Listen, we'd love to welcome to the stage the Air Products team, Seifi Ghasemi, the CEO. When I was looking today, it's been almost 10 years, nine years, which it went fast, I'll tell you that. You know, it seems like it's four or five years ago that Seifi came in and really started to change the culture of Air Products. Took out a lot of cost and, you know, his favorite slide on the slide deck, you know, the margins started to go up pretty strongly. Melissa Schaeffer, the CFO, she's been with Air Products for seven years. Again, very happy to have both of those two. Air Products is a $60 billion industrial gas company, $60 billion market cap. Revenue's about $13 billion. 40% comes from the Americas, about a quarter each in Asia and Europe. They're in the midst of a very exciting and emerging kind of blue-green hydrogen transition, with over $15 billion of capital that's been committed to that. I think Seifi, if it's okay with you, maybe we'll start there, 'cause I think that's certainly where we get the most questions. Maybe just the first one is, in general, the Inflation Reduction Act has done a lot for the industry, I think has done a lot for Air Products. What specifically has that changed for the way you look at the business, the way you look at, you know, the strategy of Air Products going forward, and where will we see it the most? Well, first of all, Duffy, it's great to be here. I have had the good fortune of knowing you for a long time, even before my Air Products days, and so it's always good to be on stage with you. I think you're asking an excellent question. The IRA, Inflation Reduction Act, is obviously addressing the issue of climate change not through a carbon tax. Through incentivizing the reduction of the price of green energy in such a way that it generates demand. fundamentally, IRA is going to make it cheaper for us to make the same product that we would have made otherwise or we might not have even made it. Therefore, when then a chemical company or a steel company or a trucking company uses the green energy, then it is cheaper than it would have otherwise been, and therefore it makes it. It is really stimulating demand. Therefore, what it does is that it creates opportunity for us that if it is stimulating demand and we see the demand, therefore we will build more facilities. We will build more facilities in the United States of America. The particular thing about the IRA that I think is excellent is that it addresses the real question, which is it is promoting hydrogen. Both blue and green hydrogen, because hydrogen is the energy of the future for hard to decarbonize sectors. Like steel, like heavy trucks, like chemicals. Therefore, by designing the program to incentivize production of blue and green hydrogen. And the fact that it is balanced, that it is both blue and green so that the transition can go, move forward, smoothly, I think it's a brilliant piece of legislation, and it is going to significantly motivate companies like us and other companies in order to produce the product. We are very fortunate because we have been in the business of hydrogen for 60 years. We know hydrogen, we have the infrastructure and all of that, so that we can immediately act and respond to that. Right. There's a lot of people who are running around aspiring to be hydrogen companies. They're going to find out it's not that easy. From our specific point of view, being the world leader in hydrogen, this is a very good incentive for us to significantly invest in the U.S., which is what we will do. We have already announced the project. . I'm gonna ask a number of questions. Sure. One, there's some talk now with the budget that maybe they would go back and make some alterations to the IRA as part of, you know, whatever negotiations you know, between the White House and the Congress. Do you worry, I mean, obviously you would have a good feel for where all the different legislatures are? the hydrogen piece of the IRA. Do you worry that there's any chance that somehow that level of subsidy would come down in some kind of negotiation around the budget? Well, the thing is that from my point of view, first of all, we made the announcement about some of the projects that we are doing even before IRA existed. The, because if there is no incentive, then the price of the product that we are making is higher. Right Which means that the demand is lower, so instead of 5 plants, we will end up building 1 plant. Right. It is not as if our strategy will disappear. We announced the project, eight and a half billion dollar project in Saudi Arabia in 2020. At that time, nobody even thought about IRA. Right. We announced our $5 billion project in Louisiana before the IRA. Right. The good thing about the IRA is that it will increase the opportunity, but it's not, it's not going to negate. Right . some of the things that we are doing. Okay. Fair enough. When you analyze the benefits you get in the IRA for both blue and green. Do you think it advantages one significantly more than the other, where it would actually drive, you know, more capital into one versus the other versus a natural base? No, I think it's a very, the $85 for, sequestration- is going to make it possible to make blue hydrogen and blue ammonia very competitively. The $3 for green hydrogen