Date: May 2023
Borrower: Neom Green Hydrogen Company
Shareholders: Acwa Power, Air Products, Neom
Size: $6.1 billion
Structure: Istisna-ijara; murabaha
Tenor: Long dated
Banks: Multiple
For such a historically carbon intensive region, the Middle East is increasingly transforming into a leader in alternative energy production, and especially in some advanced technologies that are expected to play critical roles in the world’s efforts to decarbonize.
One such technology is green hydrogen production, which essentially produces clean, sustainable hydrogen fuel from renewable energy sources.
Of several Gulf Cooperation Council countries investing in the technology, Saudi Arabia stands out for developing the world’s first industrial-scale green hydrogen plant.
Neom Green Hydrogen Company (NGHC) – a joint venture between Saudi energy group Acwa Power, US gas and chemicals company Air Products and Neom, a futuristic urban development being built by the Saudi government – is the sponsor of the $8.4 billion plant, which when completed will have enough capacity to export 1.2 million tonnes of green ammonia a year.
Green ammonia is a gas and compound of hydrogen produced using renewable energy. One way of making the gas is by using hydrogen from water electrolysis and nitrogen separated from the air.
Importantly, green ammonia is more energy efficient than hydrogen to liquefy and transport. After it is shipped, it can be split back into green hydrogen and used as a fuel.
Importantly, the financing is one of the largest project financings to be certified as green-loan compliant
The plant, which has an exclusive 30-year off-take agreement with Air Products, is due to start operating in 2026, powered by four gigawatts of solar and wind energy.
To finance its construction, last year NGHC secured $6.1 billion of non-recourse senior and mezzanine debt financing provided by a syndicate of 23 local, regional and international commercial banks, the Saudi National Investment Fund and the Saudi Industrial Development Fund, with the support from Euler Hermes, Germany’s export credit agency.
Importantly, the financing is one of the largest project financings to be certified as green-loan compliant.
Such large-scale financing was impressive, but perhaps most telling is the scale of the project, the ambition, and its leadership in developing a technology that could have a profound impact on the world’s energy transition – all reasons that make it Euromoney’s best Islamic project finance deal this year.
This impact is both direct – cutting carbon emissions by up to five million tonnes of CO2 a year – and indirect, supporting the decarbonization of a range of industries, especially the transportation and industrial sectors.
At the time of securing the financing in May last year, Nadhmi Al-Nasr, chairman of NGHC and CEO of Neom, said the substantial financial backing was an illustration of the faith and confidence in the potential of the green hydrogen project.
“Harnessing the energy of Neom’s abundant natural resources, NGHC’s project will pave the way for the large-scale adoption of green hydrogen,” he said.
