Air Products and Chemicals, Inc. (APD) Earnings Call Transcript & Summary

Good morning, and welcome to the UBS Carbon Capture huddle. I'm one of your hosts, Shneur Gershuni, Head of America's ESG Research for the Investment Bank here at UBS. Co-hosting today's events include Josh Spector, Brian Reynolds, Steve Fisher and [indiscernible], Damian Karas and [ Cleeve Rucker ], all members of the UBS U.S. equity research team here at UBS. We have a packed lineup here today, including Air Products, EnLink, [ Savante ], Navigator CO2, CF Industries, Cleveland-Cliffs and Denbury all to discuss developments in the carbon capture in the U.S. post the passage of the recent Inflation Reduction Act. Our first speaker today is Air Products & Chemicals. And before turning the panel over to Josh Spector, our chemicals analyst to host the first session, I have a few disclosures to read. As research analysts, we are required to provide certain disclosures relating to the nature of our own relationship and that of UBS with any company on which we express a view on the Zoom today. These disclosures are available at www.ubs.com\disclosures. Alternatively, please reach out to any one of us and we can provide them to you after the Zoom today. With that, I'm going to turn it over to Josh to introduce our first panel.

Yes. Thanks, Shneur and thanks, everyone, again for joining us today. So happy to be joined by the IR suite from Air Products. Air Products is a leading producer of hydrogen. It represents about 30% of their sales and a higher percentage of earnings. Total company sales are near about $13 billion, about 45% in North America, 30% EMEA, and the rest is mostly split in Asia, about half coming in China. Air Products has been very busy in the last few years and currently have about 5 large projects in their backlog, over $1 billion of investments that are focused on green or blue hydrogen. I won't go through everything, but needless to say, carbon capture is an important enabler for blue hydrogen investments in progress and decarbonizing existing Air Products operations. So from Air Products today, we're joined by Sidd Manjeshwar, VP of Treasury and IR, who is taking over the reins from Simon Moore as he nears his retirement. We're also joined by Simon today, and we also have Mun Shieh, an important pillar of Air Products IR team and from UBS also have Shneur as well who can jump in with questions from the ESG side of things. We have some questions that we'll start with. We're going to come through this -- come at this from the carbon capture angle, which for Air Products, which will naturally go into conversations on blue hydrogen as a topic as well. If anyone on the line has questions you'd like worked in, feel free to e-mail me, [email protected], or Shneur as well, and we'll try to get on those.

So thank you, Air Products for joining us today. And I'll kick it off with a question pretty broad, started moving into the subject here. So for listeners online, which may be less familiar, can you discuss your role in the CCUS value chain today?

