Tony Jones: I just wanted to ask about volumes. With the good visibility you have over the next couple of quarters, do you think some of the new projects ramping up will offset slower end-market trends, particularly EMEA, and maybe even the U.S., if things deteriorate from here?
Sanjiv Lamba: Tony, as I said, the volume trends that we were looking at in January look really good. And I mentioned the on- site customers in particular, we’re seeing them back at seasonal run rate that I would expect them to be at or slightly above that. More broadly around manufacturing, we’re also seeing a snapback after the holiday period, so the seasonal impact. And kind of watch out for what happens beyond that. Again, January showed us a good clear path to that in the U.S. as well. In Q4, our packaged goods, if I look at the gases and hard goods, both grew sales double digits, and we are seeing momentum continue into January on that as well.
Operator: Our next question comes from P.J. Juvekar with Citi.
P.J. Juvekar: Yes. Good morning. Sanjiv, in the past, you talked about three buckets of capital. I think decarbonized Linde was $3 billion, decarbonized customers was $10 billion, and then greenfield projects was $20 billion. Are the returns on — in these three buckets kind of similar to each other? And then, how do you go about forecasting long-term hydrogen price given that these could be 20, 30-year projects and hydrogen costs have been coming down substantially? Thank you.
Sanjiv Lamba: P.J., let me talk about the hydrogen price quickly and then we can talk about the three buckets and how we look at them. So, as far as hydrogen price is concerned, we’ve been in the hydrogen business for about 50 years now. So, we’ve got some long-term experience around hydrogen pricing. In terms of how we think about hydrogen pricing, we look at our projects, the capital that we put on the ground and look at, as I said before, double-digit unlevered post-tax IRRs to make sure that those projects stand on their feet. You walk that back into the hydrogen pricing. And obviously, given that we lead the hydrogen market, both in the U.S. and elsewhere in the world, we feel pretty good about being very competitive in terms of what we bring to offer.
Now, the hydrogen price development that you’re referencing over here is largely going to be that variability is largely going to come on the green side of things, a lot of scale-up needed. Green is neither scalable today, nor is it cost-effective today. Even with the PTC of $3 per kg that might come out of the IRA, I would say to you that the inflection point for green isn’t quite there yet. I see a journey of at least 5 to 7 years there. But you’re right. You’ll see some pricing curves on that will kind of develop in the next 5 to 7 years to make it — get to a point of inflection on volumes. The three buckets that we spoke about, you’re right, they are three different buckets. There are two specific elements in there that you can think about the first.
When we have assets on the ground in the U.S. Gulf Coast, as an example, today, when we add capture capability to that and then work with the sequestration partner to put a downhole, there is an existing asset base on to which I’m adding a little more incremental capital and getting the leverage of that installed base that I have. So clearly, the return will look more attractive. For the rest, whether it’s decarbonizing our customers or new markets, we are largely setting up new assets, which will be just as we have in the OCI case, in an ASU plus an ATR plus carbon capture. You put that together, we would then again look for a traditional industrial gas contract structures and return profile where we would expect to have returns commensurate with the risk that we undertake.
So, that’s how I would kind of say to you that those two buckets would really play out.
Operator: Our final question comes from Christopher Parkinson with Mizuho.
Christopher Parkinson: On the last earnings call, you had a very helpful slide for, I’m sure you remember, it was the IRA and accelerating the U.S. clean energy transition. Can we just hit on actually one of the smaller buckets, the decarbonized Linde? It seems like you have a lot of projects, $3-plus-billion opportunity, fairly low-hanging fruit. How should we be assessing those opportunities in terms of your prioritizations versus, obviously, the — I’d say short, intermediate and longer opportunities with customers as well as new markets? Thank you.
Sanjiv Lamba: Thanks, Chris. So, that bucket, and I referenced this briefly to P.J.’s question earlier on as well. That bucket is installed assets that we have today. There are about 11 to 13 assets that we have on our list for that, $3 billion spend that we talked about. And really, I expect that in the midterm, we will be looking at decarbonizing that. There are two drivers for that. One, we’re seeing conversions and demand buildup of blue hydrogen across our existing network. So clearly, we want to make sure our assets are ready and able to supply that. The second, remember that from a sustainability point of view, we’ve made a commitment that we will bring absolute reductions to our Scope 1 emissions, which are coming from that installed base of steam methane reformers that we operate in the Gulf Coast.
So, we will be tackling that both from a point of creating economic value, but also living up to our sustainability commitments that we made in reducing absolute scope on emissions. In the midterm, you’ll see actions on all of that.
Operator: That concludes today’s Q&A session. I now turn the call back over to Juan Pelaez for closing remarks.
Juan Pelaez: Devon, thank you, and thanks to everyone, for participating in today’s call. If you have any further questions, feel free to reach out. Have a safe day.
Operator: That concludes today’s conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.
