Full construction starts for Neom hydrogen project

2 March 2023

Neom Green Hydrogen Company (NGHC) will now start full construction works on the integrated green hydrogen-based ammonia production facility, after having reached financial closure on the project.

The facility is expected to be commissioned in 2026, according to Andrea Lovato, executive vice-president and global head of hydrogen at Saudi utility developer Acwa Power, which is one of the three co-developers of the $8.5bn facility. 

 "Full construction works will now start, following the full financial closure of the project," says Lovato.

He adds they will now focus on their next plant in Oman, which is being co-developed with state energy enterprise OQ and Air Products.

"Hopefully it will take less time to reach financial close on the [Oman] project, but we will see. It could also be the first green hydrogen project of its scale to get under way in Oman. There will be a different set of regulations," Lovato tells MEED.

The three companies signed a joint development agreement for the multibillion-dollar facility to be located in Oman's Dhofar region in May last year. 

Execution status

Neom, US-based Air Products and Acwa Power each have a 33.3 per cent stake in NGHC, the special project vehicle implementing the Neom green hydrogen project, which was first announced in July 2020.

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

The green ammonia will be shipped through the under-construction port at Oxagon, formerly Neom Industrial City.

In addition to being the exclusive offtaker of the green ammonia produced at the plant for 30 years, Air Products is the main engineering, procurement and construction contractor and system integrator for the Neom green hydrogen project.

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

It signed a sub-contract agreement with India’s Larsen & Toubro 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.

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.

NGHC awarded Germany’s Thyssenkrupp Uhde Chlorine Engineers the contract to supply a more than 2GW electrolysis plant for the project. Thyssenkrupp will engineer, procure and fabricate the plant based on the firm’s 20MW alkaline water electrolysis module.

US-headquartered Baker Hughes will supply Air Products with advanced compression technology for the Neom facility’s electrolyser plant.

Financing structure

NGHC has signed financing agreements with banks and lenders for the project, according to a bourse filing by Acwa Power on 1 March.

The total financing consists of $5.85bn of senior debt and $475m of mezzanine debt facilities.

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 an 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 estimated at $5bn when the project was first announced in July 2020.

The project’s capital requirement had increased to $6.7bn during the intervening period, before reaching the current estimate.

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

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

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Jennifer Aguinaldo
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