Project finance, Project news, Raising capital

NEOM Green Hydrogen reaches financial close

The consortium consisting of Air Products, ACWA Power, and NEOM has reached financial close on the Saudi Arabia green hydrogen facility for a total investment value of $8.4bn.

May 22, 2023

NEOM Green Hydrogen Company (NGHC) today announced that following signing financial documents with 23 local, regional, and international banks, and investment firms, it has now achieved financial close on the world’s largest green hydrogen production facility at a total investment value of $8.4bn.

The plant is currently being built at Oxagon, in Saudi Arabia’s region of NEOM. NGHC has also concluded the engineering, procurement, and construction (EPC) agreement with Air Products as the nominated contractor and system integrator for the entire facility.

Additionally, NGHC also announced that the non-recourse financing structured for the project has been certified by S&P Global (as the second party opinion provider) as adhering to green loan principles and is one of the largest project financings put in place under the green loan framework. Air Products has already awarded major contracts to various technology and construction partners.

As previously reported, to be funded by a combination of long-term debt and equity, the project JV, NEOM Green Hydrogen Project, will build 4 GW of renewables powering production of up to 600 tons per day of hydrogen.

The total financing consists of $5.852bn of senior debt and $475m of mezzanine debt facilities, both arranged on a non-recourse project finance basis, as follows:

– $1,500 million from National Development Fund (NDF) on behalf of National Infrastructure Fund (NIF), under foundation.

– $1,250 million is in the form of SAR denominated financing from Saudi Industrial Development Fund (SIDF),

The balance is from a consortium of financiers, structured as a combination of long term uncovered tranches and a Euler Hermes covered tranche, comprising, in no particular order, First Abu Dhabi Bank, HSBC, Standard Chartered Bank, Mitsubishi UFJ Financial Group, BNP Paribas, Abu Dhabi Commercial Bank, Natixis, Saudi British Bank, Sumitomo Mitsui Banking Corporation, Saudi National Bank, KFW, Riyad Bank, Norinchukin Bank, Mizuho Bank, Banque Saudi Fransi, Alinma Bank, APICORP, JP Morgan, DZ Bank, Korea Development Bank and Credit Agricole.

Unlock this article

The content you are trying to view is exclusive to our subscribers.

To unlock this article:

You might also like...

Project finance, Project news, Raising capital

JX Nippon joins investment consortium for Louisiana SAF plant

JX Nippon Oil & Gas Exploration Corporation has joined Sumitomo Corporation in an investment consortium supporting a Louisiana bioenergy with CCS sustainable aviation fuel plant.

JX Nippon Oil & Gas Exploration Corporation and Sumitomo Corporation have executed consortium agreements to manage investment in the Louisiana Green Fuels BECCS project at Port of Columbia, Caldwell Parish, Louisiana, according to a news release.

The project is developing a SAF production plant with renewable Naphtha as a byproduct utilizing woody biomass waste, such as thinning, with the production capacity of 32 million gallons (120,000 kiloliters) per year and the scheduled commercial operation date in 2029.

It will convert woody biomass waste into synthesis gas, and then synthesize and upgrade it into SAF and renewable naphtha. The Project is powered by a biomass-fired power plant using sawmill and other woody biomass waste attached with carbon dioxide capture and storage facility addressing CO2 emitted from the project, both installed onsite and owned by the project. As a result, the SAF and RN produced from this integrated project achieves deeply negative carbon emission (equivalent to removing nearly 300,000 passenger cars from the road every year). Once complete, the project will create approximately 150 direct jobs onsite, while five to six times as many indirect job opportunities are also expected and will contribute to the improvement of the local quality of life.

This project, which contributes to the reduction of greenhouse gas emissions and the enhancement of energy security, will accelerate the development based on the utilization of various U.S. government support measures, including the Inflation Reduction Act and the Department of Energy’s Title 17 Clean Energy Financing Program established to promote clean energy technologies.

Sumitomo, through its subsidiary Sumitomo Corporation of Americas (SCOA) entered into Joint Development Agreement with Strategic Biofuels on the Project in February 2024. JX, through its subsidiary JX Nippon Oil Exploration (U.S.A.) Limited, and SCOA will jointly establish a consortium Magnolia Sustainable Energy Partners to manage and make investment in the Project.

According to the agreement, SCOA takes an anchor position and leads the formation of a Japanese-based investment consortium aimed at funding the majority of development capital needed to carry the project to FID and commencement of construction in early 2025. As part of the agreement, SCOA will also acquire rights at FID to participate for a portion of the full project equity requirement.

SCOA intends to provide a 20-year offtake for the approximately 640 million gallons of renewable fuels produced as well as all state and federal renewable fuel credits.

Additionally, SCOA and NOEX USA will explore further business opportunities in DACCS, BECCS, and other CCS and CDR fields by leveraging the Sumitomo Corporation Group’s global initiatives in the CCUS sector and the abundant expertise and technological capabilities of the JX Nippon Oil & Gas Exploration Corporation Group.

