Air Products Exits $4.5B Texas Green Hydrogen Venture

• Air Products pulls out of Texas hydrogen venture, selling rights to AES amid market challenges, while continuing projects in Saudi Arabia, Canada, and Louisiana.

Air Products has withdrawn from its $4.5 billion green hydrogen joint venture project in Texas, selling its development rights to partner AES Corporation. The project, announced in late 2022, never reached a final investment decision (FID) as it did not align with Air Products' criteria, which require an anchor customer and 75% capacity utilization of existing facilities, according to CEO Seifi Ghasemi.

In addition to this setback, Air Products has paused a sustainable aviation fuel project in California pending permit approvals. However, the company is continuing its work on the Neom green hydrogen project in Saudi Arabia and other projects in Canada and Louisiana, despite broader industry challenges and some cancellations due to the sluggish hydrogen market.

What factors led Air Products to withdraw from the Texas green hydrogen project?

Certainly! Here's the expanded information regarding the factors that led Air Products to withdraw from the Texas green hydrogen project:

• Market Conditions: The current hydrogen market has faced sluggish demand and pricing challenges, causing companies to reassess their investments and project viability.
• Lack of Commitment: The absence of a firm anchor customer for the Texas project made it difficult for Air Products to justify moving forward, as a stable demand base is crucial for financing and project viability.
• Capacity Utilization Requirements: Air Products has strict criteria that require projects to have a projected 75% capacity utilization. The Texas project did not meet this threshold, which is essential for profitability and operational efficiency.
• Strategic Realignment: The company may be strategically reallocating resources and capital towards projects that offer stronger potential returns and align better with their business model.
• Regulatory and Permitting Challenges: Lingering regulatory hurdles and the need for permit approvals may have added uncertainty to the project timeline, making it less attractive to proceed under current market conditions.
• Focus on Established Projects: Air Products is choosing to concentrate on other ventures like the Neom project in Saudi Arabia, which are further along in development and more aligned with their growth strategy.
• Joint Venture Dynamics: Shift in dynamics with partner AES Corporation might have influenced the decision, where differences in vision or risk tolerance could have played a role in the project's viability.
• Broader Industry Trends: The hydrogen sector has seen waves of optimism followed by setbacks, making stakeholders cautious. Air Products is likely responding to broader industry uncertainties that affect investment decisions.

These factors collectively informed Air Products' decision to step back from the Texas green hydrogen project, emphasizing the need for stronger foundational elements before committing substantial resources.