligned with our ambition to play a leading role in the energy transition. The need for industrial decarbonization is increasing rapidly, and green molecules have a vital role to play in meeting these demands, whether to create alternative fuels, hydrogen, or renewable feedstocks such as green ammonia. With Power2X’s development capabilities and CPP Investments’ flexible capital and sustainable energies expertise, this partnership enables us to invest in next-generation energy assets at an industrial scale with long-term business partners.”

Power2X develops large-scale new energy assets and infrastructure focusing on decarbonizing industrial value chains and heavy transport in collaboration with industrial companies around the world. The company is focused on clean hydrogen, ammonia, and methanol, with a diverse portfolio of projects that are initially prioritising European demand. Under the terms of the deal, CPP Investments will acquire a majority interest in Power2X.

Occo Roelofsen, CEO, Power2X, said: “In 2020, we founded Power2X to have a lasting impact on world’s energy transition, by focusing on green and clean molecules. Working with CPP Investments will enable us to accelerate our ambition to become a leader in green molecules, and, in doing so, continue on our journey as a long-term and serious player in this critical arena of global sustainability. Announcing this partnership with CPP Investments today shows how far our team have come in a very short time. We are actively participating in hydrogen projects, such as ErasmoPower2X, a €1bn solar and hydrogen plant, and MadoquaPower2X, a €1bn industrial-scale hydrogen and green ammonia project.”

The term “green molecules” refers to the application of green hydrogen and its derivatives, including green ammonia and green methanol, to decarbonize non-power, hard-to-abate industrial activities. Notably, these green molecules can act as direct replacements for process feedstocks or transportation and heating fuels.

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Mining giant Anglo American invests $200m in merger with Seattle-based First Mode

The newly combined business, valued at $1.5bn, will pursue zero-emission haulage solutions for mining and other heavy industries. First Mode is working on providing critical mine site infrastructure for hydrogen production, battery recharging, and hydrogen refueling.

First Mode, a global carbon reduction company focused on heavy industry, and global mining company Anglo American have signed a binding agreement to combine First Mode and Anglo American’s nuGen™ zero emission haulage solution to accelerate the transition of mining and other heavy industries to diesel-free futures, according to a news release.

The transaction, which is expected to close in January 2023, values the newly combined business in the order of $1.5bn and includes a $200m equity injection from Anglo American.

Upon closing of the transaction, First Mode will enter into a global supply agreement to supply several nuGen™ systems to Anglo American which includes the retrofit of approximately 400 ultra-class haul trucks with First Mode’s proprietary hybrid fuel cell battery powerplant and related infrastructure. The supply agreement includes the appropriate provision of critical supporting infrastructure such as refueling, recharging, and facilitation of hydrogen production. The roll-out of nuGen™ across Anglo American’s haul truck fleet over the next 15 years is subject to certain conditions and required approvals.

Previously announced in June 2022, the transaction is a unique combination of creative engineering excellence and mining expertise which brings together the existing First Mode business with Anglo American’s nuGen™ related intellectual property, management, and operational teams. First Mode is now uniquely positioned to commercialize the nuGen™ haulage solution which intelligently incorporates new technology into mine site operations and consists of a powerplant with appropriate hybridization of hydrogen powered fuel cells and battery (depending on customer and site requirements), refueling and recharging technology, clean energy production and storage, modification of diesel electric vehicles, digital integration with mine site systems as well as ongoing services.

The investment will facilitate the rapid global growth of First Mode, development of production facilities in Seattle and new proving grounds in Centralia, Washington, support staffing goals worldwide, develop our footprint in Perth, Australia, and speed the commercialization and deployment of First Mode clean energy solutions to market.

On close, Anglo American will become a majority shareholder of First Mode, with the balance continuing to be held by First Mode employees. In addition, current First Mode President and CEO, Chris Voorhees will transition to the role of Chief Product & Technology Officer, overseeing the company’s global product and technology development out of Seattle. Julian Soles, Anglo American’s head of Technology Development, will take over as First Mode CEO and be based in First Mode’s new headquarters in London.

“First Mode was founded in 2018 with the goal of building the barely possible. We have done just that and our mission is now to rapidly decarbonize heavy industry by dramatically reducing our customers’ greenhouse gas emissions. I can’t imagine a team better suited to this urgent challenge,” said Chris Voorhees.

“The First Mode mission is much bigger than a single haul truck,” said Julian Soles. “Mining is how the world obtains the materials needed for the clean energy transition, and it is where the carbon footprint starts. This is where the First Mode solution begins; starting at the source, in mining, to replace diesel and accelerate the clean energy transition.”

The world’s first proof-of-concept including renewable energy generation, hydrogen production and refueling, and an ultra-class haul truck, launched in May 2022, continues to be operated at Anglo American’s Mogalakwena platinum group metals mine site in South Africa. This month the truck reached a significant milestone when it completed initial commissioning and was introduced into the mine’s commercial fleet operations, including pit and crusher activities.

