Lot 1: Renewable ammonia
This lot covers the purchase side (HPA) of renewable ammonia in the €900m pilot tender.
Ammonia (NH3) is a globally traded commodity, which is usually transported by ship, train or truck. It is mainly used in the production of fertilizers and in the chemical industry. Today, ammonia is produced almost exclusively in the Haber-Bosch process where hydrogen is mixed with nitrogen and together processed at high temperature and pressure with a catalyst. The most common current process for producing hydrogen is unabated steam methane reforming (SMR), using natural gas or coal.
Renewable ammonia can be produced using the traditional Haber-Bosch process, but with the distinction that the fossil-fuel based hydrogen is replaced with renewable hydrogen. This form of ammonia can be used to replace fossil ammonia in its traditional uses, such as fertilizer production, and can also be used to produce sulphur- and carbon-free fuel for shipping. Renewable ammonia can also be a transport vector for renewable hydrogen, benefiting from the existing - albeit limited - infrastructure.
€300 million were offered by Hintco to purchase renewable ammonia in its pilot tender launched in 2022. Over 1,000 interested parties in 65 countries across five continents downloaded the tender documents on Hintco’s auction platform. Twenty-two companies submitted non-binding bids, five entered negotiations, and one company was the winning bidder.
And the winner is...
Fertiglobe emerged as the successful bidder among five finalists.
Fertiglobe, which is the largest producer of nitrogen fertilizers in the MENA region, and a pioneer in sustainable ammonia, will commence production of renewable ammonia in Egypt for European ports in 2027, with a maximum contract value of EUR 397 million. As a result, Europe has secured a significant supply of renewable ammonia starting at a potential 19,500 tons in 2027, subject to the start of production date and supply availability and rising up to a total of 397,000 tons cumulatively by 2033.
Egypt Green Hydrogen
About the project
Fertiglobe’s supply of renewable hydrogen will come from Egypt Green Hydrogen, a consortium between Fertiglobe, Scatec ASA, Orascom Construction, the Sovereign Fund of Egypt, and the Egyptian Electricity Transmission Company. The project is in the Suez Canal Economic Zone.
The electricity used in the production process will be generated in a newbuild onshore wind park of 203 MW located in Ras Ghareb close to the Red Sea and a newbuild solar PV plant of 70 MW in Africa’s largest solar complex located in Benban in the south of Egypt.
The renewable ammonia will be transported to storage tanks at Ein El Sukhna Port via an existing seven km pipeline. The seaborne delivery to Europe will be overseen by Fertiglobe International Trading, a wholly owned subsidiary of Fertiglobe PLC. The renewable ammonia will be delivered to the Port of Rotterdam.
Contracted volumes
The pressurized alkaline electrolyser facility will deliver up to 13,000 tons of renewable hydrogen annually as feedstock to the ammonia production facility. The Haber-Bosch plant, which is scheduled to be operating by 2027 and reaching full capacity in early 2028, will have an annual output of up to 74,000 tons of renewable ammonia. Fertiglobe is planning a first delivery of up to 19,500 tons of renewable ammonia to Hintco as early as 2027. Hintco will sign an agreement with Fertiglobe for a guaranteed minimum offtake of 40,000 tons of renewable ammonia per annum from 2028 through to 2033. In addition to the guaranteed minimum offtake volumes, Hintco holds the option to obtain additional renewable ammonia in a range between 17,500 to 33,000 tons per annum from Fertiglobe.
Price signals
The pilot auction established the first price signal for renewable ammonia, facilitating market development and price transparency.
This pilot auction established the first price signal at a contract price of EUR 1,000 per ton and a net price of EUR 811 per ton. These price signals send a positive, clear, and strong message, indicating renewable ammonia can be produced and imported into the EU at attractive prices through targeted support to the most competitive projects. As the scale of production grows and suppliers gain experience, costs are expected to decrease further, setting the stage for additional competitive pricing in subsequent H2Global auctions.
The maximum permissible net product price was set in the auction at 1,282 €/t or 1.28 €/kg. This bid cap was determined based on selected studies and forecasts. Fertiglobe’s volume-weighted net product price is 37% lower than the bid cap.
Product specifications for ammonia
Additional product specifications
In addition to the above-mentioned technical specifications, the product must comply with additional product specifications pertaining to the renewable and emissions savings characteristics of the product. They are based on the RED II and the Delegated Acts (2023/1184 and 2023/1185) and fulfil the requirements resulting from the grant decision and additional instructions given by the provider of funds, BMWK.
They include the following criteria:
- All hydrogen atoms must be derived from water electrolysis
- The electricity used in the production process must derive from renewable sources
- The GHG emissions savings (including transportation) must beat least 73 per cent in comparison to the fossil fuel comparator as set out in the Delegated Regulation (EU) 2023/1185 at 94 gCO2eq/MJ
Environmental and social sustainability
Find out here about the range of tools we use in our pilot tender to ensure that climate protection goes hand in hand with environmental and social sustainability.
Frequently asked questions
Why were ammonia, methanol, and e-sustainable aviation fuels chosen for the first tender?
The hydrogen derivatives in the pilot tender – renewable ammonia, renewable methanol, and eSAF – were selected by BMWK, based on a market analysis and a market consultation carried out in 2021.
The products auctioned in future tenders may vary according to the individual objectives of the respective funding bodies.
Who defines the tenders in terms of process, product, technical requirements, regions, etc.?
The framework conditions for each individual tender, e.g. product, sustainability specifications, and regionality, etc., are solely defined by the providers of the funds covering the green premium/cost of difference. Hintco consults the provider of the funds during the design process and advises on commercial and procurement-related implications of the tender. As all state aid in the EU is subject to European public procurement law, the award process for any tenders funded by EU member states is based on this law.
How is a lot structured? What do “HPA” and “HSA” mean?
A lot is characterized by the double-auction process of a specific product, such as renewable hydrogen, ammonia, or methanol. In each lot, there is one auction for acquiring the product, resulting in the signing of a long-term contract with the winning bidder, called a Hydrogen Purchase Agreement (HPA). The acquired product will then be resold and auctioned by Hintco through shorter-term contracts and potentially in smaller batches.
This auction then results in the signing of several sales contracts, which are called Hydrogen Sales Agreements (HSAs), with various off-takers. This tenure and volume transformation actively contributes to the development of a functioning hydrogen market, as it provides the necessary price signals and liquidity on a continuous basis.