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Exclusive: Green ammonia firm in capital raise for flagship Texas project

A green ammonia firm is working with a bulge-bracket bank and undergoing a capital raise for its flagship project in Texas.

Green ammonia firm First Ammonia is undergoing a capital raise for its first project at the Port of Victoria, in Texas.

The New York-based company is aiming to take a final investment decision on the construction of the facility by mid-2024, Co-founder and CEO Joel Moser said in an interview.

The project is expected to be just the first in a global pipeline of green ammonia facilities that will eventually add up to 5 million MTPA of green ammonia production within a ten-year time horizon, Moser added.

The Port of Victoria project entails an up to 300 MW facility under an offtake arrangement with Germany’s Uniper, with First Ammonia evaluating building a first phase of 100 MW or building all under one financing, Moser said. Each 100 MW module will initially produce up to 100,000 MTPA of green ammonia. 

The 100 MW train of the project is estimated to cost approximately $300m, while the full 300 MW will cost between $900 – $1bn, he said.

“We like to think of ourselves not as a developer but as an industrial company, and the investors that we are likely going to be engaging with are interested in not just project one but our entire business model,” he added.

The arrangement with Uniper is “more than a heads of agreement,” Moser said, declining to specify further other than to say that the announcement “reflects an advanced stage” of their work together.

The company is in talks with debt and equity investors that would project finance the facility following a 70/30 debt-to-equity split, he said.

“We are evaluating financing and construction alternatives as to doing all 300 MW under one financing and a single build-out or two separate processes and will make that call in early 2024,” he said.

The firm is working with a bulge-bracket bank as an advisor for the capital raise, Moser said. He declined to name the advisor.

A regulated investment fund has committed seed capital to First Ammonia, which includes funding development capital to the FID stage, Moser said.

Beyond Texas

First Ammonia has contracted with Haldor Topsoe for 5 GW of solid oxide electrolysis for its project portfolio, which amounts to 5 million MTPA.

In the US, the company has a second project under development in New Mexico, for which Moser believes there will be ample offtake markets.

The inland New Mexico project is close to rail transport which can be used to take product to California or to a Gulf Coast port.

“The largest demand for green ammonia right now is to replace grey ammonia for its current uses, and that is in the chemical, refrigeration, and fertilizer industries,” he said, noting RED III regulations in the EU are driving demand for green ammonia. 

He added that the shipping industry will be another major demand center, in addition to replacing coal in Japanese power plants.

“You can move ammonia into Europe by barge” to many power plants that are serviced by bodies of water, he said, noting that these plants are likely to be converted to ammonia-burning facilities. Meanwhile, plants that are not accessible by water will more likely be serviced by hydrogen pipelines, he said.

Moser believes the Port of Victoria facility and other future projects will comply with the EU’s RFNBO standards as well as strict guidelines for 45V in the US.

For its technology, First Ammonia chose solid oxide electrolysis for several reasons.

“SOEC electrolysers are the future,” he said. “They use less renewable power.”

He added that, since SOECs run at high temperatures, the wasted heat from ammonia production can be captured and fed into the electrolysis process.

“If you’re making water into ammonia as opposed to stopping at the hydrogen point, you’re much better off with an SOEC than any other product.”

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Hydra Energy breaks ground on hydrogen refueling station

Vancouver-based Hydra Energy has broken ground on what it calls the world’s largest hydrogen refueling station in Prince George, British Columbia.

Vancouver-based Hydra Energy has broken ground on what it calls the world’s largest hydrogen refueling station in Prince George, British Columbia.

The groundbreaking marks the first project in the company’s Western Canadian Hydrogen Corridor servicing B.C.- and Alberta-based heavy-duty trucks that have been converted to run on both hydrogen and diesel using Hydra’s zero-cost, co-combustion conversion kits. This includes Hydra’s first paying fleet customer, Prince George-based Dymin Mechanical, whose fleet will represent 12 of the 65 trucks the new station will support.

“What’s so important about designing and building our own hydrogen refueling station is that it solidifies a template of how to overcome the chicken and egg problem that has plagued the hydrogen sector. This Prince George station demonstrates that hydrogen can be provided at diesel parity without up-front capital costs for fleets,” stated Hydra Energy Service Delivery Lead, Ilya Radetski.

