What is Air Products' (APD) role and investment in this joint venture?

APD is a significant equity holder, indirectly owning approximately 50.6% of the joint venture. In the initial closing, APD contributed about $1.5 billion. The joint venture itself purchased assets from Aramco for approximately $7.1 billion. APD expects to contribute an additional $900 million at a second closing in 2023.

How will this joint venture impact APD's financial reporting?

The joint venture will not be consolidated into APD's financial results. Instead, APD expects to recognize equity affiliate income from its investment. This implies that while APD is a key partner, its direct financial statements will reflect its share of the JV's profits or losses as an investment, rather than fully consolidating the JV's revenues and expenses.

What are the expected financial benefits for APD from this venture?

The joint venture is structured to provide a stable, long-term revenue stream through a 25-year contract with Aramco, which will pay a fixed monthly fee for the utilities produced. This fee-based model offers predictability and is backed by a major industrial partner, Aramco, providing a strong foundation for generating consistent equity affiliate income for APD.

APD 8-K SEC Disclosure — Oct 27, 2021

Q: What is the Jazan Integrated Gasification and Power Company joint venture?

The Jazan Integrated Gasification and Power Company is a $12 billion joint venture between Air Products & Chemicals, Inc. (APD), Saudi Aramco, ACWA Power, and Air Products Qudra. It will operate a gasification and power facility in Saudi Arabia, supplying power, steam, and hydrogen to Aramco under a 25-year contract.

Summary

Air Products & Chemicals, Inc. (APD) announced on October 27, 2021, the completion of the initial closing for its significant $12 billion gasification and power joint venture in Saudi Arabia, named Jazan Integrated Gasification and Power Company. This venture, in partnership with Aramco, ACWA Power, and Air Products Qudra, will operate a facility within Aramco's refinery complex, producing essential utilities like power, steam, and hydrogen for Aramco over a 25-year contract. The initial closing involved APD's contribution of approximately $1.5 billion and the joint venture's acquisition of significant assets from Aramco for about $7.1 billion. This transaction represents a major strategic step for Air Products in the Middle East and is structured to generate long-term, fee-based revenue. The joint venture's capital structure is comprised of 40% member contributions and 60% non-recourse project finance. Air Products will indirectly hold approximately 50.6% of the equity interests. Importantly, this joint venture will not be consolidated into APD's financial statements, and the company anticipates recognizing equity affiliate income. A second closing is anticipated in 2023 to acquire the remaining project assets, with APD expected to contribute an additional $900 million. Investors should view this as a substantial long-term earnings contributor backed by a significant industrial partner and a long-term supply agreement.

Key Highlights

1Completion of initial closing for the $12 billion Jazan Integrated Gasification and Power Company joint venture.
2Partnership includes major entities: Aramco, ACWA Power, and Air Products Qudra.
3Joint venture to operate a gasification and power facility for Aramco under a 25-year contract, providing power, steam, and hydrogen.
4APD contributed approximately $1.5 billion in the initial closing, with significant asset purchases made by the JV from Aramco.
5APD will indirectly hold a majority equity interest of approximately 50.6% in the joint venture.
6The joint venture will generate equity affiliate income for APD and will not be consolidated on its financial statements.
7A second closing is expected in 2023 to complete the project's asset acquisition.

Air Products & Chemicals, Inc. 8-K Report, Corporate Update (Oct 27, 2021)

Summary

Key Highlights

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