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How the Siemens Gamesa meltdown shapes the emerging electrolyzer market

The near-collapse of Siemens Energy in part due to the performance of its wind turbine unit, Siemens Gamesa, is informing contract developments in the emerging market for electrolyzer technology.

Siemens Energy in November reached a deal for performance guarantees backstopped by the German government and major banks after issues emerged with two of its wind turbine offerings, putting the company on the hook for nearly $5bn in added costs.

The financial wobbles have focused attention not just on the underlying technical glitches in the turbines, but also on the performance guarantees that Siemens Gamesa has provided in support of the operations of those turbines. 

Performance guarantees from technology suppliers ensure the quality of equipment at installation and through the life of a generation facility. Such guarantees from electrolyzer manufacturers have become a formidable sticking point in negotiations for supply contracts and the associated green hydrogen project finance deals.

“The lender at the project level needs the technology vendor to take technology and operational risk for 10 years,” Strata Clean Energy’s Mike Grunow said in an interview last month, referring to a series of agreements that must be in place in order for green hydrogen projects to reach financial close.

Market dynamics are currently working in favor of the electrolyzer makers, where a rush to build projects has created a supplier’s market, allowing the electrolyzer OEMs to hold back more favorable terms from project owners relating to liquidated damages and performance guarantees.

But the harsh spotlight on the issue at Siemens Gamesa is also informing the stance of electrolyzer OEMs.

Siemens Energy, itself, is working through onerous performance guarantees in the wind business while avoiding granting those same types of guarantees in other areas of its business, including electrolyzers.

‘The T&C’s situation’

In an investor presentation last month, executives from Siemens Gamesa noted their strategy to revamp the terms and conditions for the guarantees they are granting in the wind business, referring to the problem as “the T&Cs situation.”

“We have been extremely generous in the past to accept terms and conditions which, going forward, may hit us,” Jochen Eickholt, Siemens Gamesa’s CEO, said. “We are by far away from what should be the standard terms and conditions.”

In the green hydrogen industry, the lack of sufficient guarantees has held up supply contracts as well as project finance negotiations, as lenders, sponsors, and EPC firms are unwilling to take on the risks of underperformance from emerging electrolyzer technologies, experts said.

The NEOM green hydrogen project in Saudi Arabia, which reached financial close in May, is often referred to as a market precedent for similar projects. But the project had unique characteristics that will be difficult to emulate: Air Products, for one, served as sponsor, EPC contractor, and offtaker, eliminating the usual cross-party risk-sharing dynamics. 

Even so, opportunities for electrolyzer performance to deviate significantly from proven operating results is “pretty small,” according to James Bowe, a partner at King & Spalding, a law firm that advised on the NEOM project. As such, electrolyzer performance is less of an issue as it would be with rotating equipment or solar PV cells. 

Additionally, project proponents and their electrolyzer partners are finding creative ways to overcome the lack of performance guarantees. 

“The way you can overcome it is just put in another electrolyzer, because the fundamental question is ‘are you getting enough gas out to supply your requirements?’ You can do that either by adding another electrolyzer or turning up the power,” Bowe added.

He noted, for example, that green hydrogen developers can set up something of an escrow scheme, where the first shipment of green hydrogen includes extra units, which would sit for a certain delivery period in case the supply of hydrogen comes up short.

King & Spalding was recently on the verge of concluding a supply agreement with one electrolyzer manufacturer that will include a performance guarantee or performance shortfall remediation scheme, as well as a provision addressing delays, Bowe said. 

“Given this, there seems to be some hope that at least some manufacturers will agree to performance and schedule guarantees of some sort,” he added. “But this was a hard fought battle.”

Electrolyzer OEMs are having to come up the learning curve from garage industry to large-scale infrastructure projects with project financing literally overnight, said Fred Lazell, an associate on King & Spalding’s energy team in London.

