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EverWind Fuels reaches agreement for CAD 125m loan

Export Development Canada has reached an agreement in principle for a CAD $125m loan for a proposed green hydrogen facility in Nova Scotia.

EverWind and Export Development Canada have reached an agreement in principle on terms for a $125m debt facility to support the project, pending final due diligence, according to a news release.

This loan will support clean power generation and clean hydrogen production that will be able to be exported to markets in Germany and around the world, as well as for domestic consumption.

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Exclusive: Micro ammonia tech firm raising pre-IPO Series A

A micro ammonia technology firm is raising a small amount of Series A capital and plans to pursue an IPO as soon as next year.

Hydrofuel Canada, a developer of micro ammonia technology, is seeking strategic partners for a CAD 5m Series A capital raise in anticipation of an initial public offering as early as next year.

The Mississauga, Ontario-based firm recently received U.S. patents for its micro ammonia production system (MAPS), which represents a breakthrough in smaller scale on-site, low-cost ammonia production possibilities, CEO Greg Vezina said in an interview.

“Our cost to make hydrogen at end use all-in including capex, opex, and 8% financing is $1.30 per kg” before tax credits, Vezina said. “We’re pretty confident that over the next couple of months, we’re going to put together a group of investors, strategic partners, and quite frankly, a board of directors that’s going to choke a horse.”

The $1.30 per kg price for hydrogen – in ammonia – depends on an electricity price of 2 cents per kWh, Vezina said, and correlates to a price of around $456 / ton of ammonia. Cracking the ammonia at end use takes between 10% – 15% of the hydrogen, resulting in a final price of hydrogen of around $1.50 per kg.

For comparison, with electricity at 3 cents per kWh, the price of hydrogen in ammonia climbs to $1.57 per kg.

Hydrofuel is looking for five strategic partners that will each put in CAD 1m, which would advance its micro ammonia offering to commercialization. It already has orders in the book and expects to have $1bn of orders by the time it goes public via a planned initial public offering next year, Vezina said.

“We’ll go public in 2025, essentially to raise the money to deliver our products,” he said.

The company is also looking to partner with renewables developers with planned wind energy resources near ammonia demand centers in the U.S., so that the resulting ammonia production can qualify for 45V tax credits for clean hydrogen.

Vezina has been a proponent of ammonia solutions for decades, and reportedly drove an ammonia-fueled Chevy Impala across Canada in 1981. He believes that the MAPS technology will be a disruptive force in the emerging market for green hydrogen and ammonia. While Hydrofuel claims to produce ammonia on site at $1.50 per kg, the cost to transport ammonia alone — other than via a long-distance pipeline — is not currently less than $3 per kg, Vezina said, citing a recent study from the World Bank.

“I’m going to bankrupt everybody in the electrolyzer business worldwide,” he said, adding his view that the economics of large-scale electrolyzer projects make them unviable where they rely on expensive transportation networks.

MAPS

To date, Hydrofuel has raised CAD 5m, with management and employees still owning 40% of the business. In the current capital raise, Hydrofuel is selling 25% of the company, amounting to a $20m valuation, Vezina said.

The U.S. patent was issued for Hydrofuel’s MAPS 1.0 product, which utilizes externally produced hydrogen to synthesize with nitrogen from air to make ammonia. Vezina says the patent also covers the MAPS 2.0 product, which combines hydrogen and ammonia production in the same unit, but Hydrofuel has filed for an additional patent for MAPS 2.0.

Hydrofuel signed a licensing agreement for the MAPS technology with Georgia Tech University in April 2022, and later began collaborating on research and development with Colorado State University.

Farmers are a main target market for the technology, Vezina said, noting that farms can cut their anhydrous ammonia bill significantly. Industrial users of ammonia, including medical-grade ammonia, are also targeted customers.

The cost of the MAPS 2.0 unit, which has a capacity of 381 tonnes per year, is USD 850,000, and customers can secure a unit by making a $10,000 deposit with financing for 20 years, Vezina said. The company earns a profit of USD 425,000 for every MAPS 2.0 unit sold.