April 9, 2024

Innovation, Project news

WEC Energy Group, EPRI complete hydrogen blending test

During two weeks of testing in mid-October, hydrogen and natural gas were tested in blends up to 25%/75% by volume to power a reciprocating internal combustion engine.

Upper Midwest utility WEC Energy Group and the Electric Power Research Institute (EPRI) successfully demonstrated the blending of hydrogen in a natural gas generator.

The project is the first hydrogen power test of a utility-scale, grid-connected reciprocating engine generator in the world, according to a press release earlier this month.

During two weeks of testing in mid-October, hydrogen and natural gas were tested in blends up to 25/75 percent by volume to power one of the reciprocating engine generating units that serves customers of Upper Michigan Energy Resources, a WEC Energy Group subsidiary.

The testing was performed on an 18 MW unit that uses a technology known as RICE — reciprocating internal combustion engines. The RICE unit was continually monitored during the test to measure performance, output and emissions data.

“We’re very pleased to take a leading role exploring the potential of this technology as we focus on providing customers with affordable, reliable and clean energy,” said Gale Klappa, executive chairman — WEC Energy Group. “As we bring more renewable energy online, we must ensure that we can keep the lights on when the sun is not shining and the wind is not blowing. The results of this project are a strong indicator that these dispatchable units can run on very low- and no-carbon fuels.”

“Demonstration projects like this one are critical to advancing clean energy technologies needed to meet net-zero goals,” said EPRI President and CEO Arshad Mansoor. “This project will provide key insights on how this could be replicated around the world, providing energy companies with a suite of solutions to reduce carbon emissions. We look forward to working with WEC Energy Group and other energy stakeholders throughout the clean energy transition.”

WEC Energy Group has set some of the most aggressive environmental goals in the energy industry, including net-zero carbon emissions from electric generation by 2050 and net-zero methane emissions from natural gas distribution by the end of 2030.

WEC Energy Group and EPRI worked with numerous industry groups on the project, including Wärtsilä, Burns and McDonnell, and Certarus. The project would not have been possible without the cooperation and support of Cleveland-Cliffs, the primary user of the power generated by the test unit.

EPRI will share a complete analysis of the project in early 2023 to further inform the energy industry on ways to successfully use hydrogen for RICE power generation to support reducing carbon emissions.

‍

November 29, 2022

Project finance, Regulatory

Australia rail-freight co. gets $5m grant for H2 trucks

Aurizon will put four hydrogen-fueled trucks on the road in Queensland.

Australian rail-freight company Aurizon has received a grant of $5m (AUD) from the government of Queensland.

Queensland Deputy Premier and Minister for State Development Steven Miles said Aurizon were a successful applicant through round two of the $35 million Hydrogen Industry Development Fund.

The announcement comes after the release of the Queensland Energy and Jobs Plan, the Palaszczuk Government’s plan for a bold clean energy future for Queensland including the biggest pumped hydro scheme in the world.

“Aurizon’s project will put four hydrogen-fueled prime movers on the road in Townsville and create more opportunities for other businesses to convert their transport fleets to new technology fuel,” Miles said in a news release.

September 30, 2022

Project finance, Regulatory

Exclusive: American Clean Power to advocate for ‘grandfathering’ in 45V rules

The clean energy trade group plans to continue promoting the concept of “grandfathering” for early-mover green hydrogen projects in response to IRS guidance for 45V rules, according to industry sources familiar with the plans.

Clean energy industry trade group American Clean Power (ACP) plans to continue championing the concept of “grandfathering” in the green hydrogen sector, arguing that it is critical for the economic viability of early green hydrogen projects under the Inflation Reduction Act’s clean hydrogen tax credits, according to sources familiar with the group’s plans.

Grandfathering would allow these projects to adhere to less stringent annual time-matching requirements before transitioning to an hourly regime.

ACP, through its previously released Green Hydrogen Framework, has proposed to grandfather in the early-mover projects under annual time-matching as long as they start construction before January 1, 2029. That’s in contrast to guidance for the 45V clean hydrogen tax credit that would require renewable energy generation associated with green hydrogen projects to be matched hourly beginning in 2028.

The trade group, which consists of 800 clean energy companies, previously argued against too-soon hourly matching in a November white paper. Representatives of ACP did not immediately respond to requests for comment.

In response to the IRS guidance, ACP is seeking to underscore that, without grandfathering, early projects will have to be designed from the start to meet hourly matching requirements, significantly increasing costs and negating the benefits of annual time matching, sources said.

The notice of public rulemaking on 45V was issued on December 26, and is open for public comment for 60 days. The tax credit rules, which would require strict adherence to the so-called three pillars approach for incrementality, temporal matching, and deliverability, are viewed by some in the industry as overly burdensome.

ACP’s position is that the project finance market can handle some changes midstream in long-term agreements, but not fundamental shifts like transitioning from annual to hourly time matching.

