Kommunalkredit makes first equity investment with €25m hydrogen deal

Austrian infrastructure and energy lender Kommunalkredit has made its first equity investment by supporting a €25 million into a 10MW green hydrogen electrolysis plant.

The group has teamed up in a joint venture with local oil and gas firm OMV to build the plant, which will produce up to 1,500 metric tons of green hydrogen a year, replacing the fossil fuel-based hydrogen used at OMV’s Schwechat refinery. Kommunalkredit said the plant is expected to become operational in the second half of 2023 and will be Austria’s largest electrolysis project.

Kommunalkredit has been looking for opportunities in the green hydrogen space for about a year, according to Birgit Brinda, head of structuring and execution at the firm, who said it found comfort in both OMV and the project itself.

“There are many new projects being announced, but we have found in conversations with market participants that there are many projects that lack an important part to make it economically sustainable, such as the transporting of green hydrogen in pipelines, ” she told Infrastructure Investor. “What we like about this one from an infrastructure finance perspective, the offtake is pretty clear. It is directly in the refinery. You’re not relying on someone building a dedicated hydrogen pipeline before you can use your investment.”

The investment costs will be split equally between OMV and Kommunalkredit and will also be supported with €5 million from the Austrian Climate and Energy Fund, although Brinda insisted that subsidies and favourable policies have not played a significant part in the group’s investment decision.

“Other than [the Austrian fund], any considerations around specific promotional schemes have not been relevant in our investment decision,” she said. “We want to support business plans that are sustainable and don’t only rely on certain subsidies. We want to invest and contribute money to something that makes sense in the long-term. This is a strategic investment. Hydrogen will be a very important part on the way to a carbon-free economy and it is a technology with varied applications.”

The deal with OMV represents the first stage of Kommunalkredit’s expansion into equity investments, which Brinda said will focus on a “development equity strategy” in growth areas such as renewables and digital infrastructure.

The firm has previously focused on lending and last year it closed the Fidelio KA Infrastructure Debt Fund Europe 1 on €355 million, above its €250 million target. However, in Q4 last year, Kommunalkredit approved the new equity strategy and Brinda said it expects to follow the hydrogen deal with a move in the Austrian renewable sector imminently.