Vezinz said that accounting for US tax credits for clean hydrogen production as well as renewables could cover almost the entire cost of the micro ammonia installations and renewables, given the cost of $1.50 per kg and the $3 per kg tax credit.

“So a lot of smart farmers could be getting a lot of free fertilizer,” he said.

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California electrolyzer tech company hires VP

The new hire will lead NewHydrogen’s business development efforts.

NewHydrogen, Inc., a developer of technology to produce low-cost green hydrogen, has hired Steven Hill as vice president and member of the company’s board of directors, effective immediately.

Hill is an accomplished sales executive with over 20 years of experience in the biopharmaceutical industry, the company said in a news release.

In this capacity, Hill will lead NewHydrogen’s business development efforts while representing the company’s mission and technologies to investors, media, public, and potential partners.

Hill has held senior management positions over the course of his career including Regional Account Manager for Relypsa Inc, a biopharmaceutical start-up in Redwood City, CA. He also served as a managing member of Hill Investments, LLC, a real estate investment and design group during which time Mr. Hill consulted on property development and managed real estate investments.

“We are excited to welcome Steve to NewHydrogen, and expect that he will immediately strengthen our management team,” said Dr. David Lee, CEO of NewHydrogen. “Steve’s vantage point coming from executive sales experience is one we believe will provide valuable insights as NewHydrogen progresses to meet its corporate objectives.”

NewHydrogen is currently funding a sponsored research program at the Department of Materials Science and Engineering at the University of California, Los Angeles (UCLA), aimed squarely at developing technologies to lower the cost of green hydrogen. The goal of NewHydrogen’s sponsored research at the UCLA is to lower the cost of green hydrogen by eliminating or drastically reducing the use of precious metals in electrolyzers. Electrolyzers currently rely on rare materials such as iridium and platinum. These materials often account for a substantial portion of the cost of electrolyzers.

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IRS releases proposed regulations for 45V

The IRS has proposed strict rules for its approach to clean hydrogen tax credit qualifications.

Today the U.S. Department of the Treasury and Internal Revenue Service (IRS) released proposed regulations on the Clean Hydrogen Production Credit established by the Inflation Reduction Act (IRA).

A link to the document that will be published in the Federal Register next week is here.

The agencies have taken the so-called three pillars approach for incrementality, temporal matching, and deliverability. These requirements are crucial, the IRS says, for accounting for both existing and new electricity generation from biomass or fossil feedstock, as they inform the lifecycle greenhouse gas (GHG) emissions impact of these sources.

The notice of public rulemaking will be open for public comment for 60 days once it is published in the Federal Register.

The NPRM is supported by a technical paper from DOE that considers how to assess lifecycle greenhouse gas emissions associated with hydrogen production using electricity.

Incrementality:

  • The incrementality requirement is met if the Electricity Attribute Certificate (EAC) is related to an electricity generating facility with a Commercial Operation Date (COD) no more than 36 months before the related hydrogen production facility was placed in service. This requirement ensures that the energy production contributing to the EAC is relatively recent and relevant to the current energy market conditions​​.
  • Recognizing the difficulty in identifying specific electricity generators and the times and places for incrementality, the IRS is considering alternative approaches, including a proxy approach. This approach would consider five percent of the hourly generation from minimal-emitting electricity generators (like wind, solar, nuclear) to meet the incrementality requirement, still subject to temporal matching and deliverability requirements​​.

Temporal Matching:

  • The temporal matching requirement generally mandates that the EAC represents electricity generated in the same hour as the hydrogen production facility’s consumption of electricity. A transition rule allows, until January 1, 2028, for EACs representing electricity generated in the same calendar year as the hydrogen production to meet this requirement. This approach aims to address significant indirect emissions from electricity use​​.

Deliverability:

  • The deliverability requirement stipulates that the EAC must represent electricity generated by a source in the same region as the hydrogen production facility. This ensures a reasonable assurance of the electricity’s deliverability to the intended location​​.