Sure, Josh. And first of all, let me say thank you very much to you and Shneur and the UBS team for the opportunity to be here today. It's wonderful to be talking about hydrogen and CCUS is an enabler of our low zero-carbon hydrogen strategy. It's easy to dive straight into the project, Josh, but maybe let's just take a step back and set the stage from an overall strategic perspective. At the end of the day, why is Air Products doing what we are is because the world wants more energy and it wants it with a lower carbon footprint. The specifics of how different countries, regions are getting there might be slightly different, but there is an overwhelming consensus that that's the fundamental goal and direction. And we don't see anything changing there. In fact, I think that's accelerating on the back of supportive landmark public policy globally, like the U.S. IRA, the potential EUs, green industrial plan and other announcements, Canadian grants and other global programs. And then given the fact that the world needs more energy and it wants it with a lower carbon footprint, we think hydrogen has an absolutely critical role to play in decarbonizing hard-to-abate sectors of our economy. Because candidly, there are some things you can do with electricity. You can produce electricity in a renewable fashion, but there's a lot of opportunities where -- or applications where it's impossible or practical -- impractical to do so, and hence, hydrogen plays a key role. Pivoting to CCUS. We're not purely in the CCUS business, but it's purely an enabler for us and our low carbon strategy. And we've got a few exciting operating projects as well as announcements in our backlog and other things that we're working on our pipeline that we can talk about. So our first example, if you think about our operating asset for over the last decade, we have been operating one of the largest carbon capture systems at 2 of our SMRs in Port Arthur, Texas, where we capture over 1 million tons of CO2 per year, where we've deployed our own proprietary technology, right, where we've got all the patents to it. So we're excited to deploy that proprietary technology, the operating experience that we've gained and the skill set that we have and to press our first-mover advantage on the various projects we have globally as well. I think another terrific example, a second example would be our Net Zero blue hydrogen project in Edmonton, Canada. It's located off our existing pipeline network where we are connected to a robust network of customers and existing assets. It uses our gasification technology, which allows us to gasify natural gas given the large natural gas infrastructure in that part of the world and capture over 95% of the CO2. In addition, we do use some of the hydrogen for our internal energy consumption and export power to the grid, which yields us a Net Zero blue hydrogen project. In terms of the CO2 there, we hand the CO2 to the Alberta Carbon Trunk Line for sequestration, given there's an existing infrastructure for carbon sequestration in Canada and Alberta. Now IOL, which is Exxon's venture in Canada. So the tremendous value of the blue hydrogen and entered into a long-term agreement akin to our classic on-site business model and those commercial frameworks and the strength those frameworks provide to support their multi-decade investment in a renewable diesel project. And again, renewable diesel for most investors -- most people probably appreciate this consumes 5x amount of hydrogen than what a classic conventional refinery would for a classic conventional barrel of oil. Again, this project also supports a burgeoning merchant hydrogen from mobility market in Alberta and to round it out, I'd say we received approximately $500 million in grants from the government of Canada, and it was both federal and provincial grants, which recognized the merits of our first-mover advantage to accelerate the energy transition that the province of Alberta and Canada is very focused on as well. Now if we pivot back to the U.S. The third example we could cite in our backlog is our Louisiana Blue Hydrogen Project. Again, a $4.5 billion project where we produce roughly 750 million scuff of blue hydrogen per day, and we have the optionality and ability to produce blue ammonia as well. But it's again located on our pipeline network in the Gulf Coast. It's the world's largest and longest pipeline network where we've got a large customer and existing asset base. We plan to capture and sequester the carbon there and roughly 5 million tons of CO2 per year, which earns us the $85 a ton in the 45Q tax credit. Well, that's roughly $425 million a year for 12 years, which is what the program is for. Again, we were the first company, which pressed our first-mover advantage again, where we entered into a multi-decade agreement with the Mineral Board of Louisiana that granted us pore space or basically space that's the hole in the ground. And that's absolutely critical and our true competitive advantage having that -- because you hear a lot of announcements of blue hydrogen or blue ammonia projects, but at this point, if they don't have access to pore space to put that CO2, it's not really blue. You've heard Seifi occasionally call those fake blue projects. So that's something I think it's very important to emphasize and reiterate for investors. So this is another example where we've taken the carbon, we'll have title and we put it into the ground, and we're highly confident in our execution, and we're full speed ahead on that project. In addition to those, we've got an existing asset base globally in Europe and here where there is an opportunity to retrofit our assets on the back of some of the supportive regulatory policies. And Simon, last year given he leads the sustainability portfolio internally at Air Products had announced our sustainability goals. So across our Scope 1, 2 and we're one of the handful of companies globally that actually has a Scope 3 emissions as well. So we've announced a Third by '30 reduction there in our carbon intensity goals from our 2015 baseline. So overall, very excited about the projects that we've been operating as well as what are in our backlog. And we've got a huge pipeline where we're looking at other opportunities and having exciting and interesting conversations with customers as well.

That's definitely a helpful overview to think about it. I guess -- just when you think about making an investment in carbon capture or something that's going to enable that, I guess, how are you thinking about the returns of those projects and the timing of returns on those investments?

Seifi has always told investors that our mantra internally is to earn a minimum 10% EBIT for every dollar of capital that's invested in the ground or another proxy would be a 10% unlevered project return. And again, I'd stress the minimum return. Two recent examples, which you can see, is in January of this year, we announced the Group II closing of our Jazan transaction, where we acquired the world's largest industrial complex in Saudi Arabia for $12 billion, and that was closed over 2 group phase approach. We've guided investors to $1.35 in EPS for that, and we invested roughly $2.4 billion in equity in that venture. And as investors can do the math, that's well north of a minimum 10% return that we've spoken about. Again, if we look at the Louisiana project where we are going to be building a blue hydrogen project with the carbon and sequestration and capture angle to it, even if you run the math earning the 45Qs, $85 a ton for 12 years, which earns us roughly $425 million. If you calculate it based on the EBIT and even assuming natural gas prices at a $5 an MMBtu or power costs at $50 a megawatt hour, right? And you assume a number somewhere between 3.6 million and 3.4 million tons of blue ammonia just for simplicity's sake again and run it at an average price of what gray ammonia prices were for the last 10 years, you're looking at a 20%, 21% IRR project, right? So I think we are tremendously excited about the projects we're executing. And again, we'd guide you back to that minimum 10% EBIT on every dollar of capital.