is going to, again, make it competitive so that people can use the product at a reasonable price. Right. I think it's very well-balanced. What I foresee, at least from our vantage point, is that we will do both kinds of projects. Right. Okay. Is there a way to quantify maybe how much that accelerates your ability to put capital to work? I mean, before the IRA and now. I mean, is it an extra $10 billion over 10 years? Is it 20 or, you know, is there a way to kind of quantify how much help that will give you or how much more likely it'll make you know, to spend capital to get that return? For us, in the next 10 years, it could be $100 billion. Okay. I mean, it is it because the IRA is the beginning, right? Now that we have the IRA, the next step is, are other states in the United States going to adopt the Low Carbon Fuel Standard that California has? If that comes, which is on top of the IRA- Right Then the opportunities. I think that with the federal government taking the initiative- That is a very positive step, and it is going to move everything forward. The opportunity in the energy transition, I mean, you know the numbers. When you look at the energy that we use, all you need is 1% of that energy to be turned into green, and it will create $hundreds of billions of opportunity. I don't foresee us being constrained by opportunities. We are going to be constrained, finally, by the size of our balance sheet- Right The fact that we want to have an A rating. One trend that we have seen, which is a very positive trend, and you have actually seen it, is that we are able to project finance some of these projects. Instead of our own cash, then we lever that. Right. Now we can do 4 projects instead of 1 project because of that. That is a very good development. Okay. It's obviously a positive development. It is going to make it possible to do a lot. .. You brought that up on the call yesterday. If you start project financing, you know, kind of on a larger scale, obviously you did it with NEOM or announced it with them. How does that change the economics of the actual project itself? Do you bid away, I guess, some of the advantage you get from project financing into the project yourself? Or is the unlevered return the same, so you just get a much higher kind of equity return back to Air Products? What would be the strategy- I mean- you know, around the financing around? No, I think, you said it very nicely. What it does is that it creates an opportunity to make a higher return on the equity that you're putting in. Okay. Your return on equity goes up. Overall, you see, Air Products, if we do project finance, take NEOM. Let's say that we project finance it, then we get a 5.5% interest. We could have gone to the bond market, as we did. Right raised the money at 4.5%. The project financing, from an interest rate point of view, it doesn't change things. Right. What it does is that it gives you more room of using your own cash. It gives you the opportunity to make more money on return on equity calculation. One of the changes in building out, particularly blue in the U.S., we're going much more to the ATR from the historic SMR, and there's not a lot of those globally. Is there any risk that those plants will have startup issues or meaningful startup issues, or do you think you've got enough exposure, you know, to, you know, the couple that you've had, that that's not a big issue as we start constructing ATRs? Well, the technologies that we are using, ATR, we are using it in only one location, which is the plant that we are building in Edmonton. There is a very good reason for it, because in that plant, not only we produce hydrogen ourselves. The hydrogen that our customers, that is not fuel. That kind of requires a different process design or so. Okay. We think the best technology for converting natural gas to syngas is actually, partial oxidation. Okay. That is a technology that is our own technology. it is still GE technology and all that. That has been tried many times before. Okay. You know, this is one of the things that sometimes people say, they'll say, "We're talking a lot about gasification. We haven't seen any gasification projects." Well, what we are doing, we are gasifying, but instead of coal, we are gasifying natural gas. . Okay. I do not have any concern about the so-called technologies that we are using for producing. Okay blue ammonia. Okay. blue hydrogen. Fair enough. Maybe to move off the IRA, to what may be a European equivalent. Obviously, I think the Europeans kind of woke up a couple of weeks after the IRA and said, "Wait, this, you know, impairs our industry quite a lot on a relative basis." There's been talk in Europe of a, you know, counter project. How do you think that plays out? Will it be country by country? Will they figure out a way to do it kind of across all the EU? What will be their response, and will it be more of a carrot or a stick, do you think, at the end of the day, you know, as they try to transition it and help out the hydrogen industry there? I obviously don't know exactly what they are going to do, but if I had to make a prediction in terms of what they're going to do, Europe is not going to do an equivalent of an IRA. In the U.S. you can incentivize the producer. Well, there is no producer in Europe. They don't