The new station and hydrogen production will be located on five acres, will produce 3,250 kilograms of hydrogen a day, and can refuel as quickly as diesel and up to 24 Hydra-converted trucks each hour across four bays. The station’s low-carbon hydrogen is being produced from two on-site, 5 MW electrolysers with electricity coming from BC Hydro, B.C.’s main electricity utility with 31 hydroelectric facilities throughout the province.

Additional critical partners include energy project delivery expert, Solaris, and industrial construction specialist, PCL Construction, with project financing support coming from Hydra’s seed funders and non-dilutive government funding including the BC Ministry of Energy, Mines and Low Carbon Innovation – Part 3 Agreement.

Hydra’s Prince George station will be operational early 2024. In the meantime, the company is also partnering with the Edmonton International Airport (EIA) to build a similar project on EIA land. This will service Hydra-converted trucks in the Edmonton region (like Hydra’s second fleet customer, VEXSL) marking the Eastern-most endpoint of Hydra’s Western Canadian Hydrogen Corridor on Highway 16. Additionally, another station is being explored along the same highway in Port Edward/Prince Rupert located west of Prince George. Hydra is currently raising the balance of funding needed for the projects and will announce new investors once confirmed.

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Strategic RNG ventures ramping up

A pair of joint ventures to develop RNG projects in the US – between Clean Energy Fuels Corp. and bp and TotalEnergies, respectively — are expected to make first profits in the second half of this year, as projects come online and begin to generate environmental credits.

Over the next 12 to 24 months, investments made by Clean Energy Fuels and its global JV partners TotalEnergies and bp will start realizing earnings for the company, president and CEO Andrew Littlefair said in an earnings call today.

When these projects come online they have a period of nine to 12 months where the project is producing gas but not monetizing state and federal credits.

“This ramp-up period will have a negative drag on our financials in 2024, until we can monetize the RNG produced with environmental credits,” Littlefair said, adding that the company plans to store RNG until the credits can be claimed.

To date Clean Energy Fuels has invested $238m in the joint ventures established three years ago, Littlefair said. Another $35m is to be deployed into additional dairy RNG projects.

Clean Energy Fuels put $68m into its dairy RNG venture with bp late last year, Robert Vreeland, Clean Energy’s CFO, said in the call; $198m of cash infused into that JV is now all earmarked for dairy RNG development.

M&A can play a factor in Clean Energy Fuels’ RNG growth, Vreeland said. The company is open to acquiring projects to accelerate production volumes.

The RNG ventures will start producing revenues in the second half of this year, Vreeland said; 100% of net losses will occur in the first half of the year.

“You see the effects of the dairy-RNG joint ventures being in ramp-up mode,” Vreeland said. “We’ll start to see the effects of monetizing the RNG projects in the second half of the year.

A large project in Idaho with 37,000 cows will be complete in late 2024 or early 2025, Vreeland said. That project alone will be responsible for more than half of the earnings drag in 2024.

Six greenfield projects have completed construction and are in final commissioning, Littlefair said. Two projects are in or near construction and the company continues to evaluate new projects.

Clean Energy has the largest number of RNG fueling stations in the US, serving customers like Amazon. Some of the stations are customer owned and operated by Clean Energy, namely in Texas, Ohio and California.

Cummins new X15N engine will allow new fleets to adopt RNG, providing a catalyst for Clean Energy’s growth in commercial trucking and OEMs, he said.

Littlefare called the recent passage of a clean fuels standard in New Mexico a major win for RNG adoption, and noted positive signs that midwestern and northeastern states could pass their own standards soon.

Stonepeak committed $400m to Clean Energy Fuels in DecemberThe company recently made a $10m commitment to climate solutions start-up Rimere.

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Capital Power appoints new CEO

The Canadian-based power producer has appointed Avik Dey as its next CEO.

Capital Power Corporation’s board of directors has unanimously selected Avik Dey to be its next President and CEO and become a member of the board of directors, effective May 8, 2023.

The appointment follows the planned retirement of Brian Vaasjo who will support Dey to ensure a seamless transition, according to a news release.

The selection follows a rigorous North American search process conducted by a special committee of the Board, with the support of a leading executive recruiting firm. The board met with a wide range of high-quality internal and external candidates.

“Avik is a highly capable leader with deep experience in the energy and power sectors and has built a number of successful companies and teams,” said Board Chair, Jill Gardiner. “I am confident that through his knowledge, passion, and creativity he will inspire the Capital Power team to accelerate the company’s current strategic drive towards net zero. The Board looks forward to working with Avik as we continue to engage with our stakeholders and grow shareholder value. Avik will champion the team, driving the vision with our people who will own the outcomes well into the future.”