Yes. And maybe just to clarify on that latter point then. So when you are looking at these projects and that return, I mean, you could highlight the gray versus green versus blue premium. I guess how are you thinking about what you bake into your planning? Are you assuming that you don't get a premium? Or do you assume that you do get a premium for -- and is that different for blue versus green?

Sure. Great question, Josh. As an organization, Air Products does not have a cost-plus mentality, right, which you sometimes hear about in certain investment circles. We are having very interesting conversations with our customers who recognize the tremendous value of low-carbon hydrogen. The IOL Edmonton example is a clear one where Exxon's entered into a multiyear agreement for the blue hydrogen for their renewable diesel asset. I think for us, the key is to be positioned to support our customers' demand growth and their decarbonization journeys in different parts of the world. And I think we've got a myriad of solutions to their specific needs. While the colors are interesting, Josh, I think what the world really cares about is carbon intensity, right? And I think it's important for investors, regulators and customers to focus on carbon intensity. An example would be the IRA incentives. It incentivizes lower carbon intensity. It doesn't really pick winners and losers and colors, right? It lets companies figure out the best technological configurations with the lowest carbon intensity. And again, for our blue hydrogen projects, which I think blue plays a critical role in decarbonization and solving some of our climate goals alongside green, you need access to that pore space that I mentioned earlier to sequester the carbon, which is a real competitive advantage. In layman's terms, one example with -- at cite is today, when you go to a gas station, you've got 87 89/91 and 93 grade fuel level, right? and we'd liken that similar to a gray, blue and green. And I think there are used cases and exciting applications for them globally. And our Net Zero project was one example of the net blue, but again, it's on the back of our traditional on-site business model, and we received government grants as well. And finally, what I'd say is the U.S. IRA and other public policy regulatory incentives. And you can see the 45V tax incentive, which provides you $3 a kg for the lowest carbon intensity hydrogen that you can produce, right? A truly a game changer for low-carbon hydrogen and for the energy transition overall as well.

Sidd, maybe I can follow up a little bit here. So just to clarify your last response, I also had some questions on the earlier ones. So basically, the fact that the product it's -- you're not pricing the product as a premium product and so forth. Like the IRR calculations are unique for -- you get the 45Qs for putting the equipment on. That's the IRR calculation there? And then what you can actually sell the product for is completely separate and unique and it's not part of the IRR calculation. Is that kind of the right way to be thinking about it?

No, I think we look at everything holistically, Shneur. So I think our customers recognize the tremendous value of low-carbon hydrogen, right? And I think by 2024 when IOL Edmonton comes online or when NEOM comes online in '26 or our Louisiana project in '27, we'd be literally the only name in town, which has that volume of low carbon hydrogen. So I think there's a scarcity premium there. And again, given we're not a cost-plus mentality, we basically provide this value, low carbon molecule to our customers all the market's willing to bear and guiding investors back to that minimum 10% EBIT rule. So hopefully, those waypoints will give you a sense of how we navigate the landscape.

No, that makes perfect sense. And then sort of 2 follow-up questions from the ones before. You had mentioned that you have this structure in Louisiana where you were able to sequester the carbon. I just wanted to clarify, is that into a Class VI well? Just if you can give us a little bit of detail with respect to how that works because we've heard about a shortage of Class VI wells.

Sure. Today, there are several Class VI wells operating in the U.S. There are a couple that are post injection and couple in the injection phase in Illinois, and there are a couple in North Dakota as well. So there are previous precedents in terms of taking this through the permitting process with the EPA. We will be applying for Class VI permits. We're well underway on the execution of those and prep work for those. The EPA currently guides applicants to a 18- to 24-month application process there, and we're highly confident we've been -- our team has been doing a lot of work on this for the last several years if you have heard Seifi mention. And again, we will be probably hiring subcontractors that are experts in the oilfield drilling services to help execute some of these for us as well, but we have access to pore space, which is a lot more or the hole in the ground can handle a lot more than just a $4.5 billion Louisiana project, which is a large project, which we're executing on. And again, when you're ready to inject into the wells is when you need that Class VI permit. So we're executing the project and its construction schedule as things stand today and we're full speed ahead and highly confident of acquiring those permits.

