Climate Fund investment decision: 12/2021
Funding target: funding is allocated to the investment requirements for the first green hydrogen production plant
Funding:EUR 10 million capital loan, priced at the market rate listed in the EU‘s reference interest rate table. The capital loan includes a conversion right with a sustainability incentive. This means that achieving the company’s hydrogen production targets and the efficient use of waste heat generated in the production process will have a favourable effect on the company’s conversion terms.
Main anticipated impact: The company plans to achieve a cumulative emission reduction potential of 2.7 million CO2e tonnes over ten years. The first production plant will contribute an annual emission reduction of 35kt CO2e to this target. If the plan is realised, it will also have a positive impact on the development of the Finnish hydrogen market.
Combating climate change requires accelerating the energy transformation, in which the hydrogen economy plays a vital role. Green hydrogen produced with renewable energy is expected to meet a quarter of global energy needs by 2050. A widespread increase in demand for hydrogen is forecast for the 2020s, and transitioning to a hydrogen economy will not be possible without sufficient hydrogen production. P2X Solutions will build an industrial-scale green hydrogen production plant in Finland. This plant will use water electrolysis to produce hydrogen from renewable electricity and also process the hydrogen into synthetic fuels, such as synthetic methane.
The Climate Fund’s investment decisions are guided by a three-tiered set of criteria. The preconditions for funding are a credible plan for at least self-sustainable business, verifiable added value from the state’s contribution to the project’s overall funding, and alignment with the six environmental objectives of the EU’s sustainable investment network, i.e. the “do no significant harm” principle. Other aspects in the investment decision include emission reductions and other impact, such as business potential.
P2X’s estimated cumulative emission reduction potential is 2.7 Mt of CO2e over ten years if its scale-up plans are realised. The emission reduction potential of the Climate Fund’s investment target, the company’s first 20 MW green hydrogen production plant, is estimated at roughly 35kt CO2e annually. If the plan is realised, it will also have a positive impact on the development of the overall Finnish hydrogen market and enable Finland to keep pace with European hydrogen development.
According to the company, the Climate Fund’s investment will have a direct and significant impact on achieving the emission reductions and an accelerating effect on the development of the whole Finnish hydrogen market. The Climate Fund’s EUR 10 million funding will be used to cover the investment requirements for the first green hydrogen production plant.
The interest on the Climate Fund’s capital loan is market based and priced according to the EU’s reference interest rate table. In other words, the Climate Fund is entitled to the market rate on its capital loan. The capital loan includes a conversion right according to which the Climate Fund has the right to convert part or all of the loan to shares in P2X Solutions Oy. The terms of the capital loan also include an emission reduction incentive. According to the incentive, achieving the company’s hydrogen production targets and the efficient use of waste heat generated in the production process will have a favourable effect on the company’s conversion terms.