NeuVentus, the newly formed midstream infrastructure and hydrogen storage company backed by Lotus Infrastructure Partners, will likely seek project financing and tax equity for its first cache of projects in the Gulf Coast region of Texas and Louisiana in six to 12 months, CEO Sam Porter said in an interview.
“It sure looks like 45V and 45Q, and basically everything the IRA just did, is like a brick on the accelerator,” Porter said, explaining that he expects additional federal clarifications for hydrogen to come this year. “We’re looking at FIDing a first batch of projects, which I think are really going to marry up some things that the project finance community loves.”
That includes salt cavern storage and pipelines with a novel ESG twist, Porter said. The company plans to own and operate its developments as a platform. If in time demand for projects becomes overwhelming, the equity holders could sell those projects.
NeuVentus recently launched with Lotus’ backing. The private equity firm’s position is that they are able and ready to fund all project- and platform-level equity, Porter said.
“There’s certainly project level finance requirements, debt, tax equity and sponsor equity,” Porter said. The company will first get its projects de-risked as much as possible.
Pickering Energy Partners was mandated for NeuVentus’ seed raise. Porter said there could be additional opportunities for financial advisors to participate in fundraising, though Lotus has significant in-house capabilities and relationships.
Vinson & Elkins served as the law firm advising Lotus Infrastructure, formerly Starwood Energy, on the launch of NeuVentus.
The company is also open to acquiring abandoned or underutilized infrastructure assets, convertible to hydrogen, Porter said. Assets that connect production and consumption that can be more resistant to embrittlement than newer midstream infrastructure and would be of interest.
Exiting assets in regions that are good for hydrogen production, namely those that are sunny and windy, and are relatively close to consumption, will get the closest look.
Oil & gas in the energy transition
Renewable-sourced hydrogen offers an opportunity for traditional oil and gas operators to continue their work in salt domes.
NeuVentus’ plan is to focus on storage first, and then have the pipeline emanate from that, Porter said. The founding team of the company has a lot of experience in oil & gas and structuring land deals (mineral rights and surface/storage rights) in the Gulf region, where salt caverns are abundant.
The company is also open to an anchor tenant that needs a pipeline segment between production and consumption. But from a developers’ perspective the most prudent play will be around storage sites located with multiple interconnection options, he said.
There are roughly 1,500 miles of pipeline and 9 to 10 million kilograms of daily hydrogen production and consumption in the Texas and Louisiana Gulf region, Porter said.
“I think we’re going to see a significant need for more midstream build-out,” he said. “The traditional fee-for-service model is going to be appealing to a lot of the new entrants.”
A molecule-agnostic approach
Hydrogen is “a Swiss army knife” of a feedstock for numerous use cases, Porter said. That all of those use cases will prevail is uncertain, but NeuVentus ultimately only needs one or two of them to grow.
“Additional hydrogen infrastructure is going to be required,” whether it’s for ammonia as fertilizer or methanol as fuel or something else, Porter said. “We don’t necessarily care: all of them are going to require clean hydrogen.”
Equity owners in NueVentus will be opportunistic when it comes to an eventual financial exit, Porter said.
“The beauty of this is that I can see a number of potential buyers,” he said.
An offtaker that wants to vertically integrate, like foreign consumers of hydrogen products, could want to acquire a midstream platform for purposes of national energy security. Industrial gas companies could want to acquire the infrastructure as well. Large energy transfer companies that move molecules are obvious acquirers as well, and finally the company could remain independent or list publicly under its own business plan.
