Unidentified Analyst: Yes. Thank you so much.
Seifi Ghasemi: Thank you very much.
Operator: Moving next to Marc Bianchi from TD Cowen.
Marc Bianchi: Hi. Thank you. I’d first like to ask for an update on the NEOM project. Can you talk about progress there, remind us of the time line and any updates on potential off-take agreements?
Seifi Ghasemi: Our NEOM project is moving forward very nicely. We are certainly almost done with the engineering. We are actually constructing the plant. We have, as you saw an announcement today by a NEOM Green Hydrogen company that they are taking delivery of the wind turbines. So that project is expected. But right now, the time line that we have announced is at the end of 2026, beginning of 2027, and we fully expect to meet that deadline. So that — in terms of discussions about the uptake, again, there are comments that I made about Louisiana apply to that. But also at the same time, there has been public announcements by other people about their demand for green hydrogen in Europe? You saw that one of the largest oil companies in the world announced that they will need 500,000 tons of green hydrogen by 2030, just to put it in perspective, 500,000 tons is equivalent of three times the capacity of NEOM.
So there is going to be plenty of demand for that project but we will wait, as I said, in terms of our strategy to price that appropriately so that we can get appropriate return on that project.
Marc Bianchi: Okay, thank you Seifi. That’s a great overview. Thank you. The other question I had was on the targeting greater than 10% internal rate of return. Does that suggest that there’s – this is an upgrade from your prior messaging of sort of an EBIT contribution of 10% of the project cost? And does this now include the benefit of IRA, I believe, before the comment was that you were not including the benefit of IRA?
Seifi Ghasemi: Well, it’s a combination of all of that. We have always said that 10% IRA is the minimum. That really translates to what you said, $0.10 of operating profit on a dollar of investment. Those two go together. We do expect, and we have demonstrated that. Now that you have all of the detailed numbers, please take a look at the return we are getting on Jazan. In Jazan, it’s a $12 billion project. And if you look carefully, you’ll find out that in terms of IRR, the return on that is more than 15%. So we obviously, as I said, the price our products not based on just the return, the price is based on what the market bears. And — but if it goes below 10%, you usually don’t do the projects unless it is phenomenally strategic and we don’t have that — too many of those. So overall, the 10% IRR is our minimum. And we expect most of our projects to produce more than that.
Marc Bianchi: And the inclusion of benefit from IRA?
Seifi Ghasemi: Well, the IRA, it depends on which project and how much it affects that and all of that. But IRA obviously, we’ve had. But as you know, IRA was designed in such a way that we would be able to get a good return, but also price the product to encourage the customers to use that because it was an incentive for that. So it’s going to help both sides.
Marc Bianchi: Okay. Thank you very much.
Seifi Ghasemi: Thank you.
Operator: We’ll move next to Mike Sison from Wells Fargo.
Mike Sison: Hey, good morning. Nice quarter and outlook. I apologize. I just want to ask Louisiana again. Maybe I just don’t understand. So I take the $7 billion and then your normal 10% of capital should be applied on the $7 billion? Or is that less than $7 billion?
Seifi Ghasemi: Well, the rule of time thumb that we said you should expect once that plant is fully operational you should expect if we have financed that ourselves and the $7 billion is our money, you should expand the $700 million uplift on the operating income of our products. But as I said, we might decide to project finance it, which, in that case, it will be in accordance with how much cash we put in there. But if it was our money you should expect $700 million.
Mike Sison: Okay. And then given that the cost has gone up from 4 5% to 7%, is the pricing assumption on what you’re going to sell has that changed? And does that 10% return change on a certain price that you need to get for the product?
Seifi Ghasemi: Yes, we believe that – but this is why our Board approved the project at $7 billion because they see that we expect that we will be able to sell the product at a price and at a premium to get that return. Look, it is not very difficult for the investors to take pen to pencil and just go through order of magnitude that plant to make it simple, assume it is making 3.5 million ton a year of blue ammonia. Assume a price for blue ammonia, you know where the price of gray is obviously, blue is going to be higher than that and then see what the revenue is. And then the cost, it is natural gas costs that you can calculate; it is operating cost that you can calculate, its electricity cost that you can calculate very easily.
And then by the time you get done with the math, you’ll find out that, that plant has – at a reasonable price for blue ammonia, it can easily make more than $1.4 billion, $1.5 billion of EBITDA. So then that or $7 billion becomes a decent return project. So it is not difficult to actually do the calculation. Right now, you know the price of gray ammonia is. But it is not very difficult to convince yourself that, that project is a very, very good project. The important thing for Air Products is to execute the project and bring the project, get the permit for the classic, well, do the sequestration, those are the execution is the challenge for us, but I think the rest of it will work out very nicely.
Mike Sison: Understand. Thank you very much.
Seifi Ghasemi: Thank you.
Operator: Kevin McCarthy from Vertical Research Partners. Your line is open.
Kevin McCarthy: Yes, good morning. Seifi, about three weeks ago, the U.S. Government announced its intention to establish seven regional hydrogen hubs at a cost of $7 billion to be funded by the bipartisan infrastructure law. Be curious to hear your thoughts on that program. I believe you’re involved with the so-called Arches [ph] project or hub in California. On the one hand, I suppose this accelerate some market development. On the other hand, there are many dozens of partners in these hubs, some of which might be customers; others might be existing competitors or possibly future competitors. So maybe you can put that into context for us in terms of your involvement and how you see that market developing?
Seifi Ghasemi: For that particular project, which is part of the infrastructure project, we have never really emphasized that too much because that in terms of helping what we are doing is not comparable to the IRA. It is $7 billion spread over a lot of different projects. By the time it gets to any one-off individual company and so on, the amount is not that much to move in either. We obviously welcome any kind of investment to promote the use of hydrogen. That is a positive thing. But in terms of any kind of a material – we are part of the [indiscernible] in, I mean, they have an NDA, we cannot talk about it that much. But fundamentally, that contribution from that infrastructure bill, as you said, $7 billion divided by all of these projects is not going to move the needle for us in terms of what we were or we were not going to do that.