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Exclusive: Carbon conversion startup planning capital raise

A Halliburton Labs-backed startup is developing a pilot plant in the Pacific Northwestern US, while forming financial relationships for an industrial-scale carbon conversion facility in the same location.

OCOchem, a Washington state-based carbon conversion startup, will seek new capital partners to build its first commercial scale facility in 2026, CEO Todd Brix said in an interview.

Starting in late 2024 or early 2025, the company will likely go to market for new liquidity – including project debt and equity, Brix said. He declined to talk about capex, but said the first commercial plant in Richland, Washington will cost “multiple tens of millions of dollars.”

The company is working with two EPCs now and is represented legally by Miller Nash law firm in the Pacific Northwest, Brix said. The company does not have a formal relationship with an investment bank but will likely form one for a Series A and later rounds.

“We’ve been in touch with a number of private equity and project finance people,” Brix said of early-stage discussions.

OCOchem is considering land options in Richland for its first plant and is organizing to begin permitting, Brix said. There is opportunity to form relationships with industrial partners in need of an offtaker for their CO2 emissions and new incremental revenue streams, as well as customers for chloral hydrates and other formic acid products.

“We expect to build hundreds of these plants all around the planet,” Brix said, referring to the process of electrochemically converting emitted CO2 and water to formic acid, which can then be used to make a suite of products like hydrogen, carbon monoxide, and formate (methanoate) derivatives. “We are close to industrial size on our plants right now.”

CO2 is captured from steam methane reformers, natural gas processing and piping, and ammonia production, among other processes. The gas is then combined with water in a cellular, modular process producing formic acid, derivatives of which can be used in a range of industries like pharmaceuticals.

The company recently raised $5m in seed funding from lead investor TO VC, which joined backers LCY Lee Family Office, MIH Capital Management, and Halliburton Labs. An additional $8m has been raised in grant funding from the US departments of Energy (DOE) and Defense (DOD).

The company is also partnered with the Nutrien Corporation on a small scale facility in Kennewick, Washington, just upriver from Richland, Brix said. Financing for that project is largely arranged with the FEED completed.

Brix owns a majority of the company with his father.

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Interview: Vinson & Elkins’ Alan Alexander on the emerging hydrogen project development landscape

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

In the meantime, a number of novel legal and commercial issues facing hydrogen project developers have come to the forefront, as outlined in a paper from the law firm this week, which serves as a guide for thinking through major development questions that can snag projects.

In an interview, Alexander, a Houston-based project development and finance lawyer, says that, although some of the issues are unique – like the potential for a clean fuels pricing premium, ownership of environmental attributes, or carbon leaking from a sequestration site – addressing them is built on decades of practice.

“The way I like to put it is, yes, there are new issues being addressed using traditional tools, but there’s not yet a consensus around what constitutes ‘market terms’ for a number of them, so we are having to figure that out as we go,” he says.

Green hydrogen projects, for example, are “quite possibly” the most complex project type he has seen, given that they sit at the nexus between renewable electricity and downstream fuels applications, subjecting them to the commercial and permitting issues inherent in both verticals.

But even given the challenges, Alexander believes the market has reached commercial take-off for certain types of projects.

“When the hydrogen rush started, first it was renewables developers who knew a lot about how to develop renewables but nothing about how to market and sell hydrogen,” he says. “Then you got the people who were very enthusiastic about developing hydrogen projects but didn’t know exactly what to do with it. And now we’re beginning to see end-use cases develop and actionable projects that are very exciting, in some cases where renewables developers and hydrogen developers have teamed up to focus on their core competencies.”

A pricing premium?

In the article, Vinson & Elkins lawyers note that commodities pricing indices are not yet distinguishing between low-carbon and traditional fuels, even though a clean fuel has more value due to its low-carbon attributes. The observation echoes the conclusion of a group of offtakers who viewed the prospect of paying a premium for clean fuels as unrealistic, as they would need to pass on the higher costs to customers.

Eventually, Alexander says, the offtake market should price in a premium for clean products, but that might depend in the near term on incentives for clean fuels demand, such as carbon offsets and levies, like the EU’s Carbon Border Adjustment Mechanism.

“Ultimately what we need is for the market to say, ‘I will pay more for low-carbon products,’” he says. “The mindset of being willing to pay more for low-carbon products is going to need to begin to permeate into other sectors. 30 or 40 years ago the notion of paying a premium for an organic food didn’t exist. But today there are whole grocery store chains built around the idea. When the consumer is willing to pay a premium for low-carbon food, that will incentivize a farmer to pay a premium for low carbon fertilizer and ammonia, which will ultimately incentivize the payment of a premium for low-carbon hydrogen. The same needs to repeat itself across other sectors, such as fuels and anything made from steel.”