These companies “know it’s a supplier’s market,” Lazell said. “The instructions they’re receiving from senior management are ‘don’t give away the family jewels too early in the game.’ They see experiences from other technologies like offshore wind and solar, where the OEMs gave up early on in the expansion of the industry quite favorable performance regimes, and that had a big impact on those industries.”

Indeed, warranties for wind turbines have been a systemic issue for the industry, with Vestas, GE, and others having their profitability sapped in recent years.

EPC margins

The reticence of electrolyzer OEMs to provide robust performance guarantees stems from legitimate technical questions: there has never been this scale of operations and related offtake and financing commitments tied to electrolyzer technology. 

But the electrolyzer OEMs are also positioning themselves commercially, according to Lazell. “And the only way we see to get around this is through a partnership between the project owner and the OEM.”

Lazell noted that EPC contractors will provide a “wrap” – turnkey EPC agreements providing for engineering, procurement, construction, commissioning and testing of a project – but pass through the guarantees they get from the electrolyzer provider, nothing more.

Moreover, the margins required by EPC contractors to provide a wrap for the electrolyzer technology would likely blow up project economics.

“That’s why it’s so important to have that direct relationship with the electrolyzer supplier, so the owner can get the best deal possible,” he said. “Because ultimately the project owner is paying for the OEMs’ plant expansion to meet that demand and future demand,” he added, referring to the many electrolyzer providers that are planning to build new production capacity.

To mitigate the cost of an EPC wrap, a project can first put in place credit support from the technology provider, which then gets wrapped through the EPC contract, bringing down the cost of the EPC contract.

While credit support mechanisms will likely be required for many of the smaller, start-up electrolyzer makers, creditworthiness of the OEM is still an issue for the larger companies – like Siemens Energy.

S&P moved in July to downgrade Siemens Energy’s long-term credit rating to BBB-, one step above junk status.

“Although size usually matters, it doesn’t make the creditworthiness problem go away,” Bowe said. 

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Spain-based Exolum acquires stake in Houston ammonia terminal

ReSource first reported earlier this year that valuation multiples for the terminal stake held by Moda Midstream were being discussed above 20x EBITDA.

Exolum, a provider of liquid product storage and logistics, has entered into a definitive agreement to acquire a 50% interest in Vopak Moda Houston LLC, an ammonia storage, import and export terminal located on the Houston Ship Channel, from Moda Midstream LLC, according to a news release.

Terms of the transaction were not disclosed.

Greenhill & Co., LLC acted as exclusive financial adviser to Exolum, and Haynes and Boone, LLP acted as legal counsel. Intrepid Partners, LLC acted as exclusive financial advisor to Moda, and Vinson & Elkins acted as legal counsel. Shearman & Sterling acted as legal counsel to EnCap Flatrock.

ReSource first reported on the sale earlier this year, with valuations coming in at 20x – 25x contracted EBITDA of $13m.

Vopak Moda Houston (VMH) is a joint venture that is 50% owned by Moda Midstream, an EnCap Flatrock Midstream portfolio company, while the remaining 50% interest is owned by Vopak Terminals North America.

Royal Vopak remains as 50% shareholder in the new joint venture.

The acquisition will enable Exolum to establish a key presence in the U.S. Gulf Coast with existing ammonia logistics infrastructure. The terminal and its partners are currently developing one of the most advanced low-carbon ammonia production and export projects worldwide, with targeted annual throughput capacity of 1.1 million tonnes and 70,000 tonnes of additional storage capacity permitted.

The acquisition of Moda’s interest in VMH will be another step forward in Exolum’s diversification strategy and will position Exolum as a leading manager of infrastructure and decarbonizing fuel in the decades to come. The investment in VMH will serve as a platform for Exolum’s development in the U.S. and the acquisition of key competences in the development of the logistics infrastructures required by the energy transition in order to boost low-carbon fuels.

Exolum’s CEO, Jorge Lanza, highlighted that “Exolum strives to become a key player in the development of supply chains for new sustainable energy products, such as ammonia and green methanol. This operation, our first in the U.S., will enable us to continue strengthening our position in strategic ports and to promote the energy transition and the decarbonization of mobility at an international level”.