Great. And just one other question. In your opening remarks, you talked about your proprietary technology and how you've sort of done it yourself and so forth. Are there any plans to license the technology and sell it to other companies? Is that a potential new business segment for you where you actually sell it? Or is this something that's going to sit uniquely inside Air Products?

I think the technology that we employed at our Port Arthur and the 2 facilities there, given it's proprietary, we do have patents. At this point, we haven't really -- I think we appreciate the optionality of the question that you mentioned, but we haven't focused on it. I think at this point, we're having interesting conversations with our customers. And given we've got over 2 dozen assets on the Gulf Coast and others globally that potentially could be retrofitted, I think we're focused on those efforts at this point. And then there are other technologies, as you alluded to Shneur, Dow, [ BSF ] which have other amine technologies for sequestration, and those are things that we also look at. So over the last 60 years, we've accumulated a ton of wealth of experience in the hydrogen business, skills, experiences and a portfolio of technologies, right? So I think what you'll see is -- and with the Edmonton project and Louisiana projects, 2 clear examples that no 2 projects are alike, right? Depending on the geography, the regions we're in, the subsidies available, the customers, the availability of resources and renewable attributes, I think we tend to create, I'd say, specific solutions to certain climate change and customer issues that we're trying to solve.

So, Sidd, I actually want to kind of follow up on kind of some of that line of thinking. With the -- so you talked about that you have a lot of existing gray hydrogen assets today. You want to focus on addressing those. What's the limiting factor or really the catalyst for when you start to look at more of your existing assets and say now is the right time to add carbon capture? Is it the customer? Is it carbon sequestration? Where do you see that today? And how does that evolve?

Sure. Like I mentioned, we've got over 2 dozen assets, Josh. Some of those assets, candidly, may be at end of life and may not make sense in terms of what we sequester or what we retrofit, but we do have a lot of assets which are fairly new and where customers see the value in the blue hydrogen that some of those asset retrofits could provide them. Again, this IRA has been a game changer for that space. The $85 credit for each ton of CO2 has made those conversations a lot more interesting and the opportunity is more compelling. So we're in an evaluation mode at this point and when we are ready to make some announcements, we will. But we've got other opportunities in Europe where they're looking to sequester carbon in the North Sea in old depleted oil wells. So those are other opportunities that globally also have generated a lot of excitement with our customer base and us as well. And again, we've got the $4.5 billion Louisiana project. Some of our assets in California. I think there are 2 parts of the equation there. I think there's a relative ease with which those assets could be retrofitted, but having access to pore space in California, I think most folks aren't as sanguine as they are in Louisiana and the Gulf of Mexico, where those sites where there have been thousands of oil and gas wells that have been drilled and there's no natural or induced seismicity, right? So it's one of the best sites in the U.S. where you could actually capture and sequester the carbon.

Okay. I don't know if there's an easy way to answer this, but if you look at your footprint today and the various schemes that are out there, Canada and North America, what's evolving in Europe, I mean what today is economic for you to capture? So what's in place today, kind of everything lines up? How much of the carbon that's emitted today do you think you could potentially capture at an economic level?

I think we measure everything against that 10% EBIT rule, right, where for every dollar of capital, we earn a minimum 10% return. I think we haven't really disclosed that to investors at this point, but I think most of the assets in the Gulf Coast, again, it all comes down to proximally to geological pore space or the infrastructure and the pipeline access to get those carbon -- supercritical carbon dioxide to those sites, right? So I think that's all part of our thought process and evaluation process currently. Candidly, assets that are closer to the pore space will have a lot more ease, but at this point, I don't think we peel the onion further for investors. I think we are looking at the entire portfolio and should be making an announcement soon as Seifi had mentioned to investors as well.

Okay. I guess maybe asked another way, as you have your Third to '30 reduction. I guess how much of that -- I guess, is that a gross reduction? Or is that a reduction in per pound product or some framework like that? Because you are adding, obviously, less carbon-intensive production. I guess should we use that as a framework to think about how much you guys would try to go after over the next 5 to 10 years?

