Fitch Ratings has set out specific credit-risk considerations relevant to green hydrogen projects in a new report.
Fitch considers the credit risks of such projects to have the closest parallels to those of thermal power assets, and to generally be at least equal to – but potentially greater than – thermal power risks. Future technology and process developments will be evaluated and incorporated in ratings as the industry matures.
Whilst there are two key proven electrolyser technologies for producing hydrogen from renewable energy and water, the green hydrogen market is still nascent, meaning that precedents for project-financed transactions are very limited.
Green hydrogen projects have a greater range of balance of plant than solar, wind or thermal power projects. Complexity, and consequently integration risk, will therefore have a key influence on the completion risk assessment in any rating.
The availability of alternative replacement contractors to complete a project will be key for whether it can be rated above the incumbent contractor.The immaturity of the market will heighten the weight given to independent experts’ (IE) views in relation to such replaceability. We also generally expect high dependence on project parties, such as original equipment manufacturers, who will be key in O&M activities due to their expertise and equipment warranties.
The limited number of peer green hydrogen projects also means Fitch will be more reliant on the IE’s views of the reasonableness of a project’s budgeted or contracted operating costs. Any perceived lack of credibility, competence and experience of the project parties could be factored into the financial profile assessed in our ratings.
Key operating metrics include the efficiency, and rate, of hydrogen production, the plant availability, the ability to respond to intermittent power, and, where this is critical, the hydrogen purity levels.
