CDPQ's Big Green Hydrogen Investment?

Francois Normand of Les Affaires reports the Caisse does a private placement in green hydrogen (translated from French):

The Caisse de depot et placement du Québec (CDPQ) is joining forces with three organizations to make a private placement totaling 200 million euros (CA$288 million) in the capital of Hy2gen, a German producer of green hydrogen and e-fuels, which is active in Quebec.

These three organizations are Hy24 (a large clean hydrogen infrastructure fund), Mirova (a management company dedicated to sustainable development) and Technip Energies (a French company specializing in engineering related to the energy transition), as strategic partner.

Green hydrogen is produced mainly by electrolysis of water from renewable electricity. E-fuels are synthetic fuels, produced using electricity from carbon-free sources.

In a statement, the four organizations say Hy2gen will use this capital to build facilities “in multiple geographies, including Europe.”

These facilities will produce synthetic fuels called “e-fuels” or “e-fuels” based on green hydrogen for maritime and land transport, aviation and industry.

Joined by Les Affaires, the Caisse de dépôt did not disclose the size of its stake in this CA$288 million placement, because the terms of the transaction are confidential.

Moreover, this is the CDPQ's first investment in green hydrogen.

"This is in line with our pragmatic approach to accelerating the climate transition, while serving our depositors even more wisely in the coming years," said spokesperson Kate Monfette in an email.

In an email, a spokesperson for Hy2gen in Germany, Marius Nuernberg, indicates that part of these funds will be used to finance the company's projects in Quebec, including the construction of a green ammonia production platform.

This will use 77 metric tons (MT) per day of green hydrogen generated by 200 megawatts of hydroelectricity.

The electrolysis unit – whose location remains uncertain – will be supplied with hydroelectricity to produce green hydrogen. The green ammonia will be stored and made available for loading at the port of Baie-Comeau, on the North Shore.

The start of production is scheduled for 2026.

To date, Hy2gen has facilities with a capacity of 880 MW in planning and construction, and projects with a total capacity of 12 gigawatts (GW) in development.

CDPQ put out a press release on this deal earlier today:

Hy2gen AG, the green hydrogen investment platform, today announces the successful completion of a €200 million, investment round. The capital will be used for the construction of facilities in several geographies including Europe, producing green hydrogen-based fuels – or “e-fuels” – for maritime and ground transport, aviation and industrial applications. The investment, which is the largest private green hydrogen-focused capital raise to date1, is led by Hy24 with Mirova, CDPQ and strategic investor, Technip Energies.

Cyril Dufau-Sansot, CEO of Hy2gen said: “As early as 2021, we were looking for the best possible combination of financial and strategic investors to build e-fuel production facilities. These have the potential to decarbonise entire industries and transport sectors. We are now very pleased that all parties have sealed the largest investment in this segment.”

Pierre-Etienne Franc, CEO of Hy24 said: “The magic combination for success in Hydrogen scale up is sizable projects in strategic basins, strong stakeholder support from off-take to project financing and execution, and the leadership of expert teams for development and steering. This is what Hy2gen has successfully gathered around the table. This first investment made by our Clean H2 Fund allows Hy24 to step into its role as a catalyst for hydrogen-based projects at scale to foster the energy transition.” 

Hy2gen, founded in 2017, is a pioneer in the electrolysis of green hydrogen and its derivatives. The company is one of the leading players in the green hydrogen industry, with 880MW in planning and construction and a further 12GW of projects in development.

Hy24, the world’s largest clean hydrogen infrastructure platform, is a joint venture between Ardian, a world-leading private investment house, and FiveT Hydrogen, an investment manager specialising purely in clean hydrogen investments. The Clean H2 Infra Fund managed by Hy24 with €1 billion raised, intends to unlock strategic and large-scale projects under development to accelerate the scaling up of hydrogen markets.