No, I think that is a good framework. Candidly, our scope on emissions primarily are related to our HyCO franchise, right? So there's roughly $15 million in our Scope 1 emissions, right? So that's a huge target that we could sort of work on reducing. But our goals of Third by '30 are our carbon intensity target. So they basically -- the numerator is a dollar ton of CO2 based on the energy equivalency of how much it costs to produce those, because I think that's a fair metric where you can't play with the denominator in terms of cutting headcount or cost to optimizations or pass-throughs that can drive your revenues, which can be an artificially inflated number.

Okay. And I guess when you talk about Louisiana and I mean you're pretty clear, there's more perhaps capacity than what you have for the blue hydrogen plants you're visiting -- you're building, I guess, is that reserved for future Air Products capacity in your mind? Or is there something where Air Products opens that up to perhaps other companies to use that as an injection source over time?

I think at this point, it's purely focused on Air Products' assets or new projects that we're working on announced are developing in the retrofits. I think we probably could handle some more, but I think at this point, that's optionality is something that we keep in our back pocket, but we're focused on our projects and executing and providing low carbon hydrogen for our customers who see a lot of value in that today.

Okay. And I guess, if we think more broadly, I mean, the business, obviously, producing gas is -- transporting gas is a big part of a majority of what you guys do today. I mean, what do you view as the scope for Air Products? I mean, I guess, is it -- you're producing hydrogen, you're selling hydrogen, that's the focus you want to grow into. Is there any scenario where you'd say we have these pipelines, we have these networks, we have expertise moving things in point A to B that you'd want to be involved in CO2 for sequestration versus CO2 for customer needs, which is what you're doing today?

No, I think we're purely focused on our low-carbon hydrogen strategy. We think of our strategy today. It's built on our sustainability foundation, and our base business is one pillar of the strategy and our low-carbon blue and green hydrogen is the second pillar of the strategy. And I think CCUS for us is an enabler of the blue hydrogen today.

Okay. I guess if I flip that question around the other way and look at it in terms of hydrogen markets today are involving a lot of new participants in various parts of that value chain. What's Air Products' role in that value chain? And where do you see you, Air Products, or the gases companies historically having a competitive advantage there versus new entrants?

No, great question, Josh. Look, Air Products was the first company that started the on-site business model, right? And today, roughly over 52% of our business is that on-site business model. We've been in that hydrogen business for 60 years. As you mentioned, today, we're the largest producer of gray hydrogen at 9,000 tons per day. We've got the largest global pipeline networks in the Gulf Coast in California, in Rotterdam. And we move those molecules today via our pipeline and through our on-site business model. We also move it via truck in either a gaseous or liquid form. And we've got an outstanding record on reliability, efficiency, safety and customer service, which our customers appreciate. So what I'd say is we've got a 60-year head start on most new entrants into the business. People -- you've heard Seifi amusingly say that sometimes you have 3 guys and a dog in a truck that try to get into this business, right? There are significant barriers to entry for new entrants in this business. Capital, safety and execution, track record of credibility. And candidly, certain of our industry incumbents have now jumped on our bandwagon on our strategy as well after being negative on the strategy for some time. So I think we continue to press our first-mover advantage. We're backed by 80 years of operating history in this space. We've got the expertise, the skills and a portfolio of technologies with the real projects and access to pore space. So we will have low carbon blue molecules by 2024 in Canada, green molecules out of NEOM in '26 and Louisiana by '27. But look, candidly, where this low carbon hydrogen economy is headed, we're competitive and we'd love to win all projects, but you do need a lot more players adding to this, right, given where this market is potentially headed.

Sidd, maybe I can jump in with a few more questions here. I'm sure we want to chat about clean ammonia as well, too. But what I sort of think about pre and post IRA. Now we're at $85 a ton. Are we in a position now where -- I mean, for lack of a better word, are you effectively getting paid for the carbon? Is that sort of how the economics essentially works when you say that you're able to earn a 10% return? There's the cost structure of capturing the carbon, transporting it and sequestering it. And then you taking that. So I mean, assuming that there's sequester points within, call it, 50 miles of your facilities, is there any reason not to be doing it on your entire facility at this point? And could you potentially exceed your 30% target just by -- if the economics allow it? Just sort of wondering if you can sort of walk us through the steps.

