March 24, 2022 • Paul Rodden • Season: 2022 • Episode: 101
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Welcome to The Hydrogen Podcast!
In episode 101, Air Liquide announces its strategic plan for 2025. I’ll dive into it and give you my assessment on today’s hydrogen podcast.
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Transcript:
Air Liquide announces its strategic plan for 2025. I’ll dive into it and give you my assessment on today’s hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.
In a press release on March 22, Air Liquide presents ADVANCE its new strategic plan for 2025 Combining financial and extra financial performance. The announcement places Sustainable Development at the heart of its strategy, and combines financial and extra financial performance with a strong business model which has proven its resilience with innovation capacity, and its technological know how the group is particularly well positioned to continue its growth trajectory, while contributing to respond efficiently to major economic, environmental, and social challenges. According to Benoît Potier, a chairman and CEO of Air Liquide “In a world transformed by the COVID epidemic, and marked by a geopolitical crisis whose dimension of humanitarian disaster is overwhelming. We have to act today, but also keep preparing for the future. With advance financial performance as well as environmental and societal performances are combined in our objectives. For Air Liquide building the future means delivering strong financial results, as it is a condition to our durability and our ability to invest in the future. But it also means to act as a leader in decarbonisation of the industry, to promote progress through technological innovation, and to act for all with advance Air Liquide is opening a new chapter of its history, by linking in separately growth and sustainable future. Now, to achieve a comprehensive performance, advanced is structured around four priorities, the first to deliver a strong financial performance. Now with advance Air Liquide, is taking action today while preparing for the future.
It is rising up to an ambitious challenge, which is to maintain its growth momentum while pursuing its co2 emission reduction targets and investing in the markets of the future. Now three objectives define their ambitions when it comes to performance. The first is an acceleration in sales growth, reaching a pace of five to 6% on average per year. The second is a return on capital employed of more than 10%, starting from 2023. And thirdly, a reduction of their co2 emissions in absolute terms starting around 2025. So to achieve this, they’re going to rely on the optimization of their capital resources, and on the improvement of their operating margin, the ladder will improve by more than 160 BPS over four years. By acting on several levers. A dynamic pricing policy, regular efficiencies and an active management of their portfolio of activities. Now at the same time, investment decisions will be increased to a record level to reach about 16 billion euros over the 2022 to 2025 period, half of the industrial investments being dedicated to the energy transition. On average, the annual amount of industrial decisions increases by 45%.
Sort of their second priority, which is decarbonizing the planet. With advance Air Liquide confirms its leadership and the decarbonisation of the industry. And in the emergence of a low carbon society in which hydrogen plays a decisive part. The co2 reduction emissions is a major challenge for the large players of the industry and for the heavy duty mobility. This represents a pool of opportunities for Air Liquide so to address this huge market and to accompany its large industry customers in their path of decarbonisation. The group has a large portfolio of technological solutions and services, and notably includes supply of low carbon gases, co2 capture and management, as well as solutions to transform their customers individual processes. The group is committed to decarbonizing its own assets, with the objective to start reducing co2 emissions in absolute terms around 2025. Within the context of its sustainable development objectives, Air Liquide aims to reduce by a third its emissions by 2035 and to reach carbon neutrality by 2050, while supporting its customers in their decarbonisation process.
The third priority is technological innovation to open new markets. Again, with advance Air Liquide is aiming to contribute to the development of key sectors for the future, where it intends to reinforce its positions, leveraging on innovation and technology to major assets of the group. The group will focus on five new markets the first being hydrogen mobility, and notably heavy duty mobility with a very high potential market, where they have a leading position in which low carbon hydrogen will play a key role. The second is electronics, where the digital revolution represents a real development opportunity and will strengthen their leadership position. The third being healthcare in which their value based approach which improves quality of life for the patient as well as the best cost for the health system responds to major societal issues. The fourth is industrial merchant, whose growth is driven by environmental challenges, and by new usages, which is notably digital and lastly, high technologies, including space deep cryogenics, and the quantum industry. And number four on the list of priorities is acting for all.