Moda Midstream President & CEO Jonathan Ackerman said, “I am proud of the collaboration and hard work among the Moda, Vopak and Vopak Moda Houston teams as we transformed a greenfield site into a brand-new liquids terminal in the Port of Houston. I am excited to see how Vopak Moda Houston will build upon its solid foundation to expand and pursue growth opportunities with global storage leader Exolum as its new partner”.

Maria Ciliberti, Vopak president US and Canada: “I am very pleased with Exolum entering as co- shareholder. By pooling our knowledge, network and experience we can further develop this strategically located terminal and marine infrastructure. The worldwide movement to decarbonize industry and transportation will drive strong global demand for low-carbon ammonia. Our joint venture entity situated on the Houston Ship Channel is very well positioned and can serve a critical role in the energy transition, not only for the USA but also for export markets”.

VMH is the only existing waterborne ammonia terminal on the Houston Ship Channel with a Very Large Gas Carrier (VLGC)-capable deepwater berth and is strategically connected via pipeline to the Port of Houston’s petrochemical complex, the largest petrochemical hub in the U.S. and the world’s second largest. The facility currently provides ammonia and natural gas liquid (NGL) storage services.

The facility’s location, large-scale export capabilities, extensive experience in management and ample undeveloped acreage offer new growth opportunities for further development. In October 2023, VMH announced its plans to build a new large-scale, low-carbon ammonia export facility in collaboration with INPEX Corporation, based in Tokyo, Air Liquide Group, based in Paris, and LSB Industries, Inc., based in Oklahoma City.

Ammonia is widely expected to become a driver for decarbonization due to its ability to reduce emissions in hard-to-decarbonize sectors, including power generation, heavy industry, marine fuel, and other mobility methods. With the ability to safely and reliably store and transport ammonia and other pressurised gasses, VMH will be a great contributor to the energy transition supply chain.

With its state-of-the-art ammonia terminal infrastructure and workforce that is ideally located on the Houston Ship Channel, VMH is positioned to become the leading hydrogen and low-carbon ammonia hub on the U.S. Gulf Coast and to facilitate the acceleration of energy decarbonization globally, according to the release.

The transaction, which is subject to customary regulatory reviews and approvals is expected to close in the first quarter of 2024.

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BayoTech appoints CFO

BayoTech has appointed Brian Kellar as chief financial officer.

BayoTech, a provider of hydrogen production and transportation solutions, has appointed Brian Kellar as its new chief financial officer.

Before joining BayoTech, Brian Kellar served as CFO at Northwind Midstream Partners, where he played a crucial role in the company’s formation and strategic financial planning, according to a news release. His leadership at EVX Midstream saw the company’s growth from a startup to the dominant player in the South Texas saltwater disposal landscape.

In his role as CFO, Mr. Kellar will direct BayoTech’s financial strategy and operations, focusing on enhancing financial performance and aligning closely with the company’s strategic goals. His leadership is pivotal in fortifying BayoTech’s financial foundation and supporting its mission to establish a network of localized hydrogen production hubs throughout the United States.

Kellar steps into his new role following Jeff Wood. BayoTech expresses its gratitude to Mr. Wood for his contributions and wishes him the best in his future endeavors.

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Los Angeles moves forward with $800m green hydrogen conversion

The Los Angeles City Council has authorized the Department of Water and Power to begin contracting processes for converting a gas-fired generating station to hydrogen.

The Los Angeles City Council has unanimously approved a motion to move forward with the the conversion of the gas-fired Scattergood Generating Station near El Segundo to hydrogen, according to a vote record posted on the city’s website.

Subsequent coverage in the Los Angeles Times states that the city has plans to converting additional regional gas facilities — Harbor and Haynes and Valley Generating Station – into hydrogen-fueled peaking power stations.

Environmentalists have grouped to oppose the plan based on expressed climate and safety concerns.