Yes. I think great question, Shneur. And look, all these projects we've announced, right, a big mega scale project. So our Edmonton project is $1.6 billion, NEOM is $8.5 billion, Louisiana is $4.5 billion, our SAF project in California is $2.5 billion. So these projects, once they come online, will literally be a step function change in our carbon intensity metrics, right? The existing fleet that -- we have several of those assets qualify for retrofits given your earlier comment of proximity to pore space, access to pipeline infrastructure, et cetera. Some assets may not get retrofitted given they may be end of life and there could be other new exciting opportunities in our $100 billion backlog or pipeline that Seifi often talks about. So I think that's how we look at our overall global footprint and our projects. As it pertains to pricing, I think our customers see a lot of value in the product today. I think candidly, a lot of these subsidies were done to sort of provide economical benefits to the producers. And some of those would probably get passed to the customers as well to make that more viable. But I think one thing which sometimes is often lost on investors is the seismic shift we're seeing in the investment landscape is purely driven by public policy today, right, and all the compelling incentives they're providing. Because if you think of the last 150 years, when we went from, say, coal -- from wood to coal to oil, it was purely driven on the back of oil have the most efficient and the cost-effective energy source, people pivoted. But today, we can't compete with hydrocarbons toe to toe in terms of competitiveness. The IRA, the EU programs are helping in a large way, but a lot of this is driven by public policy pushing people into the low-carbon space. And then we have investor conversations all the time where they're asking us about our ESG goals and what we are looking to do to accelerate that. And all our customers in the steel space, the refining, the pet-chem, mobility, hydrogen as an energy substitute, their investor bases are pushing them and asking them the same questions. So I think there's a collective push across companies, regions, countries in the world to get to a Net Zero target soon.

And maybe one final question before I turn it back to Josh. You mentioned your customers have their objectives as well, too. So I mean, are you effectively helping them facilitate their goals and that could potentially -- I mean you talked about a potential for a premium pricing up in Alberta, but could that be something that sort of cascades throughout your entire organization and all your products kind of on a go-forward basis as your customers are attempting to achieve their own ESG-related goals or carbon reduction-related goals.

Absolutely. And I think the IOL example with our Edmonton asset. In addition to their carbon ESG goals as well, the renewable diesel that they produce has a lot of value and subsidies that they get in Western Canada as well as in California with the LCFS sort of regimes, right? And then SAF also gets a subsidy in the IRA. So I think there's a value transfer across the chain, and we're all solving each other's ESG goals. So it's a win-win situation for all involved.

Yes, Sidd. I guess I'd like to ask about some of the evolving European regulation. So I think, I mean, obviously, a lot of focus on the IRA and I think we understand some of the benefits there. I guess, with the introduction of the Net Zero Act in Europe, I mean, I know it's still evolving and there's a meshwork of different frameworks to look at. Is there anything you'd highlight from that, that is incremental or maybe changes how you thought about investing in Europe because a lot of your mega projects have been obviously more North America, previously more Asia? How do you think about Europe now?

Sure. Maybe I'll spend 30 seconds on the IRA, and then we can compare and contrast that to Europe. So look, the IRA was a seismic shift, right? A true seminal moment in the U.S. It was a firm commitment to the energy transition and the critical role hydrogen plays. And we've been on the strategy for the last several years. So this is great for us. Now if you think of Europe, Europe is in actually very interesting dilemma at this point, right? Because most people didn't expect the U.S. would end up being the first nation to come and pass this landmark legislation. So they're faced with the prospect where with their energy crisis as well, and thankfully, Europe is coming through the energy crisis, they've had a milder winter. So our thoughts are with them. But there is a significant prospect of a lot of people in Europe looking to move their operations globally, right, and to the U.S. on the back of the support of U.S. IRA. Now the U.S. IRA was heavily skewed to the product producers or incentives for the producers like us. I think in Europe -- look, we don't like to speculate on legislation. There have been certain drafts that have leaked out and it's a balance between the 2, where they've got some incentives on the producer side, but it's more heavily -- it's more skewed to the customer side where you incentivize truck drivers, steel companies, chemical companies, power generation companies to all use the low hydrogen product. But Europe has been on this journey for a long time, right? If you think of Germany, picking them as an example, they have had some announcements in the recent past before the EU green industrial plan, where they've got this program called H2 Global, which imports 10 million tons of green ammonia/hydrogen by 2030. And they've got other incentives across Europe where they provide grants for capital investments in fuel cell vehicles and mobility or provide subsidies on the consumption side. You hear the contract for difference term use. They've also got programs where the RED II standard provides what we are familiar within California as LCFS credits -- equal in credits in certain countries, there on a dollar per kg. But just at a very high level, they've got this concept called a Hydrogen Bank and where they're looking to provide certain subsidies to low carbon fuel providers such as ourselves and others who import that product into Europe on this contract for difference sort of framework. And then they've also got this contract for carbon sort of a setup where the customer steel and other industrial applications provided subsidies for low carbon fuel consumption as well. So I think Europe is thinking about this, they're clearly focused. They're seeking opinions from all the various players in that space. And I think we are looking forward to some constructive legislation that comes to fruition soon there.

