Neom finalises $6.7bn hydrogen EPC contract

22 May 2023
The $8.4bn project has reached financial close, with 23 lenders backing the deal

Register for MEED's guest programme 

Neom Green Hydrogen Company (NGHC) has reached financial close following the signing of financial agreements with 23 local, regional and international banks and investment firms for the $8.4bn integrated green hydrogen project in Neom, Saudi Arabia.

NGHC has also concluded the engineering, procurement and construction (EPC) agreement, valued at $6.7bn, with US-headquartered Air Products as the nominated contractor and system integrator for the entire facility.

Neom, Air Products and Saudi utility developer Acwa Power each have a 33.3 per cent stake in NGHC, the special project vehicle implementing the project at Oxagon, formerly Neom Industrial City.

Acwa Power said in March that the total financing consists of $5.85bn of senior debt and $475m of mezzanine debt facilities, as MEED reported, citing a bourse filing at the time.

Both are arranged on a non-recourse project finance basis, as follows:

  • $1.5bn from the National Development Fund on behalf of the National Infrastructure Fund
  • $1.25bn in the form of SR-denominated financing from the Saudi Industrial Development Fund

The balance is from a consortium of financiers, structured as a combination of long-term uncovered tranches and a Euler Hermes covered tranche, comprising:

  • First Abu Dhabi Bank
  • HSBC
  • Standard Chartered Bank
  • Mitsubishi UFJ Financial Group
  • BNP Paribas
  • Abu Dhabi Commercial Bank
  • Natixis
  • Saudi British Bank
  • Sumitomo Mitsui Banking Corporation
  • Saudi National Bank
  • KFW
  • Riyad Bank
  • Norinchukin Bank
  • Mizuho Bank
  • Banque Saudi Fransi
  • Alinma Bank
  • Apicorp
  • JP Morgan
  • DZ Bank
  • Korea Development Bank 
  • Credit Agricole

MEED previously reported that the project capital needs for the integrated Neom green hydrogen project have increased to $8.5bn, up 70 per cent from the original cost, which was estimated at $5bn when the project was first announced in July 2020.

This has been revised slightly downward to $8.4bn.

The previously reported increases accounted for inflation since 2020 and the additional scope to make the project more self-sufficient and with lower operating costs.

The upward capital revision accounts for project financing costs, up-front fees, interest during construction, additional joint venture costs and land, among other expenses.

In addition to being the EPC contractor and system integrator for the project, Air Products is also the exclusive offtaker over 30 years for the green ammonia produced at the facility.

The integrated facility will produce hydrogen to be synthesised into carbon-free ammonia for export exclusively by Air Products to global markets.

Execution status

Air Products said the project’s engineering phase is 30 per cent complete, with all major subcontracts awarded. The land preparation is also complete.

Air Products signed a sub-contract agreement with India’s Larsen & Toubro (L&T) for the power grid and generation works for the Neom green hydrogen project, as MEED reported in January.

The contract covers the construction of a 2,930MW solar power generation plant, a 1,370MW wind power farm and a 400MW battery energy storage system, according to a source familiar with the plan.

The package also includes a power transmission network extending 190 kilometres.

The planned wind and solar power plants are located in northwest Saudi Arabia, close to the border with Jordan.

Signed contracts

In April 2021, Acwa Power confirmed having signed limited notice to proceed (LNTP) agreements for the overall EPC contract for the Neom green hydrogen project.

The agreements included an in-kingdom LNTP for the EPC contract between NGHC and Air Products Middle East Industrial Gases and an out-of-kingdom LNTP for the EPC contract between NGHC and Air Products Equipment.

In addition to the renewable energy plants, battery storage and power transmission network, the Neom green hydrogen and ammonia project comprises 2,000MW of electrolysers to produce 650 tonnes of hydrogen a day and air separation units to produce nitrogen for the conversion of hydrogen into 1.2 million tonnes of ammonia a year.

In June 2021, US-headquartered Baker Hughes announced it would supply Air Products with advanced compression technology for the Neom facility’s electrolyser plant.

In December 2021, NGHC awarded Germany’s Thyssenkrupp Uhde Chlorine Engineers the contract to supply a more than 2GW electrolysis plant for the project.

Under this contract, Thyssenkrupp will engineer, procure and fabricate the plant based on the firm’s 20MW alkaline water electrolysis module.

MEED's latest special report on Saudi Arabia includes:

> GIGAPROJECTS: Saudi Arabia under project pressure
> ECONOMY: Riyadh steps up the Vision 2030 tempo
> CONSTRUCTION: Saudi construction project ramp-up accelerates
> UPSTREAM: Aramco slated to escalate upstream spending
> DOWNSTREAM: Petchems ambitions define Saudi downstream
> POWER: Saudi Arabia reinvigorates power sector
> WATER: Saudi water begins next growth phase
> BANKING: Saudi banks bid to keep ahead of the pack
> DATABANK: Riyadh holds its buoyant economic heading

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.