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Exclusive: Verde Clean Fuels seeking project finance for gas refineries

Publicly listed Verde Clean Fuels plans to seek equity and debt investors for low-carbon gasoline refineries it expects to deploy across the US. We spoke to CEO Ernest Miller about the strategy.

Verde Clean Fuels, a publicly listed developer of clean fuels technology and projects, is planning to seek project debt and equity investors to finance a series of low-carbon gasoline refineries it expects to deploy across the US.

Houston-based Verde, which employs syngas-to-gasoline refining technology, recently announced an agreement with Diamondback Energy to construct a facility in the Permian Basin that will utilize stranded natural gas to produce 3,000 barrels per day of gasoline.

The company is also pursuing a carbon-negative gasoline project on the premises of California Resources’ Net Zero Industrial Park in Bakersfield, California. The California project will produce approximately 500 barrels of RBOB renewable gasoline per day from agricultural waste, while capturing and sequestering around 125,000 tons of CO2 per year.

Verde is capitalized following a private investment in public equity (PIPE) injection of $54m as part of a reverse merger last year, allowing the company to take the Bakersfield and West Texas projects through the FEED phase, CEO Ernest Miller said in an interview.

Underpinning Verde’s business model is the view that gasoline will persist as a transportation fuel for many years to come, and that very few parties are working to decarbonize the gasoline supply chain.

“Between renewable diesel, renewable natural gas, and sustainable aviation fuel, there is very little awareness that renewable gasoline is even a thing,” Miller said. “The addressable market is enormous, and the impact that can be made by taking even a sliver of that market is enormous.”

Miller says that many market participants believe that electric vehicles will solve the emissions problem from road transport.

“The fact is that gasoline has a very, very long runway ahead of it,” he said. “Regardless of the assumptions you want to make about EV penetration, the volume of gasoline that we continue to use for the foreseeable future is huge.”

Verde Clean Fuels demo plant.

Verde’s projects are sized in the 500 – 3,000 barrels per day range, making them a unique player at the smaller end of the production range. The only other companies with similar methanol-to-gas technology are ExxonMobil and Danish-based Topsoe, which operate at a much larger scale, according to Miller.

Miller recognizes that low-carbon, or negative-carbon, gasoline operates within a complex ecosystem, with the California project potentially playing in that state’s LCFS and D3 RIN markets, in addition to the market for gasoline.

“What I would like to see us do is have an offtaker that plays in all three of those products – so if I can go to Shell Trading, or bp, or Vitol, and get one of them to say, ‘here’s a price,’ and they take all of that exposure and optionality,” Miller said, “that allows me to finance the project without having to manage a whole bunch of different commodity exposures and risk.”


The Bakersfield project, estimated to cost $235m to build, will utilize 450 tons per day of agricultural waste to produce gasoline, and sequester CO2 via California Resources’ carbon management company, Carbon TerraVault, a joint venture with Brookfield Renewable.

Because of the carbon sequestration, the project will qualify for incentives under 45Q, but since it is producing, in Miller’s words, “deeply carbon-negative gasoline,” most of the value for the project will come from California’s LCFS program.

In order to qualify for LCFS credits, the Bakersfield facility goes through the full GREET modeling process – including transport of feedstock, processing and refining, and transport away from the facility – returning a negative 125 grams equivalent per MJ carbon intensity score for the project, according to Miller.

As for investors, Verde “would like to see both California Resources and Brookfield Renewable in the project, either individually or through the Carbon TerraVault JV,” Miller said.

Verde is also in discussions with a handful of financial players, including infrastructure and pension funds that are looking for bond-like cash flow that a project finance model can provide. The company has also explored the municipal bond market in California, which would bring to bear a favorable capital structure for the project, Miller said.

Verde is not currently working with a project finance advisor, Miller said, noting that they have in-house project finance experience. In Texas, Verde is working with Vinson & Elkins as its law firm; and in California Verde is working with Orrick as counsel.