This switch could lead to a dramatic decrease in green hydrogen production and a concurrent exponential increase in production costs. Investors, anticipating these risks, might finance green hydrogen production agreements as if they were under an hourly regime from the beginning, thereby eliminating the initial benefits of annual time matching, according to the sources familiar.

A Wood Mackenzie study estimates that hourly time matching requirements could result in a price increase of 68% in Texas and 175% in Arizona, for example.

ACP, according to sources, stresses that the absence of grandfathering would create an economic cliff for agreements straddling both accounting systems. This would add to project costs, potentially discourage customer interest in green hydrogen, and hinder the industry’s maturation, the sources explained. In contrast, grandfathering first-mover projects under an annual time matching regime would ensure competitive production costs, driving demand for green hydrogen, the trade group believes.

Moreover, sources explained that ACP’s position is that the transition from annual to hourly matching without grandfathering would likely necessitate assuming hourly matching from the onset in power purchase agreements, leading to higher hydrogen costs from the start. This could delay green hydrogen industry development and give an advantage to blue hydrogen with early adopters, potentially excluding green hydrogen from the market.

January 19, 2024

exclusive

Project finance, Project news

California Resources pursuing pipeline of blue molecule projects

Through a subsidiary called Carbon TerraVault, the upstream oil and gas producer will approach carbon capture and blue molecule production investments on a project-level basis to help meet California’s lofty decarbonization goals.

Through its subsidiary Carbon TerraVault, California Resources Corporation will approach carbon capture and blue molecule production investments on a project-level basis to help meet California’s lofty decarbonization goals, Chief Sustainability Officer Chris Gould said in an interview.

Carbon TerraVault is differentiated by its nature as a CCS-as-a-service company, Gould said, as most CCS projects are owned by emitters themselves.

“We are bringing to market a solution to decarbonize other parts of the California economy,” Gould said, noting that hydrogen producers, power plants and steel and cement makers are among potential clients. “We are out across the state, working with emitters.”

Carbon TerraVault is self-mandated to return one billion tons of carbon back into the ground, first as a gas and then pressurized into liquid. Revenue comes from the federal 45Q incentive and the California LCFS and related tradeable market.

The company has a JV with Brookfield Renewable for the first 200 million tons. That JV recently formed a separate JV with Lone Cypress Energy Services for a planned blue hydrogen plant at the Elk Hills Field in Kern County.

Carbon TerraVault will provide permanent sequestration for 100,000 MTPA at the facility, and will receive an injection fee on a per ton basis, according to a December 7 presentation.

In hiring Carbon TerraVault to provide CCS as a service, LoneCypress also invited the company to invest in the production, Gould said. The JV has the right to participate in the blue hydrogen facility up to and including a majority equity stake, the presentation shows.

“You should expect to see over time as we do more and more of these that we’re going to have multiple models,” Gould said of these partnerships and financial structures. A typical model may emerge as the industry matures.

The company could repeat that effort for “many more” blue hydrogen projects in the state, Gould said. “Green [hydrogen] is a longer-term proposition that is going to be based on renewable buildout,” he said. “Blue is kind of here now.”

Target market

Carbon TerraVault estimates that California’s total CCS market opportunity is between 150 MMTPA – 210 MMTPA, and is in discussions for 8 MMTPA of CCS, of which 1 MMTPA is in advanced discussions, the presentation shows.

Through California Resources’ Elk Hills land position of 47,000 acres and CO2 sequestration reservoirs, the company could attract additional greenfield infrastructure projects like the Lone Cypress Hydrogen Project and create a Net Zero Industrial Park, according to the presentation.

In that vein, Gould noted the huge need for decarbonized ammonia in California’s central valley agriculture, which today is imported from abroad.

“There is a need for clean hydrogen in California and it is best if it is created in California,” Gould said.

The JV with Brookfield funds Carbon TerraVault’s storage needs, Gould said. Investments in the production processes, such as the deal with Lone Cypress, will likely require additional capital.

Project level financing is a “default assumption,” Gould said, though that’s not set in stone. The company is working with a financial advisor but Gould declined to name the firm.

The scale of California’s hydrogen ambitions is far beyond what any one company can do, Gould said.

“If you’re an advisor that is working with a developer likeLone Cypress that is considering locating in California, then I would say give us a ring,” Gould said. “We’re the ones who are going to be able to do the sequestration there.”

December 21, 2022

M&A, Raising capital

Exclusive: Additional details revealed on e-fuels equity raise

A US e-fuels developer is in the midst of a Series C raise with BofA Securities advising.

E-fuels developer Infinium is raising $300m in a Series C capital raise that launched last year, according to a source familiar with the matter.

BofA Securities has been engaged to advise on the process, as previously reported by ReSource. The amount of the capital raise was not previously reported.

Infinium and BofA did not respond to requests for comment.

Infinium recently announced the existence of Project Roadrunner, located in West Texas, which will convert an existing brownfield gas-to-liquids project into an e-fuels 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. The company is always scouting new projects and is looking for partners to provide CO2, develop power generation and offtake end products, an executive said previously.

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.

January 30, 2024