Pierre-Etienne Franc is no stranger to the world of finance or hydrogen.
After spending a quarter century developing Air Liquide's business, managing the use, research, and development of hydrogen use and applications, Franc stepped away to start a pure play hydrogen investment fund known as FiveT Hydrogen.
Six months later, FiveT Hydrogen partnered with France's Ardian and launched a clean hydrogen infrastructure investment platform, dubbed Hy24. With Franc as CEO, Hy24 has already raised €1 billion ($1.09 billion) in its first fund, which is targeting €1.5bn overall and has inked deals across Europe and in North America.
On 7 March, the fund acquired a €100 million ($109 million) equity investment from the Japan Bank for International Cooperation, marking its first partnership with a multinational bank and its foray into Asia.
In a Q&A with Net-Zero Business Daily by S&P Global Commodities Insights, Franc spoke candidly about Hy24's plans, the investment prospects for clean hydrogen infrastructure, and the fuel itself to replace carbon-intensive applications especially in the transportation sector.
Net-Zero Business Daily: Starting with the basics, how does your fund decide what is clean hydrogen? Is it green (renewable-sourced) hydrogen, or blue hydrogen gleaned from natural gas, or pink hydrogen where the source is nuclear?
Franc: We are looking at hydrogen that is qualified under the European taxonomy and Sustainable Finance Disclosure Regulation (SFDR) in a way that it is Article 9 compatible—so whatever process we use needs to reduce [GHG] emissions by a factor of 70 to 80%.
[Note: Article 9 of the SFDR applies to funds that have sustainable investment and/or reduction in carbon emissions as their objective].
This means blue hydrogen, derived from natural gas utilizing a very high level of carbon capture is acceptable. As is green hydrogen using renewable sources of energy such as hydroelectric, solar, or wind. Nuclear-based hydrogen is also acceptable.
Now, there are some markets or segment of consumers that will only value purely green hydrogen, like the refineries in Europe, given European regulations. As you probably know, they need to accept hydrogen if it is created from green sources of electricity, with the temporality and additionality principles, so that makes it more stringent. So while we will have a strong focus on green hydrogen, we also have broader coverage because in many other countries, nuclear-based hydrogen or CCS [carbon capture and storage] would be acceptable. It needs to be contributing to the climate … If it does not, it's, it's useless. And even financial investors, I think would probably fly away from those fossil-based assets because they could become stranded assets in the long term. And we don't want that. We want to offer a long-term asset base play for our investors.
Net-Zero Business Daily: Do you employ some criteria for selecting these projects?
Franc: We look with the view that we need to invest in assets that will generate true capital gain in the next eight to 10 years. In order to do so, there need to be sizable projects. So, hundreds of megawatts of solar, bigger equipment upstream, [and] they need to be mature technologies, solid partners, and have a certain minimum level of offtakers because that's fundamental. And they need to be driven by either very good entrepreneurs who know the hydrogen and project space—or solid industrial players.
Look at the hydrogen projects where we have invested, we have a mix of all. We have strong stakeholders around the table. You've got Trafigura, you've got Technip [Energies], you've got CDPQ [Caisse de depot et placement du Quebec], which is a wide bench of strong players. And you've got sites identified to develop ammonia projects in Quebec and in Norway that are close to the sea, with very good connections to the grid. They also have hydroelectricity access with a very low cost of power and a solid uptake situation. Those are the key ingredients to make it happen.
Another way is to partner with very large players, [who] already have secured financing for projects and … want to share the risk or the cost or consolidate, or who want to grow together with you.
That's the case with the second project [when] we decided to do with Enagás in Spain, where we basically speed up their renewable to gas projects, as a financial partner. For us partnering with Enagás in Spain, where they have a very solid ecosystem play and regulated position, gives us a very strong level of comfort.