What is Hy24?
We are the first and largest specialized hydrogen investment fund – Hy24, operated under the FiveT Hydrogen platform together with Ardian. Hy24 is an infrastructure fund with a value of 2 billion euros, which aims to invest only in projects that are 100% in compliance with the European Taxonomy, in projects with sustainable financing. We are an impact fund and we invest in the entire value chain, in production infrastructure, in midstream, i.e. storage and distribution and in downstream, i.e. charging stations, fleets of trucks, buses, taxis focused on hydrogen.
The investment fund opened in 2021 and we have already made three investments this year in Spain, where we will produce both renewable electricity and renewable hydrogen for different offtakers in Spain.
In Germany we invested in H2Mobility Germany, which is the operator of local hydrogen recharging stations and currently they have 95 stations and through our investment, but also with input from other investors, we want to reach 300 recharging stations. We also invested in a company that aims to produce chemicals, such as ammonia or methanol from renewable hydrogen.
What was the average value of the investments?
Between 30 and 110 million euros each. We are always co-investors, we do not buy companies that we own 100%. Our investment strategy is to be minority investors, but with a share let’s say quite large – basically 20-40% of the companies.
What funds are allocated to the Central and South Eastern Europe region?
The fund is global. Of the 2 billion euros, we want to invest 50% in Europe, 25% in the American continent and 25% in Asia – Japan, South Korea and Australia, where there are jurisdictions that are very advanced in terms of hydrogen policies, regulations, technology, companies, etc. USA is moving fast, especially after the adoption of the Inflation Reduction Act, which offers support of up to 4 dollars per kg for renewable hydrogen. However, our focus is Europe.
In Central and Eastern Europe, speaking about countries, everyone is at about the same level, Maybe, Poland is moving a bit faster – big Polish energy companies have some very advanced hydrogen projects that they have brought to the final investment decision stage and they already have projects to build charging stations. On the other hand, I see enormous potential in Romania. That’s why I’m investing my personal time to come to Romania – the head office is in Paris – to help develop the business environment.
What would be the next steps in the development of this industry in Romania? We should probably adopt a new law for hydrogen, which has been under preparation for several years…?
Of course, the law must be passed. A law that provides a regulatory framework and gives the market signals. It is the most important thing for all investors to see what market they are going to compete in – and how their business cases will work. Without such information, they cannot do their calculations. That is the first thing. The second is the need that the local industry develops its own projects. We, as an investment fund, are not going to build anyone’s project. We invest in a mature project, which we judge and invest in after we believe it has potential. Of course, we help as much as we can, and as an investment fund, we are very special, because we are half experts in finance and half experts in hydrogen. It is a unique thing because we bring into an investment project both knowledge from a financial point of view, but also knowledge from the point of view of hydrogen. It is very important for the team – when we make an investment, to support the respective company with all our knowledge to develop its project, to be sure that it reaches commercial and technological maturity.
How did the investment return (IRR) change in the crisis? Did it grew up, maybe?
The crisis, which is absolutely tragic, and it is not something we are happy about, was in fact a major boost for the hydrogen industry, a turning point that moved hydrogen discussion from technology and R&D for some time in the future, towards energy security, and the energy model we would like to have for achieving energy independence, ideally in tandem with decarbonization… Discussions in Europe at the moment are about how we can get out of the natural gas problem and out of our dependence on fossil fuels. The main solution which seems to emerge, for Europe, is the adoption, on a large scale, of renewable energy and hydrogen. This raised the hydrogen extremely high on the public agenda. One of the advantages hydrogen has and a well-defined hydrogen project has is stability. When we are in an energy crisis, everyone suffers because of the price volatility. Natural gas and electricity prices increased by 300%, or, in such situations, you cannot run a business. Well, an investment in hydrogen provides clear stability, for the next 10, 20 years, you know exactly the price you will pay for hydrogen.
For such an end we need also other instruments active in the market like contracts for difference (CfD)…
Sure, CfDs or other “fixed premium” type mechanisms (similar to the one in the US) are needed in the beginning, just as they were needed for renewables, but we see it as something we need for a very short time, for a period when technology and factors of production can be scaled to a point where support will no longer be needed. It also depends on the offtake segment. CfDs are more needed in the industrial sector, in the heavy industry, where we are talking about very large quantities, which need support and cash flow, because they are in trouble in Europe at present. But in other sectors, such as mobility, we are talking about other tools that are necessary – for example – infrastructure support, for the development of recharging stations or for vehicles…
The transport and distribution infrastructure must also be developed, so that it can welcome hydrogen more than 10% in share…
Discussions about hydrogen transmission infrastructure are a bit more complex. The highest value of hydrogen is reached when it is not mixed with natural gas. However, this requires a parallel infrastructure. Transgaz and other hydrogen transmission and distribution companies, apart from their technical capabilities, have a huge asset and this is not necessarily the pipeline, but the concessions and rights on the lands through which their existing pipelines circulate. As they have the land concessions, the new gas and hydrogen bill (Hydrogen and decarbonized gas package), at European level, proposes that those concessions granted to natural gas be automatically extended for hydrogen too. This means that the owner of the concession can install a parallel pipe with hydrogen. Well, that depends on each player’s strategy – you can choose to place a parallel hydrogen pipeline, or to change the gas infrastructure, because, at a certain moment in future, you will no longer need it, or, as long as the gas is still in use, to use those concessions and build a new pipeline. Investment costs for a new pipeline, parallel to the old one, are not big – because what is always difficult – permitting and land use rights is already solved – and this problem does not exist anymore.
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This interview first appeared in the printed edition of Energynomics Magazine, issued in December 2022.
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