On Wednesday, JPMorgan reaffirmed its Overweight rating on shares of Air Products (NYSE:APD) & Chemicals Inc. (NYSE:APD), emphasizing the company's strategic focus on green hydrogen production for the European market. Air Products has highlighted that Europe, which has set ambitious renewable energy targets, is the primary market for its green hydrogen produced in NEOM.
The company noted that the European Union's mandate for renewable fuels of non-biological origin (RFNBO) by 2030 surpasses NEOM's yearly production capacity, signaling a growing market demand.
Air Products, recognizing the potential for increased value of green hydrogen as legislative deadlines approach, is delaying the signing of offtake agreements. The company's purchase price for ammonia from the NEOM joint venture has remained unchanged since the initial negotiation in July 2020, despite the capital investment being $5 billion at that time.
The company also expects to capitalize on a larger carbon sequestration opportunity in Louisiana, where it has doubled its estimated capacity from previous figures to 10 million tons. This increase is due to the potential transportation of carbon dioxide from regional steam methane reformers to an expanded sequestration site.
The number of eligible reformers in the Gulf Coast area is estimated to be between four and five, each producing substantial amounts of carbon dioxide annually.
The permitting process for Class VI wells in Louisiana, which is crucial for carbon sequestration, has been expedited. With the state now overseeing the process, the timeline could be reduced to one year from the previous estimate of two and a half years under the U.S. Environmental Protection Agency.
Air Products aims to maintain its A-rating for financial health, targeting an ideal leverage ratio between 1.5 and 2.5 times. The company views dividends as critical to its financial strategy and is considering selling equity stakes in certain projects or using debt financing to preserve its balance sheet integrity.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.