NEOM Accelerates Moves towards Green Hydrogen Production

 David Edmondson, CEO of the NEOM Green Hydrogen Company (NGHC) Asharq Al-Awsat)
 David Edmondson, CEO of the NEOM Green Hydrogen Company (NGHC) Asharq Al-Awsat)
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NEOM Accelerates Moves towards Green Hydrogen Production

 David Edmondson, CEO of the NEOM Green Hydrogen Company (NGHC) Asharq Al-Awsat)
 David Edmondson, CEO of the NEOM Green Hydrogen Company (NGHC) Asharq Al-Awsat)

Saudi Arabia’s NEOM is accelerating steps towards hydrogen production, as part of its endeavor to advance green and sustainable solutions and achieve the zero-carbon emission initiative by 2060.

NEOM Green Hydrogen Company has announced an exclusive 30-year off-take agreement with Air Products for the world’s largest green hydrogen plant.

David Edmondson, CEO of the NEOM Green Hydrogen Company (NGHC), said that the Saudi market, and specifically NEOM, would shift towards an economy that depends on green hydrogen, and transfer it to America, Europe and Asia through Air Products.

Edmondson added that officials in NEOM continue to lead change and transformation in this field. He noted that the product will be sold in the local market for the transportation sector, whether trucks or buses, revealing that the plant will start operating in mid-2024.

Located in Oxagon, the NEOM Green Hydrogen Company (NGHC) facility will be the largest commercial-scale green hydrogen production complex in the world, with initial production of up to 600 tons of green hydrogen per day, saving 5 million tons of CO2 annually, NEOM said in a statement.

NGHC – an equal joint venture between NEOM, ACWA Power and Air Products – highlighted a total of SAR 22.9 billion of financing secured from 23 financial institutions, including Saudi Industrial Development Fund (SIDF), National Infrastructure Fund (NIF), as well as local and international banks.

Moreover, NGHC also announced that the non-recourse financing structured for the project has been certified by S&P Global (as the second party opinion provider) as adhering to green loan principles and is one of the largest project financings put in place under the green loan framework.

NEOM added that Oxagon was selected as the location for NGHC due to its natural resources, strategic coastal location and the opportunity for industrial efficiency as a result of proximity to supporting cutting-edge facilities and future tenants based there.

In January, the Saudi Ministry of Industry and Mineral Resources granted the first industrial operating license to NEOM for green hydrogen, in a move that supports the Kingdom’s efforts to produce green hydrogen worldwide and consolidates its position as a leading country in the global energy sector.



Year of War Creates Cracks in Israel's Borrowing Strength

The Bank of Israel building is seen in Jerusalem June 16, 2020. REUTERS/Ronen Zvulun/File Photo
The Bank of Israel building is seen in Jerusalem June 16, 2020. REUTERS/Ronen Zvulun/File Photo
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Year of War Creates Cracks in Israel's Borrowing Strength

The Bank of Israel building is seen in Jerusalem June 16, 2020. REUTERS/Ronen Zvulun/File Photo
The Bank of Israel building is seen in Jerusalem June 16, 2020. REUTERS/Ronen Zvulun/File Photo

Israel's economy has for almost a year ridden out the chaos of a war that risks spiralling into a regional conflict, but rising borrowing costs are starting to strain its financial architecture.

The direct cost of funding the war in Gaza through August was 100 billion shekel ($26.3 billion), according to the finance ministry. The Bank of Israel reckons the total could rise to 250 billion shekel by the end of 2025, but that estimate was made before Israel's incursion into Lebanon, which will add to the tally.

That has led to credit ratings downgrades, which are amplifying economic effects that could reverberate for years, while the cost of insuring Israel's debt against default is near a 12-year high and its budget deficit is ballooning, Reuters reported.

"As long as the war continues, the sovereign debt metrics will continue to worsen," said Sergey Dergachev, portfolio manager at Union Investment.

Although Israel's debt-to-GDP, a core metric for economic health, stood at 62% last year, borrowing needs have blown out.

"Even if Israel has a relatively good base, still it will be painful on the fiscal side," Dergachev said, adding: "And over time, it will put pressure on the rating."

Israel's finance minister has said the economy is strong, and the country's credit ratings should rebound once the war has ended.

The cost of the war is steep due to Israel's Iron Dome air defenses, large-scale troop mobilization and intensive bombing campaigns. This year, debt-to-GDP hit 67%, while the government deficit is 8.3% of GDP, well above the 6.6% previously expected.

While the core buyers of Israel's international bonds - pension funds or major asset managers lured by its relatively high sovereign debt rating - are unlikely to shed the assets at short notice, the investor base has narrowed.

Privately, investors say there is increasing interest in offloading Israel's bonds, or not purchasing them, due to concerns over the ESG implications of how the war is conducted.

Norges Bank sold a small holding in Israeli government bonds in 2023 "given increased uncertainty in the market," a spokesperson for Norway's sovereign wealth fund said.

"What you do see reflecting these concerns is obviously the valuations," said Trang Nguyen, Global Head of Emerging Markets Credit Strategy at BNP Paribas, adding Israeli bonds were trading at far wider spreads than similarly rated countries.

Asked about rising borrowing costs and investors' ESG concerns for this story, Israel's finance ministry did not immediately respond to a request for comment.

While Israel's domestic bond market is deep, liquid and expanding rapidly, foreign investors have pulled back.

Central bank data shows the share held by non-residents declined to 8.4%, or 55.5 billion shekels, in July from 14.4%, or nearly 80 billion shekels, in September last year. Over the same period, the amount of outstanding bonds grew by more than a fifth.

"Israeli institutions actually are buying more during the last few months and I guess some global investors sold bonds because of geopolitics and uncertainty," a finance ministry official said, declining to be named.

Equity investors are also cutting back. Data from Copley Fund Research showed that international investors' cuts to Israel funds, which began in May 2023 amid disputed judicial reforms, accelerated after the Oct. 7 Hamas attacks.

Global funds' ownership of Israeli stocks is now at its lowest in a decade.

Foreign direct investment into Israel dropped by 29% year-on-year in 2023, according to UNCTAD - the lowest since 2016. While 2024 figures are not available, ratings agencies have flagged the war's unpredictable impact on such investment as a concern.

All this has amplified the need for local investment, and government support.

The government in April pledged $160 million in public money to boost venture capital funding for the crucial tech sector, which accounts for some 20% of Israel's economy.

This adds to other costs, including housing thousands displaced by the fighting, many in hotels vacant due to the steep drop in tourists.

The displacements, worker shortages due to mobilization and Israel's refusal to allow Palestinian workers in, are hindering its agriculture and construction sectors.

The latter has been a key factor curtailing economic growth - which plunged more than 20% in the fourth quarter of last year and has yet to recover. Data from the three months to end-June show seasonally adjusted GDP remained 1.5% below pre-attack levels, Goldman Sachs calculations show.

Israel has thus far had little trouble raising money. It sold some $8 billion of debt on international capital markets this year. Its diaspora bond vehicle, Israel Bonds, is targeting a second annual record haul above $2.7 billion.

But rising borrowing costs, coupled with rising spending and economic pressure, loom.

"There is room for Israel to continue muddling through, given a large domestic investor base that can continue to fund another sizeable deficit," said Roger Mark, analyst in the Fixed Income team at Ninety One.

"However, local investors are looking for at least some signs of consolidation efforts from the government."