In the context of advance Air Liquide aims to include the perspective of its direct stakeholders as well as those of society at large. Concretely, this means fostering employee engagement and the development of their skills through the implementation of new ways of working in a safe and inclusive and collaborative environment. This also means reinforcing their customer centric culture, to better acknowledge, anticipate and support their needs, by the continuing profound transformation already underway to better serve their patients. Alright, so a pretty major announcement from the biggest players globally in hydrogen. So let’s see if we can break this down a little bit and go through some of these objectives one by one. So their first objective being a strong financial performance. And under that they essentially had three objectives, which is a sales growth of five to 6%, a return on capital of over 10%, and then decreasing their co2 emissions starting at 2025. Well, let’s think about the sales growth for starters, I think five to 6%, on average per year is going to be pretty easy, especially looking at how much hydrogen is advancing year over year. But what about the next one return on capital employed of greater than 10% by 2023, and on from there?
Well, from everything that I’ve been hearing about Air Liquide investing in technology, I think their software developments and improvements can really reduce their capex and their opex, meaning a higher return on capital going forward. So yes, I can see 10% being achievable by next year. And lastly, the co2 emissions reduction. This is really the goal of everyone in hydrogen right now. Or I should say the goal of every legacy hydrogen operator, historically moving forward, the talk about reducing their emissions on co2 starting at 2025. But ultimately, their goal is to be carbon neutral by 2050, which is obviously in alignment with the Paris Accord. Now I’m sure they’ll figure out several ways to reduce their co2 emissions. What I do know is that traditional gray hydrogen is very expensive to transition to blue. And so as CCUS is going to play a big factor in this, I would expect to see quite a ramp up in CapEx for decarbonizing their legacy plants. And that really does lead us into their second objective, which is decarbonizing the planet.
Now, as big as Air Liquide is their efforts to decarbonize the planet really could have a substantial impact. Now, they’ve stated that they want to reach a 33% decrease of its scope one and scope two co2 emissions by 2035 Compared to 2020. Now, ultimately, what that means is that the group is going to maintain their current objective to reduce by at least 30% their carbon intensity and kilograms of co2 per euro spin and EBITDA in 2025 Compared to 2015. Now, to do this, they do list three things that they’re going to try to do to accelerate this effort, which includes tripling its turnover in order to reach more than 6 billion Euros by 2035. And accelerating their hydrogen development. They also want to reach that goal by investing approximately 8 billion euros in low carbon hydrogen supply chain by 2035. They’re also aiming to expand their electrolysis capacity to three gigawatts by 2030. And so what that tells me is that they’re looking to advance quite more substantially in green hydrogen, or electrolysis derived hydrogen much more heavily than in the past. And really, the last thing I’ll cover on this is that third objective, which is fostering progress through technological innovation. And I covered a little bit of that and that I think that a lot of technological innovation is going to drive down their capex and opex.
But they’re also looking at five new markets, the first being hydrogen mobility. Now I don’t think that’s gonna be a surprise to anyone in the hydrogen industry. But one of the biggest suppliers in the world of hydrogen is looking at hydrogen mobility. It’s the lowest hanging fruit and honestly one that needs to be addressed. Now the other markets being electronics, healthcare, industry and space. A lot of people have talked industry and for good reason, heavy industries such as cement, steel, aluminum, things like that can really utilize hydrogen to decarbonize their work. And so if Air Liquide puts a lot of its force behind getting hydrogen to those markets, I think the world will begin to see just how beneficial hydrogen is in decarbonizing those heavy, heavy industries. Okay, so all in all, it looks like a really good plan to me. Now, here in the US, they’re well positioned geographically, to really have all of these objectives take a good foothold. And I think they’re also positioned well in Europe.
Alright, that’s it for me, everyone. If you have any questions, comments or concerns about today’s episode, come and visit me on my website at thehydrogenpodcast.com, or you can always email me at info@thehydrogenpodcast.com. I would really love to hear from you. And as always, take care. Stay safe. I’ll talk to you later.
Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more, I’d appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.