Yes. I think -- I mean the Hydrogen Bank, I thought was an interesting concept, and I at least was interested to see some of the import perhaps mechanisms they had to support things. I mean, so you guys are building the NEOM facility, green hydrogen going to green ammonia that you're exporting. In the U.S., you have blue hydrogen with potential for blue ammonia. I guess 2 things there; one, does -- would imported green blue ammonia be something that could get a credit from the Hydrogen Bank initiative in Europe, do you think today? And two, along those lines, how do you think about shipping hydrogen versus ammonia in a clean form around the world? Where do you see more opportunity there?

Yes. No. Great question, Josh. Look, I think, again, I wouldn't want to speculate on how it all plays out, but the H2 global program that was announced in Germany is a similar sort of a setup, where they provide you a subsidy for importing. So hopefully, they're thinking about similar frameworks for the existing legislation as well. But I think to your point, when NEOM was announced in July of 2020, we had mentioned that Europe was going to be one of the potential markets. Since that, we've now started connecting the dots for investors where we've announced 3-port import green ammonia import terminals, work that we're doing in Europe, right, one in Hamburg where Seifi was with Minister Habeck, when that was announced in December last year. We're doing the same in Rotterdam, where we've got an existing pipeline network. So we could import the green ammonia, disassociated, we can put into our pipeline to our existing customer base or we've got the options of liquefying it and moving in it by truck to other mobility applications, right? And similarly, the same in Immingham where it can service the entire U.K.'s needs as well. Now if you think about Germany in that H2 global program, Josh, NEOM, even if you assume a truck consumes 50 kg of hydrogen per day, that is 13,000 trucks that you need in Germany to fully load the asset. Last I checked, I think Germany has somewhere between 650,000 and 700,000 trucks applying on the roads in Germany today. So it's a drop in the ocean in terms of adoption, right? And then since we made the announcement, in addition the hydrogen for mobility applications. I think the green hydrogen industrial application, that opportunity set has gotten tremendously exciting for us, right? If you think of green steel and everything people are looking to do there, Germany produces between 40 million and 50 million tons of steel today. That market globally is roughly 1.8 billion, 1.9 billion tons. Assuming even $50 to $60 a kg of hydrogen needed for 1 ton of green steel, NEOM is entirely spoken for with just 1% -- or 10% of the molecules going to green steel in Germany, right? And we're seeing a lot of pilot projects for those in Germany today. Again, power consumption, you heard of green ammonia being blended into coal and other power generation applications. Germany has lost over 140 terawatt hours of power generation assets through its coal and [indiscernible], right? So Chancellor Scholz last week had made an announcement with any 21 gigawatts of new hydrogen-based gas turbine technology. So I think steel, pet-chem, refining, the mobility, the energy substitute applications are just going to be gigantic not only in Germany, but just globally and we're excited for where this is headed.

Okay. That's it. I think we're actually at the end of the 40 minutes here, a pretty busy schedule for the day. I want to thank everyone from Air Products for joining and thank everyone that's on the line. I mean if you have any questions in Air Products, Sidd, [ Mun ], Simon, all great about responding and getting back to you, or feel free to ask something to us and we can try to help you or pass that along. So I guess, Shneur, I don't know if I'll hand it over to you to maybe you want to wrap things up or lead to the next call here.

Yes. No. Thank you, everyone, for joining. Sidd, thank you. Great presentation. Really appreciate the candidness in your responses today. We will be continuing again in about 8 minutes at 8:50 with EnLink. So thank you again to the Air Products team. You guys are, of course, welcome to continue participating in the conference. And we'll take a pause here for another 7 minutes now. Thank you, everyone.

Sounds good. Thanks, Josh and Shneur. Thanks all our investors for your time.