Gasoline runway

For the Diamondback facility in West Texas, which requires roughly $325m of capex, both Verde and Diamondback will take equity stakes in the project, and Verde will seek to bring in debt financing to fund the rest of the project costs in a non-recourse project finance deal, Miller said.

The Permian project seeks to provide a pathway to monetize stranded gas in the basin by taking advantage of and alleviating its lack of takeaway capacity, which causes gas prices at the Waha Hub in West Texas to trade at a significant discount to the Henry Hub price.

“Diamondback would take the position that any gas that’s getting consumed in the Permian Basin is gas that’s not getting flared in the Permian Basin,” Miller said, thus making the project a emissions-mitigating option. “There will never be enough natural gas takeaway capacity out of the Permian Basin,” he added, noting that driller profiles are only going to get gassier as time goes on.

Diamondback, for example, produces more in the Permian than it can take out via pipeline, therefore “finding a use, a different exposure, for that gas by turning it into gasoline, is of value for them,” Miller said.

“It’s the same dynamic in the Marcellus and Bakken and Uinta – all the pipeline-constrained basins,” he added, alluding to possible future expansion to those basins.

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Exclusive: Banker enlisted for CO2-to-SAF capital raise

BofA Securities is running a capital raise for a US-based CO2-to-SAF technology provider and project developer with a global pipeline of projects.

eFuels developer Infinium has launched a Series C capital raise along with efforts to advance unannounced projects in its development pipeline, Ayesha Choudhury, head of capital markets, said in an interview.

Bank of America has been engaged to advise on the capital raise.

Infinium recently announced the existence of Project Roadrunner, located in West Texas, which will convert an existing brownfield gas-to-liquids project into an eFuels facility delivering products to both US and international markets. Breakthrough Energy Catalyst has contributed $75m in project equity.

Infinium, which launched in 2020, closed a $69m Series B in 2021, with Amazon, NextEra and Mitsubishi Heavy Industries participating. Its Project Pathfinder in Corpus Christi is fully capitalized.

About a dozen projects, split roughly 50/50 between North America and the rest of the world, are in development now, Choudhury said. The company is always scouting new projects and is looking for partners to provide CO2, develop power generation and offtake end products.

A CO2 feedstock agreement for a US Midwest project with BlackRock-backed Navigator CO2 Ventures was recently scrapped after the latter developer cancelled its CO2 pipeline project.

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Exclusive: E-fuels developer raising $500m

A developer of green hydrogen for e-fuel products is looking for a more diverse set of backers for a recently launched Series C capital raise.

Ineratec, the German power-to-liquid fuels developer and technology provider, has launched a $500m Series C and could take on a US-based financial advisor to help, CEO Tim Boeltken said in an interview.

German boutique Pava Partners helped Ineratec on its $129m Series B, which was led by Piva Capital. The Series B raise, which was announced in January, also included participation from HG Ventures, TDK Ventures, Copec WIND Ventures, RockCreek, Emerald, Samsung Ventures as well as the increased support from current investors, including global corporates like ENGIE New Ventures, Safran Corporate Ventures and Honda.

The Series C can include equity, debt and project finance, Boeltken said.

The company, which takes a modular approach to fuels production, serves customers in Switzerland, Spain and Finland. Its e-fuels process involves two main steps: first, turning CO2 and hydrogen into synthesis gas, then using a second reactor to turn the synthesis gas into liquid and solid hydrocarbons, according to its website.

Growth in the US would include eventual rollout of its 100 MW commercial unit, none of which have been built to date. Now the company is focused on its 10 MW commercial units, following completion of a 1 MW industrial plant operating now.

In the next month Ineratec will be scouting locations in the US, Boeltken said, adding the the company is “hoping for many, many US installations” with eyes on additional applications in South America and Japan. The company also intends to establish a US headquarters.

Sites in New York and California are of first interest but there are also growth intentions in Texas, Washington state and Appalachia.

Ineratec is currently raising project finance for a “triple-digit” million capex project in the Europe, he said.

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