Seifi Ghasemi: Thank you very much, Dr. Serhan. I appreciate that. Now please turn to Slide #22. We present this slide during every earning call because it is our core belief that the commitment and motivation of our people are the key drivers of our success. After all, technologies, processes and physical assets, which are often cited as competitive advantages, are all created by people in the organization. At Air Products, we have built an outstanding organization. Our people working together are creating innovative technologies, processes and facilities that are making us a first mover in supporting the transition to lower and zero carbon energy and decarbonizing the transportation and industrial sectors. We are doing this alongside our excellent core industrial gases business which is also underpinned by sustainability and delivering significant productivity and environmental benefits to our customers around the world.
At Air Products, our higher purpose is to bring people together to collaborate and innovate solutions to significant energy and environmental challenges in our world. I can say that our entire team is focused on sustainable growth opportunities generating a cleaner future for humanity. With that, we are now ready to answer any of your questions and we welcome them. Operator, we are ready for questions please.
Operator: Thank you. [Operator Instructions] We’ll take your first caller, John McNulty from BMO Capital Markets. Please go ahead.
John McNulty: Yes. Good morning. Thanks for taking my question. So I guess I wanted to dig into the Louisiana project a little bit more and the incremental $2.5 billion dollars of spend. I guess it sounds like there’s a bunch of buckets including capitalized interest, taking over more utilities, kind of expanding the scope of the project. I guess, can you help us to put into buckets where the bulk of that $2.5 billion is going?
Seifi Ghasemi: Good morning, John. John, excellent question. Number one, obviously, as we said, we announced this project two and a half years ago, everybody knows that there has been inflation, there is no skating that, and there will be inflation as we continue to do this project. The labor markets are tight. Some of the supply equipment and so on are tight. Therefore, there is significant inflation that we have had to deal with, and we have included that in the new capital project. Order of magnitude, I mean, let’s say that it’s about $1 billion or more is inflation. The rest of it is the fact that we have, as I said during the call, we have put in interest on capital. Obviously, as capital goes up, we do charge ourselves interest during our own capital, because otherwise, we would apply it under.
So that is a significant part of that $2.5 billion. And then in addition to that, we have decided – because we see demand for this product being significant, that right now, some of the fundamental infrastructure, we want to build it bigger, so that when we want to expand, we don’t have to build smaller units again, right? Things like water supply, things like land preparation, things like we bought additional 1,000 acres for expansion. So it’s a combination of all of that, that adds up to the $2.5 billion, you would say, increase. We also have put in contingency and we have reviewed this thing in detail with our Board, and I’m very happy that they have supported us, but I keep going back to the fundamental issue that we are reiterating, but we are pleased, very carefully that we expect double-digit return now on $7 billion better than double-digit return on $4.5 billion.
So if you want to look at it in a glass half full, we are actually going to make more money than before. John, I cannot overstress the fact that we see the demand for the product, materializing, it is serious. And as we go forward, we will be able to demonstrate that to you. But this is a very exciting project. It’s a unique project. We are executing it. We are in the field and our people are very excited about it, and we are all very excited and very positive about this project.
John McNulty: Got it. Thanks very much for the color on that. And then I guess my second question would just be on the Netherlands project. It sounds like it’s an interesting kind of emerging opportunity. Can you help us to think about how much capital may get put to work on that project and how you’re thinking about the returns for it as well?
Seifi Ghasemi: Yes. I’m going to add Dr. Serhan will give you more color, but obviously, the return for that will be double digits as like anything else we do. But Dr. Serhan is very close to that project, and I’d like him to comment on that. Samir?
Samir Serhan: Thanks, Seifi. We’re really not going to talk about the specific about the capital for the project. But again, it’s a very exciting opportunity. It’s our third project in our first mover advantage when it comes to blue hydrogen. We started with the net-zero blue hydrogen project in Edmonton, Canada, and we went to the Louisiana Darrow project. And now this is really the third and it’s really the biggest also in Europe. Very excited about it with long-term off-take agreement with a subsidiary of Exxon Mobil Esso. We capture — we will capture CO2 from our existing hydrogen facility in the Port of Rotterdam and we will also capture CO2 from another Exxon hydrogen plan where we basically provided to Porthos to sequester under the North Sea. Again, emphasizing the double-digit return for the project and coming on to the…
John McNulty: Thanks very much for the color.
Samir Serhan: Thank you.
Seifi Ghasemi: Thank you, John.
Operator: We’ll hear next from John Roberts from Mizuho.
John Roberts: Thank you. Nice quarter. Staying on the blue hydrogen project in Europe, anything unique about the gas sourcing for that project? Given Europe’s disadvantaged gas situation? And is that replacing existing hydrogen capacity? Or is your customer expanding their demand?
Seifi Ghasemi: I can answer that, and then if Dr. Serhan wants to add to that. But fundamentally, it is an existing plant that we have – existing plants that Exxon has. We have their technology and the know-how, we are going to put carbon capture on these existing units and capture the carbon and put it in this pipeline to go and be sequestered. So we are actually reducing CO2 emission into the air. This is not a new plant that people say, what you are building a new plant you are capturing the CO2, but you’re not really reducing existing emission. This is really reducing existing emissions. And that is where our technology is, and that’s where our know-how is. And therefore, it’s a very positive project, it’s received very positively.