The law firm writes that US projects seeking to export to Europe or Asia need to take into account the greenhouse gas emissions and other requirements of the destination market when designing projects.

In the agreements that V&E is working on, for example, clients were first focused on structuring to make sure they met requirements for IRA tax credits and other domestic incentives, Alexander says. Meanwhile, as those clean fuels made their way to export markets, customers were coming back with a long list of requirements, “so what we’re seeing is this very interesting influx” of sustainability considerations into the hydrogen space, many of which are driven by requirements of the end-use market, such as the EU or Japan.

The more stringent requirements have existed for products like biofuels for some time, he adds, “but we’re beginning to see it in hydrogen and non-biogenic fuels.”

Sharing risk

Hydrogen projects are encountering other novel commercial and legal issues for which a “market” has not yet been developed, the law firm says, especially given the entry of a raft of new players and the recent passage of the Inflation Reduction Act.

In the case of a blue hydrogen or ammonia project where carbon is captured and sequestered but eventually leaks from a geological formation, for example, no one knows what the risk truly is, and the market is waiting for an insurance product to provide protection, Alexander says. But until it does, project parties can implement a risk-sharing mechanism in the form of a cap on liabilities – a traditional project development tool.

“If you’re a sequestration party you say, ‘Yeah, I get it, there is a risk of recapture and you’re relying on me to make sure that it doesn’t happen. But if something catastrophic does happen and the government were to reclaim your tax credits, it would bankrupt me if I were to fully indemnify you. So I simply can’t take the full amount of that risk.’”

What ends up getting negotiated is a cap on the liability, Alexander says, or the limit up to which the sequestration party is willing to absorb the liability through an indemnity.

The market is also evolving to take into account project-on-project risk for hydrogen, where an electrolyzer facility depends on the availability of, for example, clean electricity from a newly built wind farm.

“For most of my career, having a project up and reaching commercial operations by a certain date is addressed through no-fault termination rights,” he says. “But given the number of players in the hydrogen space and the amount of dollars involved, you’re beginning to see delay liquidated damages – which are typically an EPC concept – creep into supply and offtake agreements.”

If a developer is building an electrolyzer facility, and the renewables partner doesn’t have the wind farm up and running on time, it’s not in the hydrogen developer’s interest to terminate through a no-fault clause, given that they would then have a stranded asset and need to start over with another renewable power provider. Instead, Alexander says, the renewables partner can offset the losses by paying liquidated damages.

Commercial watch list

In terms of interesting commercial models for hydrogen, Alexander says he is watching the onsite modular hydrogen development space as well as power-to-fuels (natural gas, diesel, SAF), ammonia and methanol, given the challenges of transporting hydrogen.

“If you’re going to produce hydrogen, you need to produce it close to the place where it’s going to be consumed, because transporting it is hard. Or you need to turn it into something else that we already know how to transport – natural gas, renewable diesel, naphtha, ammonia.”

Alexander believes power-to-fuels projects and developers that are focused on smaller, on-site modular low-carbon hydrogen production are some of the most interesting to watch right now. Emitters are starting to realize they can lower their overall carbon footprint, he says, with a relatively small amount of low-carbon fuels and inputs.

“The argument there is to not completely replace an industrial gas supplier but to displace a little bit of it.”

At the same time, the mobility market may take off with help from US government incentives for hydrogen production and the growing realization that EVs might not provide a silver-bullet solution for decarbonizing transport, Alexander adds. However, hydrogen project developers targeting the mobility market are still competing with the cost of diesel, the current “bogey” for the hydrogen heavy mobility space, Alexander says.

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Exclusive: Wisconsin RNG portfolio for sale with large renewables portfolio

A major Canadian utility is auctioning off four Wisconsin RNG assets as part of a larger renewables selldown. The subsidiary at auction has previously indicated that it would take part in Northeastern US hydrogen development.

Algonquin Power & Utilities is selling a package of four renewable natural gas assets, totaling 532 mmbtu, in Wisconsin as part of a larger renewables auction, according to two sources familiar with the matter.

JP Morgan is advising on the process, codenamed Project Power, the sources said.

The process comprises mostly operational onshore wind (2,325 MW) and solar (670 MW), along with an 8 GW development pipeline across 10 power markets, according to a teaser seen by ReSource. The renewable assets are collectively known as Liberty under the Algonquin banner.

The pipeline includes 1,600 mmbtu of RNG. The operational RNG assets reached COD in 2022.

Algonquin did not respond to requests for comment. JP Morgan declined comment.

The Wisconsin assets are apparently the former Sandhill Advanced Biofuels projects, which were acquired by Algonquin in 2022.

When that acquisition was made, it was announced that Liberty had signed on as a “hydrogen ecosystem partner” in the multi-state Northeast Regional Clean Hydrogen Hub. That hub ultimately was not selected by the US department of Energy for hub funding.

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