Raphaël Lance, Head of Mirova’s Energy Transition Infrastructure Funds said: “Mirova is committed to financing sustainable solutions for the energy transition. We are convinced that green hydrogen has a key role to play in the decarbonisation of the industry and are proud to partner with Hy2gen and support their ambition to become a key player in the deployment of this energy of the future.”

Emmanuel Jaclot, Executive Vice-President and Head of Infrastructure at CDPQ, said: “CDPQ is delighted to take part in our first green hydrogen transaction alongside trailblazers of this promising vector of energy, one which has the potential to accelerate the decarbonisation of highly polluting industries. With this investment in Hy2gen, we demonstrate our determination to bring concrete and pragmatic solutions to address today’s environmental challenges.”

Arnaud Pieton, Chief Executive Officer of Technip Energies, stated: “We are partnering and investing in Hy2gen, a first mover developer in the green hydrogen value chain. This will further strengthen our key market positioning in green hydrogen and its derivatives. This investment confirms the consistency of our partnership choices to deliver on our strategy. We look forward to contributing our engineering capabilities and our proven project delivery expertise to the concretization and acceleration of Hy2gen projects.”

Nomura Greentech acted as exclusive financial adviser to Hy2gen. Société Générale acted as exclusive financial adviser to Hy24 and Mirova. Legal advisors included Baker Tilly acting for Hy2gen, Bird & Bird acting for Hy24 and Mirova, Jones Day acting for CDPQ, and Clifford Chance acting for Technip Energies.


 1 Based on a screening of equity capital raises by unlisted companies with a core focus on green hydrogen production on PitchBook as of February 6th, 2022.

I must admit, I have read a few things about green hydrogen but know very little about it.

I took the time to listen to this webinar, Green Hydrogen: What's All the Hype?, and it was very interesting.

Basically, this is still early innings for green hydrogen but the potential is huge as costs come down and they can scale it properly (there are still storage and transportation issues).

It's already being used in chemical feedstocks (to create ammonia and ethanol) but there's big potential in heating, long haul heavy duty transportation and renewable energy storage.

Moreover, I recommend you read an excellent white paper, Hydrogen in the Electricity Value Chain, to really familiarize yourself with the hydrogen in the electricity value chain.

It is estimated by 2035, the production of hydrogen from surplus electricity will compete with natural gas-based hydrogen production.

What else? Leigh Collins of Recharge reports that ‘Green hydrogen is now competitive with fossil fuels’ | ArcelorMittal among offtakers at massive 7.4GW project in Spain:

Most gigawatt-scale green hydrogen projects that have been announced to date are somewhat speculative, focused more on production than usage — yet without guaranteed off-takers, developers will struggle to raise the necessary finance.

A new 7.4GW renewable H2 project has been announced in Spain that largely solves this problem, by including two major industrial consumers — steel maker ArcelorMittal and fertiliser producer Fertiberia — among the developers.

HyDeal España — the first part of the 67GW HyDeal Ambition project that spans Spain, France and Germany — will use 9.5GW of solar energy to power 7.4GW of electrolysers that will split water molecules into hydrogen and oxygen. And the 330,000 tonnes of H2 produced each year will be supplied to a new industrial hub in the Asturias region, northern Spain, and bought by ArcelorMittal and Fertiberia (and other companies yet to join the project).

“The direct connection of mass-scale renewable hydrogen production and long-term bankable consumption create enormous value for the system,” said ArcelorMittal in a statement.

HyDeal España, a joint venture between Spanish gas grid operator Enagás, ArcelorMittal, Fertiberia and Spanish project developer DH2 Energy, will begin production of 200,000 tonnes annually by 2026, reaching full capacity by 2030, when it would reduce Spain's annual greenhouse gas emissions by 4%.

“We bring a historic message to all energy users: green hydrogen is not just about small and local expensive projects. It is now a full-fledged commodity, able to compete with coal, oil and natural gas in both costs and volumes, the perfect weapon at scale against the climate crisis and skyrocketing energy prices,” said Thierry Lepercq, the chief executive of DH2, who initiated the HyDeal projects. 

