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W|EPC: Future Of Transportation – Ranking & Evaluating Alternative Fuels – H2 ∙ BEV ∙ Methanol ∙ CNG Hybrid ∙ Ethanol ∙ Ammonia ∙ Diesel ∙ Biofuels

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Alternative Fuel Analysis…Will History Repeat Itself?

In 1992 & 2005, the Department of Energy (DOE) created & amended the Energy Policy Act (EPA) that addressed fuel research and tax benefits for vehicle manufacturing.

Battery Electric Vehicles (BEV), Hydrogen (H2), Hybrids, Biofuels, Ethanol and Methanol were analyzed in 2005, but vehicle manufacturers supported gasoline hybrid vehicles due to technology and production constraints.

Since then, fuel cell technology and global, federal, & state emission guidelines have accelerated innovation and the market is now actively deciding transportation alternatives.

Small Vehicle Applications

BEV have taken a leading role in the small vehicle category with minimal competition from Hydrogen.

Hydrogen’s price, lack of infrastructure, and safety concerns highlight the risk associated with new fuel applications; however, Methanol may have an opportunity to fill this role.

The Roland Gumpert Nathalie markets an impressive range and methanol costs are comparative to BEV, but the $450k price tag limits it’s applications until manufacturing scales up to reduce cost. 

Mid-Sized Vehicles and Truck Applications

Fuel energy density becomes a larger role as the size of a vehicle increases.

Fuel storage capacity, energy density, and vehicle efficiency play a large role in the range and cost for a vehicle.

Semi-Truck Range Is A Gating Issue For Future Fuels

New Semi-Truck concepts are ranging from shorter applications (<300 miles) to the long-haul market (>600 mile/day).

Daimler eCascadia seems to make sense for shorter applications and Hyliion’s Compressed Natural Gas (CNG) hybrid semi will likely apply well to long haul trades, if the marketing is as good as advertised.

 

W|EPC: Future Of Transportation – Ranking & Evaluating Alternative Fuels – H2 ∙ BEV ∙ Methanol ∙ CNG Hybrid ∙ Ethanol ∙ Ammonia ∙ Diesel ∙ Biofuels

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W|EPC: Enterprise (EPD) PDH-2 Q420 Project Monitor & Satellite Image Review

Key Takeaways: Enterprise (EPD) PDH-2 Q420 Project Monitor & Satellite Image Review

EPD PDH 2 – Project Delay Analysis.  In Q220, EPD announced a 3-month schedule slip (from Q123 to Q223), potentially limiting future change orders (i.e. cost escalation) related to COVID impact (based on typical EPC contract FM concepts).To reduce the COVID delay to only 3 months, we believe EPD implemented a schedule recovery plan that accelerated/compressed back-end construction activities to meet a Q423 COD forecast. (pgs. 10 – 13). We’ve independently estimated PDH 2’s slippage based on Q420 aerial project site images, with details found within our note… (pages 4 – 7).

Enterprise’s First ESG Guidance… : On October 28, 2020, EPD released their approach to ESG. In the report, EPD touts they are the largest Midstream producer of Hydrogen. With the addition of PDH2, Enterprise would increase their Hydrogen production by 140k tons/year, and we estimate ~150MW of electricity by incorporating fuel cells in their Mont Belvieu, TX facility.

Companies like SK are working with fuel cell manufacturers to integrate high temperature Solid Oxide Fuel Cells (SOFC) into PDH units to use the hydrogen produced to reduce operating costs….this could help EPD’s ESG potential.

Project Timeline Catch Up – Risks & Benefits: A schedule recovery plan can be costly and is not guaranteed to succeed. PDH 2 schedule recovery risks/benefits include: Risks – An EPC lump sum contractor (S&B) compresses the schedule & may cause inefficient construction & cost escalation. Benefits – The COVID delay started before site prep and avoided a de-staffing of the project. Based on limited on-site progress, S&B likely hasn’t spent much of their field budget & may have available contingency to support acceleration costs/inefficiencies.

