A quartet of investors have joined forces to take part in a $650 million equity syndication programme run by energy infrastructure firm Haddington Ventures, to provide funding to develop an underground salt cavern in Delta, Utah, set to become the site of the world’s largest green hydrogen platform to date.
The Ontario Teachers’ Pension Plan, Alberta Investment Management Corporation and Singaporean sovereign wealth fund GIC each invested $200 million, Infrastructure Investor understands, with Manulife deploying $50 million in capital. They have the option to increase their collective investment to $1.5 billion.
The project, which is being developed as a joint venture between Mitsubishi Power Americas and Magnum Development, a portfolio company of Haddington, received a landmark loan guarantee of $504.4 million form the US Department of Energy. The financing marked the first loan guarantee for a new clean energy technology project from DOE’s Loan Programs Office since 2014. ACES Delta will have electrolyser capacity to produce up to 100 metric tonnes per day of green hydrogen under a long-term contract with the Intermountain Power Agency (IPA) in Utah and will be larger than any existing green hydrogen production and storage site by a factor of 10, Haddington Ventures said in a statement.
Haddington Ventures, formed in 1998, has historically specialised in investing in oil and gas storage facilities. The pivot towards the utilisation of hydrogen storage is a natural move for the firm, stated managing director Sam Pyne.
“This isn’t a strategy shift [for Haddington Ventures],” he told Infrastructure Investor. “We’ll continue to focus on underground storage, but just shift what we store from hydrocarbon products to renewable hydrogen.”
The decisions made by the four investors involved, however, could not have come to fruition without the efforts made by both Haddington and the federal government. Haddington, for example, noticed that investors largely misunderstood the opportunities that green hydrogen provided the renewables market.
Pyne added: “Institutional investors like to see success first with similar projects or investments, so it’s not easy to be the first [large scale green hydrogen platform], but the educational processes we put in place helped to mitigate that.”
Additionally, the aforementioned DOE loan worked to quell those fears, as the requirements to apply were steep.
James Lam, also a managing director at Haddington Ventures, described the ordeal: “[We had to prove that our project could] enable decarbonisation, be based in the US and be innovative enough to further technology [in the space]. We also had to prove that we were able to repay the loan.”
While the government has aided this green hydrogen project’s development immensely, its work for the development for the overall sector is far from finished.
“The Department of Energy has set aside $8 billion to support eight to 10 hydrogen hubs through the infrastructure bill”, said Pyne. “The creation of a hydrogen economy is on the horizon. Nevertheless, the government needs to accelerate more projects in the US. A hydrogen production tax credit has been proposed [which would do this].”
Haddington Ventures expects the site to be up-and-running by 2025, generating 220MW of electrolyser capacity to produce green hydrogen will be stored in salt-dome storage caverns and made available on demand to IPA.