In addition to these specific requirements, the document discusses how these concepts might be applied differently in the context of renewable natural gas (RNG) or biogas, taking into account the different emission sources, markets, tracking methods, and potential incentives​​.

The IRS and the Treasury Department are actively seeking feedback on these proposed regulations, particularly concerning the practical implementation and verification of these requirements.

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exclusive

Government money still top of mind for early movers in US hydrogen

Gaining access to funding from government and other agency sources is top of mind for many developers seeking to de-risk their projects and reach FID. But only hydrogen, ammonia, and other clean fuels projects exhibiting “the best in the business” are garnering support from government financing agencies and commercial lenders, experts say.

The US Department of Energy came out this week with the news that it was not yet ready to release the long-awaited winners of its $8bn hydrogen hubs funding opportunity, as Secretary of Energy Jennifer Granholm noted Monday at the Hydrogen Americas Summit in Washington, DC.

The delay disappointed many in the industry, who are also waiting for crucial guidance from the IRS on rules for clean hydrogen tax credits.

Gaining access to funding from government and other agency sources is top of mind for many developers seeking to de-risk their projects and reach FID. But only hydrogen, ammonia, and other clean fuels projects exhibiting “the best in the business” are garnering support from government financing agencies and commercial lenders.

Speakers on a financing panel at the summit yesterday pointed to the successful FID of the Air Products-backed NEOM green hydrogen project in Saudi Arabia as an effective project finance model, where major sponsors working together helped to de-risk the proposal and attract support from export credit agencies and global banks.

In the US, large players like ExxonMobil (Hydrogen Liftoff Hub), NextEra (Southeast Hydrogen Network), and Chevron (ACES Delta) have applied for DOE hydrogen hubs funding, according to the results of a FOIA request, joining major utilities and other oil and gas companies like bp and Linde in the running for funds.

In addition to inadequate regulatory guidance, some developers have already started grumbling that the proposed government assistance will not be enough to meet the scale of decarbonization needs. And the nascent clean fuels project finance market still needs to sift through techno-economic challenges in order to reach its potential, according to comments made yesterday on a panel called Financing Clean Hydrogen.

Leopoldo Gomez, a vice president of global infrastructure finance at Citi, sees a big role for the project finance framework for hydrogen facilities undertaken by independent project developers as well as strategics looking to strike the appropriate risk allocation for new projects.

And Michael Mudd, a director on BofA’s global sustainable finance team, said hydrogen projects are similar in many ways to established facilities like power and LNG, but with additional complexities, like understanding the impact of intermittent power and how to appropriately scale technologies.

Credibility

This year, Pennsylvania-based Air Products along with ACWA Power and NEOM Company finalized and signed an $8.5bn financing agreement for NEOM the project, which will build 4 GW of renewables powering production of up to 600 tons per day of hydrogen. The National Development Fund and the Saudi Industrial Development Fund kicked in a total of $2.75bn for the project, with the balance covered by a consortium of 23 global lenders.

“It is very important from the financing side to make sure the parties that are at the table are the best in the business, and that’s what we’re seeing with the projects that are able to receive either commitments from the DOE Loan Programs office or from commercial lenders and export credit agencies,” Gomez said.

Highly credible engineering firms are also critical to advance projects, and the EPCs themselves might still need to get comfortable integrating new technologies that add more complexity to projects when compared to power generation or LNG projects.

“The bottom line is that having someone that’s very credible to execute a complex project that involves electrolyzers or carbon capture or new renewable power generation within the parameters of the transaction” is critical for providing risk mitigation for the benefit of investors, Gomez added.

Funding sources

Additional funding sources are intended to be made available for clean fuels projects as part of the Inflation Reduction Act, the panelists said.

Most notably, tax credit transferability and the credits in section 45Q for carbon capture and sequestration and 45V for clean hydrogen are available on a long-term basis and as a direct-pay option, which would open up cash flows for developers.

“If you can use [tax credit transfers] as a contract, you can essentially monetize the tax credits in the form of debt and equity,” Mudd said. And if a highly rated corporate entity is the counterparty on the tax transfer, he added, the corporate rating of the buyer can be used to leverage the project for developers that don’t have the tax capacity.