Dey spent more than two decades in executive, operational, investing and strategic advisory roles. He has invested over $12bn in growing long term value for energy and energy transition companies. Most recently Mr. Dey held key executive leadership roles with The Carlyle Group, NOVA Chemicals, and Canada Pension Plan Investment Board. Prior to these roles, he was President & CEO of Remvest Energy Partners in Houston, Texas and a Founder serving as Chief Financial Officer of Remora Energy.

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exclusive

TC Energy executive talks hydrogen strategy

Canadian midstream giant TC Energy recently unveiled it was pursuing 10 hydrogen projects across North America. To learn more we caught up with Omar Khayum, a vice president at the company in charge of hydrogen project development.

TC Energy is evaluating 10 blue and green hydrogen hubs across North America, viewing incumbency as a significant competitive advantage.

The company is looking to use hydrogen as a means of providing a larger basket of low-carbon solutions to customers, according to Omar Khayum, a TC Energy vice president who is in charge of hydrogen project development. That basket includes mature power generation assets like wind, solar and pumped hydro, Khayum said in an interview, as well as additional firming resources, renewable natural gas, and carbon capture.

“We have a continental platform of customers that are in oil & gas and heavy industry that are looking to decarbonize their existing feedstock,” he said.

TC Energy is partnering with end-use customers, adding capabilities into the partnerships, and sharing in both the risk and benefit of the projects, he said.

“Our incumbency really allows us to partner with end users, and identify customer solutions,” Khayum said. “That’s our business model around de-risking what is a newer form of energy solution.”

Khayum declined to specify where the 10 hydrogen projects are located, other than to say they are proximate to industrial load – existing steelmaking, power plants, chemical facilities and refineries – and are not on the Gulf Coast. TC Energy has announced one project in Alberta which involves an evaluation of its Crossfield gas storage facility and would entail generating 60 tonnes of hydrogen per day with capacity potentially increasing to up to 150 tonnes per day.

In some cases, TC Energy is partnering with the end-use customer to jointly develop the hydrogen projects, Khayum said. “We are the lead developer in most cases but we’re not managing all of the risk ourselves – we’re putting together coalitions with organizations that have upstream and downstream capabilities to make sure we de-risk effectively.”

While conducting project management, TC will use external EPC firms and OEMs to deliver projects, depending on the location and technology in use, Khayum said.

Project funding

As for funding the projects, Khayum said the business model for hydrogen looks similar to the model for liquefied natural gas projects. “We have a wide degree of flexibility in how we can finance projects,” he said, noting the availability of project financing as well as the option to fund projects from TC Energy’s balance sheet.

“We have a number of financial advisors engaged to ensure that as we develop the projects from the offtake agreements to the supply chain agreements – and everywhere in between – those contracts are bankable to provide us the optionality to use project financing,” he said.

Khayum believes that the project finance market is still about 12 months away from being ready to finance hydrogen projects. “That’s because we are one of the early movers in hydrogen development and, as such, we’ll be bringing forward to the marketplace some of the first bankable offtake and supply chain contracts along with risk management tools and activities.”

He noted there was still work to be done among underwriters to validate those contracts for bankability. “We are working over the next year to not only get our projects to FID but working in tandem with our financial advisors to enable the banking system to accommodate those transactions.”

Much of the underwriting requirements have already been well-established in LNG, he noted. “If we can manage risk in a similar fashion,” he added, “we think it will be much more expeditious to achieving a positive FID.”

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Hydrogen developer raising equity for US and EU projects

A Washington, DC-based hydrogen developer has hired an advisor to raise equity for three projects in California, and is laying the groundwork for a second capital raise in the EU.

SGH2 Energy, a Washington D.C.-based hydrogen developer, is in the early stages of a process to raise project equity for its three California projects.

Morgan Stanley has been retained to run the process, which could result in taking on two investors, CEO Robert Do said in an interview. The company hopes to have the process wrapped up within three months, he added.

Do declined to disclose the amount he is seeking to raise, but said the company prefers a strategic investor that can co-develop projects outside of California.

