Xebec Adsorption and Shanghai-based Shenergy Group have announced a strengthened partnership.
For the debt and interest that Xebec Shanghai owes for its share buyback obligation, Shenergy will make a direct strategic equity investment of $3.4 million into the Sino-Joint Venture partnership that was originally formed in 2015. As a result of the newly formed partnership, China will have unprecedented access to resources for the construction of hydrogen infrastructure. The establishment of hydrogen infrastructure in Shanghai and throughout China has been assigned to a number of state-owned enterprises, one of which is Shenergy.
“Xebec has been a valuable partner since 2015 when we embarked with them to collaborate on hydrogen projects in China. The hydrogen fuel market is now starting to accelerate with China’s new government policies, and we wanted to strengthen our relationship with this strategic investment. Xebec’s PSA technology platform is known for its robust performance, compact footprint and low operating costs for hydrogen purification. We see Xebec’s solutions and expertise as a key component in our mandate for the rollout of hydrogen refueling stations and onsite hydrogen generation infrastructure. I look forward to our collaboration and it is our honor to be working with a worldwide renewable gas leader,” states Xue Feng Song, Deputy General Manager at Shenergy Group Company Limited.
“We’re excited to be taking our partnership with Shenergy to the next level. Shenergy is an energy leader in China and has been a key partner for Xebec Shanghai since 2015. They saw an opportunity to further our relationship by making a strategic equity investment into Xebec as they prepare for China’s new hydrogen policy, one of the most aggressive in the world. This partnership will help us grow our hydrogen business in Asia and is expected to have a positive impact on our activities in Europe and North America as Xebec integrates with and benefits from the growing hydrogen supply chain in China,” says Kurt Sorschak, President & CEO, Xebec Adsorption Inc.
Aggressive hydrogen policy
Earlier this year, China unveiled an aggressive hydrogen policy that aims to put 1 million FCEVs on the road by 2030. It is hoped that by 2025, the hydrogen fuel cell vehicle industry will have deployed 10,000 FCEVs and generated RMB 24 billion in economic output as part of a five-year acceleration plan.
To date, China has installed 7,200 FCEVs and 80 refueling stations. According to the company, this policy shows how important FCEVs are for decarbonizing transportation and extending hydrogen’s use in industry.
As an added bonus, China has committed to becoming carbon-neutral by the year 2060 as part of its new hydrogen policy. New Zealand joins a group of more than 60 countries that have made a commitment to be carbon neutral by 2050. As a low-carbon alternative to high-carbon fuels, hydrogen is expected to play a significant role in reducing global GHG emissions.
Twenty-five of Xebec Shanghai’s hydrogen purification systems have been successfully deployed in China, with a further seven set to be put into service in the coming months. They have been used in the past to purify refinery or petrochemical exhaust gas for use in FCEVs or other industrial applications. Xebec’s technology is expected to play a role in hydrogen refueling infrastructure and decentralized hydrogen production as a result of the new policy.
The debt Xebec owed to Shenergy’s financial services subsidiary, Shanghai Chengyi New Energy Venture Capital Co., has been converted into a direct strategic equity investment by Shenergy. There will be a payment of $1.7 million for Xebec’s outstanding interest, and the $3.4 million in long-term debt will be transferred to Xebec’s equity section. Xebec will hold 60% of the Sino-Joint Venture, with Shenergy holding 35% and a management incentive pool holding the remaining 5%.
End-of-October final agreements were signed, and closing is expected to occur at the end of December 2020. Directors from Xebec and Shenergy will be represented on the board in Shanghai, where decisions will require a majority of more than two-thirds of the board members. As a result, Xebec will no longer consolidate Xebec Shanghai into its financial statements; instead, Xebec will consolidate Xebec Shanghai’s proportional profit and loss.