Still, section 45V is potentially the most complex tax credit the market has ever seen, requiring a multi-layer analysis, according to Gomez, who advised patience among developers as prospective lenders evaluate the potential revenue streams from the tax credit market.

“First and foremost we’ll be looking at cash flows driven by the offtake contract, but it will be highly likely that lenders can take a view on […] underwriting 10 years of 45V at a given amount,” Gomez added.

Crucial guidance on how to conduct a lifecycle emissions analysis is still outstanding, however, making it difficult to bring all project parties to the table, according to Shannon Angielski, a principal at law and government relations firm Van Ness Feldman.

“It’s going to hinge on how the lifecycle analyses are conducted and how you have some transparency across states and borders” regarding the potential for a green premium on clean hydrogen, she added.

Agency support

In Canada, the Varennes Carbon Recycling plant in Quebec has received CAD 770m of provincial and federal support, primarily from the Canada Infrastructure Bank and the province of Quebec, noted Amendeep Garcha of Natural Resources Canada.

Around CAD 500m of funding from the Canada Infrastructure bank is also going to support hydrogen refueling infrastructure, Garcha said, with the aim of establishing a hydrogen highway that will form the basis of the hydrogen ecosystem in Quebec.

Pierre Audinet, lead energy specialist from World Bank Group, noted how the international development agency was stepping in to provide support for projects that might otherwise not get off the ground.

“In the world where I work, we face a lot of scarcity of capital,” he noted, adding that the World Bank has backed the implementation of clean fuels policies in India with a $1.5bn loan.

Additionally, the World Bank has supported a $150m project in Chile, providing insurance and capital for a financing facility that will reduce the costs of electrolyzers. Chile, while it benefits from sun and wind resources, said Audinet, is less competitive when it comes to transportation given its geographic location.

The agency is also working to help the local government in the Northeastern Brazil port of Pecem. Shared infrastructure at the port will help reduce risks for investors who have taken a stake in the port facilities, Audinet said.

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exclusive

Green ammonia provider looking to US for growth

A European green ammonia solutions provider is considering a number of strategies to grow in the US, including capital raising, strategic partnerships and a spinoff.

Proton Ventures, a provider of small-scale green ammonia solutions based in Holland, is considering several possibilities for growing its presence in the US, founder Hans Vrijenhoef said on the sidelines of the World Hydrogen Summit in Rotterdam.

Vrijenhoef, who also serves as president of the Ammonia Energy Association, founded Proton Ventures in 2000 after speaking to John Holbrook, an early proponent of ammonia as a fuel and a founder of the AEA.

Today Vrijenhoef is a minority shareholder owning one-third of the company, he said. The majority shareholder is Kees Koolen, the former CEO of Booking.com and a founding partner of EQT Ventures.

In the US the firm’s concept is to deploy its technology – small scale ammonia production – at wind farms in Midwestern states like Iowa, Kansas and the Dakotas to make fertilizer for regional farms and replace grey hydrogen in US agribusiness.

The company’s technology has also been deployed to convert flare gas at shale oil production sites in Saskatchewan into ammonia, Vrijenhoef said, adding that any energy source is applicable.

“We are in a position to deploy multiple hundreds of units in the US,” he said. “We need liquidity to do projects. We need a shareholder to come in.”

The company may have a need for a US-based M&A advisor, Vrijenhoef said. Multiple capital strategies, including a spinoff of the North American subsidiaries, are possible.

The technology is proven through a pilot project in Morocco, which has reached FID, he said. Modular ammonia units can produce between 1,000 and 20,000 tonnes, with the option to put multiple units at one site.

The company partly contracts its manufacturing in The Netherlands but could find new partnerships in the US, Vrijenhoef said. He highlighted an existing relationship with Northwest Mechanical in Davenport,Iowa.

The US subsidiary of Proton Ventures is an LLC based in Cheyenne, Wyoming, Vrijenhoef said. A Calgary-based subsidiary is called NFuelTechnologies.

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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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