Meanwhile, SGH2 has filled out 70% of the senior debt commitments it will need for its Lancaster, California plant, Do said. At the Lancaster plant, SGH2 plans to produce up to 12,000 kilograms (1,380 MMBtu) of clean hydrogen per day, and 4.5 million kilograms per year (517,000 MMBtu) from the conversion of 42,000 tons per year of rejected recycled mixed-paper waste.

An additional set of three projects in Germany, Belgium and Holland will need an equity provider as well, Do said. That process could launch at the end of this year and the company could hire additional financial advisors.

A less expensive proposition

In addition to the Lancaster plant, SGH2 is advancing a Bay Area agricultural waste-to-hydrogen project in Stockton and a Sierra Valley forest residue-to-hydrogen plant.

Lancaster has offtake agreements for 10 years, and the company is in talks with the same offtaker for the other projects.

SGH2’s process requires about five acres of land for a project, as opposed to about 300 acres for solar-powered electrolysis, Do said. The process also requires less water.

“It gives us a cost-competitiveness where we can be two-to-three times cheaper,” Do said.

SGH2 is exporting that process to Europe, Do said. The EU is still going through iterations of new legislation, particularly the Renewable Energy Directive III, that could clarify SGH2’s place in that market.

“Until the legislation is clear it’s hard to really launch the project and know what kind of support you’re getting,” Do said. SGH2 has sites, feedstock and development partners in place for Europe.

SGH2 was spun off from a technology development company that raised about $50m from various VC firms and energy companies, Do said. He is the controlling owner of SGH2.

Do plans to expand across the globe and will be raising money to fund projects in Korea, South Africa and elsewhere.

“There will be indeed opportunities for us to work with additional bankers and funders,” he said.

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exclusive

Reaching bankability: The developing financial landscape around green hydrogen

Panelists at the S&P Platts Global Power Markets conference discussed existing and future opportunities to finance hydrogen production, storage and transport.

Decarbonizing is no longer an option: almost every company in every industry understands that’s the direction in which they need to be moving – now.

And for some companies, hydrogen is the only solution, Fanny Charrier, hydrogen Americas coordinator at Crédit Agricole CIB, said during the Fueling Tomorrow with Hydrogen panel at the S&P Platts Global Power Markets conference this week.

Even so, the project menu is limited.

“We haven’t seen many projects to finance,” Charrier said. “Everybody’s waiting.”

ACES Delta in Utah is thus far the only producing green hydrogen project in the US to raise financing, Charrier said. Credit Agricole is thus focused on M&A debt and equity advisory.

“What we’re looking at is mostly pure green hydrogen projects,” she said. Green ammonia shipping to Europe is a main end-use and market. Project sizes range from a few million up to USD 5bn. “We’re also supporting some electrolyzer manufacturing plants.”

Mobility, heavy trucks and shippers looking for hydrogen is a potentially huge market, but hasn’t materialized yet, she said.

Demand signals

In Europe, commitments to close traditional power generation assets hold promise for clean fuels, António Fayad, manager of hydrogen strategy at EDP Renewables, said during the panel. In the US, EDP is mainly looking to industry to buy hydrogen at or adjacent to factories and other relevant facilities.

There has been a strong, customer-led demand signal from the US, said Sam Bartholomaeus, vice president of power and renewables at Woodside Energy. Woodside was already considering a hydrogen project in Oklahoma when the IRA was passed.

“The signal was already there in terms of seeing demand sectors that need to be decarbonized and seeing that we had a competitive proposition,” he said of the hydrogen portfolio Woodside is developing in the US.

Woodside recently signed a contract for Air Liquide to provide liquefaction equipment for a hydrogen project in Ardmore, Oklahoma. First production at that project will begin in 2026 and Woodside is targeting FID this year.

Government support and finding offtake  

Last year, the USD 504m loan guarantee for the US Department of Energy was a huge boost for the ACES Delta in Utah, Susan Fernandez, senior director of strategy at ACES-Delta, said.

That kind of support from governments and legislatively mandated decarbonization quickens the proliferation of new hydrogen technologies and projects.

“Others will also have the ability to receive more loan guarantee dollars,” Fernandez said of the post-IRA landscape. “We’ll see more projects come to the space.”

Still, offtake is key to reaching bankability, Charrier said.

“The key is always the offtake,” she said. Rather than a chicken-and-egg metaphor, she said she likes to mention a domino effect. “Yes, at the beginning we’ll have to pay a premium, but if it’s driven by a net-zero commitment everything will fall into place.”

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