W|EPC’s estimated timeline shows site labor and progress can support pulling activities back to Q223 with a probability of success of…. (pgs. 10-13)

W|EPC: Enterprise (EPD) PDH-2 Q420 Project Monitor & Satellite Image Review

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W|EPC: Southern Company (SO) – Q420 Vogtle Project Monitor – Key Decisions That Could Haunt Cost Prudency

Key Takeaways: Vogtle Q420 Monitor – Key Decisions That Could Haunt Cost Prudency

Who Will Be Getting Stuck With +$2.1B In Cost Overruns? Once Vogtle Unit 4 reaches “fuel load”, Georgia Power/Southern Company (GP/SO) can request a cost prudency determination to push their portion of cost overruns (~$2.1B) into recoverable utility rates. (Page 4)

Regulators will determine cost prudency based on project data, testimony, and a simple question: What should a reasonable manager have done at the time of the decision? (Page 5)

We expect that process to be heavily scrutinized considering the scale of the overruns, and, in our opinion, some questionable GP/SO decisions. (Pages 4-5)

Decisions That Could Haunt GP/SO’s Prudency. We believe there’s a case to be made that multiple GP/SO management decisions ran contrary to industry standards, potentially contributing to ($) billions in cost overruns, including

  • A failure to either include or implement multiple EPC contract……(Page 7)
  • For the first 4-years of the project, GP/SO used only…..(Page 23)
  • In 2017, it appears GP/SO did not validate critical underlying EPC…..(Pages 9- 10)

Analyzing 12-Years Of GP & SO Testimony… (Pages 20 & 23)

Please join us for our next Client Call at 12pm EST on Monday 10/26, to review our Vogtle Project Monitor. Please reach out to us for access details.

Table Of Contents:

  • Key Takeaways – Page 2
  • Who Owns $2.1B In Cost Overruns? – Page 3
  • Georgia Public Service Commission 2018 Order – Page 4
  • Cost Prudency Definition & Process – Page 5
  • Decisions That Could Haunt GP/SO
  • LSTK Contract Mismanagement  – Page 7
  • Bankruptcy – Parent Company Guarantee Settlement – Page 8
  • Estimate to Complete  – Page 9
  • Transition from EPC LSTK to T&M – Page 10
  • QRA – Cost Page 11
  • QRA – Schedule – Page 12
  • GP Testimony & W|EPC Analysis (2009 to 2017
  • EPC Contract Overview – Page 14
  • October 2009 – Page 15
  • October 2010 – Page 16
  • April 2011 – Page 17
  • November 2012 – Page 18
  • June 2013 – Page 19
  • October 2014 – Page 20
  • October 2015 Page 21
  • December 2015 – Settlement of LD’s Page 22
  • December 2015 – Revised EPC Contract – Page 23
  • October 2016 Page 25
  • April 2017 Page 26

W|EPC: Southern Company (SO) – Q420 Vogtle Project Monitor – Key Decisions That Could Haunt Cost Prudency

For access information, please email us at [email protected], or our institutional sales at wal[email protected]

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W|EPC: LNG Canada – Updated Satellite Image Analysis & Construction Progress – Q420 Project Monitor

 Shell ∙ Fluor ∙ Mitsubishi ∙ PetroChina ∙ PETRONAS ∙ KOGAS

Table Of Contents:

  • LNG Canada Q4 Monitor: Key Takeaways…………………………..….…Page 2
  • LNG Canada Cost & Schedule Updates
    • Updated Estimates…………………………..……………….….……..Page 4
    • Project Milestones………………………………………………………Page 5
    • Progress Analysis…………………………………………….….….….Page 6
    • Analyzing Fluor’s 27.5% Reported Progress…….…………….……Page 7
    • Project Staffing……………………………………………..……….….Page 8
  • Satellite/Aerial Image Analysis
    • July 2020 Overview………………….…………………….….………Page 10
    • Sep 2020 Site Analysis……………………………………….………Page 11
    • Jul vs. Sep 2020 – LNG Storage Tank…………………………..….Page 12
    • Module Yard Analysis………………………………………………….Page 13