As you can read, when it comes to green hydrogen, Europe is ahead of North America. 

And it's not just Europe. Sudarshan Varadhan of Reuters reports that India plans to produce 5 mln tonnes of green hydrogen by 2030:

India plans to manufacture a cumulative five million tonnes of green hydrogen by 2030, the power ministry said on Thursday, aiming to meet its climate targets and become a production and export hub for the fuel.

Green hydrogen, produced using renewable energy, has some of the best environmental credentials among cleaner-burning fuels. The zero-carbon fuel is made using renewable power from wind or solar sources to split water into hydrogen and oxygen.

India will set up separate manufacturing zones, waive inter-state power transmission charges for 25 years and provide priority connectivity to electric grids to green hydrogen and ammonia producers in a bid to incentivise production, the federal power ministry said.

The five million tonnes production target is half of that of the European Union, which plans to produce 10 million tonnes of hydrogen from renewable energy by 2030.

While green hydrogen is not currently made in India on a commercial scale, the country's richest men Mukesh Ambani and Gautam Adani have announced plans to produce it.

India, with a population more than three times larger than the EU, has a much lower per capita energy consumption, but among the fastest rates of energy demand growth in the world.

Mayank Bansal, chief commercial officer of ReNew Power, said the incentives announced by India could help lower cost of hydrogen manufacturing.

"Currently, manufacturing green hydrogen is a costly proposition and in cognizance of this, the government has correctly waived off inter-state transmission charges," Bansal said in a statement.

India's Power Minister RK Singh said on Wednesday green hydrogen manufacturers would also be allowed to transmit unused electricity to the grid.

The incentives announced on Thursday are the first part of India's national hydrogen policy. The government has not said when the rest will be released.

India also plans to provide federal financial support to set up electrolysers, as it wants to make the use of green hydrogen mandatory for refineries and fertiliser plants.

I am just providing a glimpse of the green hydrogen future.

This is why CDPQ's investment in Hy2gen, a German producer of green hydrogen and e-fuels which is active in Quebec, is exciting.:

HY2GEN AG develops, finances, builds and operates plants for the production of green hydrogen and hydrogen-based e-fuels worldwide. These products are used to create CO2-free or CO2-neutral and competitive fuels and industrial solutions. The first plants are being built in France, Norway, Canada, Germany, and the USA. Hy2gen’s goal is to become the market leader in the production of green hydrogen and green e-fuels for mobility, agriculture, and industry. Founded in 2016, the company’s first-mover advantage is underlined by a current project pipeline in planning and construction of 880 MW and a project pipeline of over 12 GW in development.

In other CDPQ news today, Innocap and BNY Mellon's HedgeMark will create the industry’s leading alternative investment platform:
You can read the press release here but I prefer covering this in a separate post as it's worthy of more of my attention and I am already in discussions with François Rivard, President and Chief Executive Officer at Innocap to cover it properly.

Suffice to say Innocap is the world's leading institutional alternative investment platform used by top Canadian and global investors and it represents a true Canadian and Quebec success story.

I once worked there eons ago right before the Great Financial Crisis (short contract) and it has grown by leaps and bounds since then, garnering important institutional assets.

The deal with BNY Mellon's HedgeMark will only bolster its industry-leading institutional investment platform. 

Alright, let me wrap it up there. 

Below, CNBC reports hydrogen is a clean-burning molecule, meaning that it can help to decarbonize a range of sectors that have proved hard to clean up in the past. But today, most hydrogen is produced from CO2-emitting fossil fuels. Hydrogen produced from renewable electricity, known as green hydrogen, could be the solution to cutting our carbon footprint but first, it must overcome a number of challenges.

Also, green hydrogen produces zero emissions and many believe it holds the key to limiting global warming. So is it the big hope for the future or a multi-billion euro mistake? Watch this DW documentary for a more critical view (German public broadcast service).