Seifi Ghasemi
Chairman, President and Chief Executive Officer at Air Products and Chemicals
Thank you, Melissa. Now, I would like to take this opportunity to discuss our growth strategy. Please turn to slide number 16. Our growth strategy consists of two pillars: our excellent core industrial gases business and our developing clean-energy business. Our core industrial gas business is an industry-leader, it is a stable business and grows at GDP or industrial production levels around the world. We continue to optimize for maximum efficiency and invest strategically to maintain our market share. In 2023 and 2024, almost half of our capital investment was related to our core industrial gases business.
Second, we see tremendous opportunity in clean hydrogen, driven by strong demand for decarbonization solutions that we are already seeing play-out today. We are particularly optimistic about the use of blue hydrogen in the form of clean ammonia to minimize the use of coal in Asia's power plants. Another promising demand is the use of blue ammonia directly to power ships. Dozens of such ships are already on order or under constructions. We are equally excited about the application of green hydrogen to meet Europe's emission reduction mandates across the heavy, industrial and transport sectors. Clean hydrogen has real demand today and we expect to drive outside growth relative to our core industrial gas business over the long-term. The two pillars of our growth strategy are complementary and interrelated, underpinned by our core competencies, technology and of course, more than 65 years of hydrogen experience. We are committed to efficiently running and growing our core industrial gas business, while pursuing a strategic high-growth and high-return opportunities in clean hydrogen.
Now please turn to slide 17. I want to expand on my comments about how we developed our clean hydrogen platform. Clean hydrogen is not a new business for Air Products. It's merely an extension of our existing core business. As I said, Air Products has been supplying hydrogen for more than 65 years, over which time we have developed key customer relationships that expand both to private and public sectors. About 30 years ago, Air Products pioneered the on-site hydrogen business model to take-or-pay provision -- take-or-pay provisions and contractual pass-through, supplying hydrogen over defense to refineries in California. We then gradually expanded to the US Gulf Coast, Canada and Europe. We capitalized on global desulphurization regulations to ultimately become the world's largest hydrogen supplier with the most extensive hydrogen pipeline system. Now, we are well-positioned to capitalize on the next phase of hydrogen development, which is clean hydrogen supported by the need to decarbonize hard to abate sectors. We moved first with focus and conviction to capture the important first-mover advantages, which I will talk more about in a moment.
Consistent with our traditional hydrogen business, clean hydrogen offtake will also follow the onsite business model and we anticipate these projects will provide attractive returns. Our strategic first-mover actions are now creating the opportunity for us to become the world's largest clean hydrogen supplier.
Please turn to slide number 18. There are clear advantages in moving first. They have been able to secure optimum locations for renewable resources, including for areas with strong sun and wind generation, at the same time, to produce low-cost green hydrogen. And for blue hydrogen, we have been able to gain access to the right geologies needed for carbon sequestration, which is the key enabler to making blue hydrogen. As mentioned, we also have been able to apply more than 65 years of hydrogen and technology expertise, which sets us apart. Finally, as we have demonstrated, the first-mover gets the best seat at the table with customers to negotiate the best offtake agreements.
Next, on slide number 19, you can see an overview of the various regulatory drivers for clean hydrogen in Europe and Asia, focusing on heavy industry and transport sectors where battery-electric metals are not effective. A wide range of industries need to decarbonize using clean hydrogen, and we continue to extend our reach into these sectors.
Now turning to slide number 20. Let me underscore the significant demand for clean hydrogen today. Various leading companies, including Total Energies, as one key example, have issued requests for quotation requesting capacity equal to requirements that far exceed the capacity of our green hydrogen project under construction in NEOM. Taking a step-back, Total Energy's RFQ, as large as it is 500,000 tonnes per day, accounts for only 10% of green hydrogen now used by European refineries. And the output of our NEOM project is less than 5% of the green hydrogen used by European refineries. And beyond refineries, there is demand for several other hard-to-abate sectors, including shipping and steel-making. This strong demand in the market today gives us great confidence in our ability to load the green hydrogen facility under construction in NEOM.
Turning to slide 21, this demonstrates the sheer scale of the clean hydrogen industry in the coming years. Clean hydrogen is expected to be more than $600 billion market by 2030 and eventually exceed $1 trillion by 2050. There is significant demand now and that demand is expected to grow significantly over the long term. Air products capturing even a very small portion of that demand means that we will be well positioned to deliver significant growth. And to demonstrate how large this market opportunity is, Air Products currently approved clean hydrogen projects account for less than 1% of future market expectations.