Key Takeaways:

  • Delays At LNG Canada Continue to Build   (Pages 4 – 7, 10 – 13)
    • Fluor reported ~27.5% Engineering, Procurement, Fabrication, & Construction (EPFC) progress in September, vs our current estimate of…
    • We believe Fluor’s 27.5% guidance implies module fabrication progress of ~45%, which is ~9x…
    • Fluor also referenced COVID-related project delays (without getting specific)
    • Our Current Delay Estimate:…..
    • Estimated Probability Of Maintaining Schedule:…..
    • Mind The Gap: There are several potential explanations for such a degree of progress variance
  • Examining Fluor’s Goal of 2,500 On-Site Workers By Dec-20 (Pages 4, 8, 10 – 13)
    • Aerial images suggest meaningful concrete, structural steel, and significant construction activities have yet to start (beyond piling)…
    • Pre-COVID, Fluor’s reported onsite labor was higher than the project’s publicly reported staffing levels, leading to cost overruns (Pages, 4, 8)
    • Limited construction work fronts could constrain Flour’s ability to…
  • Kicking The Can Down The Road… LNG Canada Starting to Resemble Another Fluor/JGC Project… (Pages 4, 8)
    • In 3Q13, CPChem awarded Fluor & JGC a ~$6B EPC contract for an Ethylene Cracker in Texas. ~39-months later, Fluor/JGC announced the project would be over budget. The project was finished in mid-2018 (a year behind its baseline plan).
    • ~23-months after FID, we believe the LNG Canada (JFJV) schedule is slipping and costs are…

W|EPC: LNG Canada – Updated Satellite Image Analysis & Construction Progress – Q420 Project Monitor

 

For access information, please email us at [email protected], or our institutional sales at [email protected]

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Hydrogen (H2) – The Production Process Roadmap – Upstream, Midstream, & Downstream – Q420

 Hydrogen  ∙  Ammonia  ∙  Methanol

Table Of Contents:

  • Key Takeaways And Flow Of H2 & CO2………………………………………Page 2
  • Hydrogen’s Upstream
    • Electrolysis Technologies & Market Leaders…………………….…..…Page 6
    • Blue Hydrogen CO2 Issue………………………………………….…….Page 7
    • Hydrogen Is Getting Cheaper………………………………………….…Page 8
    • Carbon Capture Systems & CO2’s Critical Role…………..………..…Page 9
  • Hydrogen’s Midstream – Transportation
    • Ammonia Transportation – Green Hydrogen………………..….…….Page 12
    • Methanol Transportation – Blue & Green Hydrogen……………..….Page 14
    • Cryogenic Hydrogen Energy Loss Concern…………………….……Page 16
  • Closer Look – Ammonia vs Methanol
    • Hydrogen Comparison…………………………………………………Page 18
    • Example Product Comparison…………………………………………Page 19
    • Converting Back To H2…………………………………………………Page 20
    • Ammonia & Methanol Co-Production Facilities………..….………..Page 21
  • Marine and Fuel Cell Comps
    • Industry Impact – H2 Transportation…………………………………Page 23
    • IMO Driving LNG, Ammonia Or Methanol Fuel For Ships….……..Page 24
    • Carbon Neutral Marine Fuels – IMO 2050………………………….Page 25
    • Ammonia & Methanol Co-Production Facilities…………………….Page 26
  • Technology Leaders and Applications
    • H2 – Industry Technology Leaders………………………………….Page 28
    • Applying Technology In The EPC Process…………….………..…Page 29
    • Technology Packaging & Trends…………………………….….….Page 30

Key Takeaways:

