PROJECTS / Green Hydrogen (GH2) Implementation, Trinidad and Tobago

Green Hydrogen (GH2) Implementation, Trinidad and Tobago

Latin America and the Caribbean

June 8, 2023

The IADB has hired the KBR team to assist the Government of Trinidad and Tobago in developing and implementing green hydrogen demonstration projects. K&M is responsible for conducting financial and economic analyses of these projects, aiming to assess production costs, analyze economic benefits, and propose suitable business models for implementation.

Under this project, K&M will create a financial and economic model of the demonstration projects with an estimate aggregate size of USD120 million in investment. This analysis will forecast cash flows and financial results for each project and consolidate the projections to show overall program results. The financial model for each project will consider factors such as size, initial and operational expenses, investment timing, renewable energy costs, green hydrogen production costs (including electrolyzer expenses, water costs, operational and maintenance expenses, and storage costs), and costs associated with downstream products like green ammonia, green methanol, or green cement production. The model will also project the quantity of electricity, green hydrogen, and other products generated by each project and estimate the required investments through cash flow projections based on the initial expenses. It will further calculate the levelized costs of electricity, hydrogen, and other products, considering factors like production, conditioning, storage, and relevant expenses. By disaggregating the costs of green hydrogen and ammonia, the model will identify the main cost drivers, including electricity, storage, electrolyzer CAPEX, and operational expenses. Additionally, the model will assess the economic and financial viability of each project and the overall program, establishing key performance indicators (KPIs). It will also allow for sensitivity analysis of critical variables and be flexible enough to incorporate new projects.

K&M will also lead the design of the business model and financial structure for the projects. K&M will propose three different business models, assigning activities to both private and public partners, and work with the government to determine the most suitable model. The analysis will evaluate the role of the public sector in facilitating the business model and include a comprehensive risk assessment covering commercial, technical, financial, and socio-environmental risks. K&M will allocate risks among operators, investors, government, and financiers, and propose strategies for risk mitigation. Furthermore, K&M will analyze the financial viability and structure of the business model, considering the financial revenue and returns for each project and all involved parties.

K&M will provide additional support to KBR in various activities. Firstly, it will examine the challenges and opportunities related to renewable energy and green hydrogen production, considering the entire value chain. Based on this perspective, K&M will develop recommendations for the Government of Trinidad and Tobago and public institutions to facilitate and promote future investments in these projects, ensuring maximum benefits are realized. Secondly, K&M will prepare the necessary documentation to initiate the procurement process for each demonstration project. This documentation will include technical specifications, drawings, budgets, procurement types, and strategies for the expression of interest (EOI) and request for proposal (RFP) processes, adhering to industry best practices and IDB procurement policies. K&M will also create a procurement plan listing all the necessary procurements required for project implementation, aligned with the business model and the responsible parties. Budgets, procurement types, and strategies for the EOI and RFP processes will be outlined for each procurement, following industry best practices and IDB procurement policies. Lastly, K&M will assist the IDB and the Government of Trinidad and Tobago in preparing the required material to secure international funds. This will involve preparing the necessary documentation for the demonstration projects to access funds, with K&M leading the financial and economic aspects while KBR contributes to the technical aspects. The documentation will be tailored for up to three funds, including the Global Environmental Facility (GEF), the European Union (EU) Latin America and Caribbean Investment Facility (LACIF), and any other international donors or agencies agreed upon by the Government and the IDB.

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