Before we discuss our key projects, please turn to slide number 22 with important takeaways about our strategy and disciplined approach to creating shareholder value. Our core industrial gases business remains fundamentally strong with industry-leading adjusted EBITDA margin and solid GDP and industrial production growth. We are adding to this strong foundation by pursuing attractive growth opportunities in clean hydrogen. Driven by decarbonization, future clean hydrogen demand is expected to be significant. We ultimately need to capture, as I said before, only a small portion of this anticipated high-growth market for our initial projects to be successful. We believe favorable supply-demand dynamics will enable us an attractive return on clean hydrogen. We are pursuing this strategy prudently and only approve new projects, and I'd like to stress, only approved new projects after securing anchor customers. As we have said before, we will not take any final investment decision on new projects until our current facilities are loaded at least 75% or more. And we have focused teams within Air Products, executing these two-pillar strategy. Our employees are dedicated to the ongoing success of both our core industrial gases business and our clean hydrogen business.
Now I would like to take a moment to provide an update on our key project sliding -- on slide number 24. There you can see an actual, recent aerial photo of the NEOM project and their construction. I'd like to stress this is a real project. It's not a computer generated slide. It covers the ammonia production site, the electrolyzer facility and the jetting. Although this view covers a vast area, it does not capture the wind farms located 50 miles to the north near the Gulf of Acoba [Phonetic] and the solar farms situated 14 miles to the west on the other side of the mountain range. We are full speed ahead on this project.
Please turn to slide number 25. First, we have made immense progress on this green hydrogen project. Construction is about 60% complete and we are on-track to bring this facility on the stream at the end of 2026. There are 18,000 workers on the site building this facility today. Importantly, roughly 35% of the total amount of the production has been contracted on a take-or-pay basis and negotiations are underway for additional offtake, which would exceed the production of the facility. NEOM has been financed by 23 banks, providing more than 70% of the total capital needed. Air Products is investing about $800 million or less than 10% of the total project cost. This is significantly less than the $1.7 billion that we originally projected for this project and illustrates our ability to execute highly successful project financing.
Now please turn to slide number 26. In June of this year, we were delighted to announce a 15-year agreement to supply 70,000 tons of green hydrogen annually to Total Energies beginning in 2030. This was a milestone for us and the nature of this agreement will drive stability in growing our clean hydrogen business. This pioneering agreement validates our clean hydrogen strategy and demonstrates significant demand for green hydrogen with one of the largest energy companies in the world.
Moving to slide 27, let me share the status of two other major clean hydrogen projects. First, our Canada net-zero hydrogen energy project we are -- we have committed 60% of the capacity on a long-term take-or-pay contract and we are in active discussion for the remainder of the capacity. And as for our Louisiana project, the blue hydrogen project, we have submitted for permits, which we expect to be issued in 2025 and 2026, and we have received major pieces of equipment already in the site in readiness for construction work. We are in active discussion for offtake from this facility, also in discussions with possible equity partnership and also assessing project financing for this project, and we will keep you updated as we move forward.
Moving to slide number 28. As we have said before, we have put the sustainable aviation fuel project in Paramount, California on hold until we get our full permits. With regard to the proposed $4.5 billion joint-venture to produce green hydrogen in Northern Texas. This project never reached final investment decision. It does not meet our established guidelines for new low-carbon project investments and therefore, we have stopped our involvement in this project and we have sold our development rights to our partners.
Finally, on slide number 29, you can see that we continue to focus on our core industrial gas business, which accounts for more than 50% of our total fiscal 2023 to fiscal 2025 capex. Much of that capex is focused on growth. Projects for core industrial gas business and clean hydrogen both need to meet or exceed our internal return targets. We regularly evaluate alternative funding opportunities to optimize our cash allocation. Beginning in 2027, we anticipate meaningful decline in net-debt to EBITDA ratio, as well as, possible net cash-flow.
Now for an update on succession planning, please turn to slide number 31. As discussed in our last earnings call, we have decided to bring into the company a fully qualified potential successor has [Indecipherable] and a member of our Board of Directors. This person should be well-known to investors with a clear record of success, preferably a current or former CEO of a public company with significant international experience and relationships. This board-driven process is being led by our Independent Director, Mr Ed Monser with the support of the full Board and the Executive search firm EgonZehnder. I'm happy to say that qualified candidates have already been identified and we are anticipating announcing the President's name in the first-half of fiscal year 2025.
Now, please turn to slide number 33. At Air Products, our two-pillar growth strategy includes running our core industrial gas business efficiently and continuing to invest and grow it, at the same time, levering our 65 years of hydrogen experience to serve the large high-growth clean hydrogen market. We expect our clean hydrogen projects to achieve higher returns than our core industrial gas business. Underpinning all of this is our relentless focus on thoughtful, strategic capital allocation. Being a prudent steward of Air Products' capital has been at -- and will continue to be our top priority.
Now please turn to slide number 34. The people of Air Products are working hard every day-to deliver for our customers, do so safely and deliver best-in-result profitability. Our operating discipline combined with our focus on delivering shareholder value gives us confidence as we enter into the next chapter of our growth at Air Products.
Now, we will be delighted to answer your questions. Operator?