Upstream Sources Of Hydrogen – Blue & Green (Pages 4 – 9)
          >95% of Hydrogen (H2) is produced using Steam Methane Reformer (SMR) technology that produces 7 units of CO2/unit of H2 (on average)
SMR w/ a carbon capture system (Blue H2) is the preferred option to environmentally manage excess CO2. (page 7)
Green H2 provides minimal CO2 but current technology limits Green H2’s cost competitiveness. (Page 6)
H2’s Sprint To Market Share… Current Leaders (Pages 17 – 21, 27 – 30)
      We analyzed 13 Technology Companies spanning 12 Process industries, including ThyssenKrupp, Air Products, Air Liquide, & KBR/Johnson Matthey…the clear technology leaders include…
Frozen Industries – Marine, Automotive, & H2 Transport (Pages 22 – 26)
       Outside factors (i.e. carbon neutral fuels, fuel cells, regulations, safety, & other downstream applications) will play a large role in selecting the midstream transportation choice for H2.
International Maritime Organization’s (IMO) mandates for reduced emissions has many ship builders looking at LNG, Ammonia, and/or Methanol; without a clear long-term winner (yet), many shipbuilders are frozen.
Fuel pumps (gas stations) must receive H2 from high-pressure storage vehicles, pipelines, or by converting Methanol or Ammonia to H2 at the fuel pump, with a number of implications.…(page 20)
Midstream For Hydrogen – H2 Transportation Options (Pages 10 – 16)
     Ammonia, Methanol, and Cryogenic H2 are used to transport H2 long-distances.
Ammonia is the clear favorite to…
Methanol is the best option for…
Cryogenic H2 technology/costs…

W|EPC: The Production Hydrogen (H2) Production Roadmap – The Upstream, Midstream, & Downstream Process – Hydrogen ∙ Ammonia ∙ Methanol

For access information, please email us at [email protected], or our institutional sales at [email protected]

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Renewable Energy: Expanding Our Hydrogen & Solar Coverage

Initiating Coverage Of PLUG, BLDP, & SEDG 

Plug Power (PLUG)
Company Overview – Page 5
Plug Symposium (Raw Notes) – Page 10
Investment Rationale / Key Points – Page 12
Primary Risks – Page 14
Valuation – Page 15

Ballard Power Systems (BLDP)
Company Overview – Page 22
Analyst Day (Raw Notes) – Page 28
Investment Rationale / Key Points – Page 35
Primary Risks – Page 36
Valuation – Page 37

SolarEdge Technologies (SEDG)
Company Overview – Page 45
Investment Rationale / Key Points – Page 48
Primary Risks – Page 49
Valuation – Page 50
Industry Overviews

Hydrogen & Fuel Cells – Page 55
Solar / Inverters – Page 67

Expanding Our Hydrogen & Inverter Coverage. We are initiating coverage of PLUG (Outperform, PT: $19), BLDP (Outperform, PT: $26), and SEDG (Market Perform, PT: $200). Since launching our first wave of coverage in April (REGI – OP, ENPH – MP, TPIC – MP, and ENS – MP) renewables have continued to aggressively take both mind-share and market-share – positioning the sector for unprecedented investment as governments, counterparties, and end-users move toward carbon neutrality over the next 15-40 years. Benchmark renewable levelized cost of energy (LCOE) figures have declined nearly 75% over the past-10 years, increasing the viability of alternative energy sources. We believe the extension of that process toward low- and zero-carbon hydrogen could create a generational growth engine across Energy, Industrials, and Technology over the next several decades.

The Push For Hydrogen: Major markets worldwide continue to adopt integrated hydrogen strategies and roadmaps, with Europe and China at the forefront. The EU is expected to invest €183-€490B by 2050 to effectively develop a continental hydrogen economy, with green hydrogen (i.e. hydrogen created using renewable sources) at its center. China recently announced its National Hydrogen Fuel Cell Strategy and pledged to reach carbon neutrality by 2060 despite currently deriving two-thirds of its power from coal. We think the increasingly widespread support for carbon-reducing policy creates a deliberate and sturdy foundation for renewables, and particularly hydrogen.

Figure 58. California Advanced Clean Truck Regulations

Figure 50. Hydrogen Production Costs From Renewables & Fossil Fuels

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