Neom’s mega green hydrogen plant’s price tag went up by USD 3.5 bn

Neom’s mega green hydrogen project needs more capital: Saudi Arabia’s Neom green hydrogen project — a JV between Neom, US-based gas supplier Air Products and Saudi Arabia’s Acwa Power — will need additional capital injections to the tune of USD 3.5 bn, Air Products said in its 1Q 2023 earnings call, according to a transcript (pdf). The overall estimated price tag for the project has been adjusted upward to USD 8.5 bn from the original USD 5 bn due to rising inflation, advance payments for land rights, and USD 1 bn of interest payments on loans to fund the project, the company said.

The breakdown in added expenses: The US-based gas supplier attributes USD 500 mn to surging inflation, USD 1.2 bn to be disbursed to push down the project’s operating expenses and ensure the project’s self-sufficiency, and an additional USD 1.8 bn needed for project financing costs, upfront fees, interest during construction, and additional joint venture costs, among other expenses.

The JV is also revising its investment structure: Air Products is investing approximately USD 800 mn in cash instead of the original USD 1.7 bn it had earmarked for the project, according to the call transcript. The JV will now fund the project with 25% cash and 75% debt financing. The project is 2x oversubscribed with over 20 international financial institutions committed to bankrolling the green hydrogen project, Air Products said, without disclosing the names of the project’s financiers.

The revised price tag isn’t holding the project back, though: Saudi Arabia’s Industry and Mineral Resources Ministry issued an industrial operating license for the Neom Green Hydrogen Company, and all major subcontracts for the project have also been awarded and construction already underway with 30% of engineering works for the hydrogen plant completed, Air Products noted on the call.