have natural gas, and they don't have a lot of sun and wind. Right. It doesn't make sense to incentivize somebody if you put in, whatever, they put an equivalent of IRA, we are not going to go build a plant there because there is nothing to do. They are going to focus. on incentivizing the consumer. Right. That is, they are going to go to the steel company. Right? saying that, "You are putting in 2 tons of CO2 per every ton of steel you're making. If you use green hydrogen to do that. . I'm going to give you $X per ton incentive- Okay . to compensate for the cost. It is the same thing at the end of the day. That is, I think, what they'll have. Okay. They are going toward the stick. That is, they are definitely going toward carbon tax. Right. Okay. For all practical purposes, they do have a carbon tax. They are going to, not going to the steelmaker and saying, "Look, it's going to be painful. I'll help you. Right. By the way, if you don't do it. You have to pay the tax. Okay. Which is the direction that Canada is going to. Okay. Okay. Then maybe just, kind of one last group of geographies. You know, folks like Japan and Korea had actually been kind of early movers on hydrogens in some way. You know, at least in the press now, they've been surpassed by the U.S. and the IRA, it's gotten all the buzz. Where do you think Japan and Korea and some of the Asian nations are with their hydrogen strategy? Has the IRA changed their view at all, where they feel like they have to do more to kind of compete for resources and hydrogen, you know, to move where they want to go? Countries like Japan and Korea are in a very tough place. They have no possibility of making this stuff. They have to import all of that. Right. Therefore, IRA and, oh, no. Therefore, their issue is supply. That is why they are going and talking to everybody under the sun and trying to promote projects. They talking about some project that doesn't make sense, but the fundamentally, their issue is, how do I get an investment-. Right in a blue ammonia facility in the United States. . so that when I need it, I can get it? That is their biggest concern, is access to the energy. Right. They are going to be totally dependent on 2 locations in the world, I think. The same way that they are with oil. Right. They are going to be dependent on the Middle East and they are going to be dependent on the United States for blue, especially blue, ammonia. Right. this is why I think most of the imported energy. . will be in terms of blue ammonia. When you look at the future, I mean, I don't know how long in the future. They might start thinking that, "Why am I buying LNG? . Right. Why don't I just buy blue ammonia because it's decarbonized? I don't have a carbon problem when I get it." Fundamentally, their issue is supply. Okay. They will be after companies like us, and, "Hey, make it for us. Okay. The issue, the fundamental issue is going to be, they want equity in some of these projects. Right. You know, not everybody is too excited. Right. Okay . giving them another equity. Fair. Maybe from the demand side on blue and green hydrogen, how do you see that market developing over, you know, the next three, four, five years? Will it be, you know, kind of a public market where there will be a known price what people are paying for? Will it be a lot of kind of negotiated, you know, deals with, I'll make it up, you and the Frankfurt government maybe doing something on their bus system? Just, you know, how do you see, I guess, the demand side developing, and how much of that will we be able to see, you know, as far as price discovery, you know, volume discovery, that type of stuff? At the beginning, Duffy, it's going to be private negotiations between different people because there's not going to be a lot of supply, there's probably going to be more demand than all. 10, 15 years from now, I can see that being like, you know, there is some kind of an index for blue hydrogen and some kind of an index for green hydrogen. Okay . that people will look at, and that would fluctuate based on supply and demand. Okay. If it's going to become a source of energy. . then it is going to behave- Sure like the source of energy that we have. Okay. In the beginning, you think it will be. mostly. Okay. Yes. I guess there have been some people that have speculated we might end up with too much, let's say, blue ammonia for a period of time. You know, you guys are doing some, the fertilizer companies are looking to do some. You know, there's a number of people that have existing assets that might be able to take advantage of some of that. Is that a concern for you, that there might be a two or three-year gap where the demand hasn't developed yet for that blue ammonia, but we have supply coming online, and so you kind of end up selling it into a fertilizer market that doesn't give a premium for Blue? I think that one of the issues over there is the definition of what is blue hydrogen. Sure. You know, you can't just fake it. When you say blue, that means you have to say that there are so many kilograms of CO2 per kilogram of hydrogen. A lot of people who are talking about making blue hydrogen are not going to get there. Okay. They are not going to have blue hydrogen. They're going to have something that is 10%, 20%, 30% of the carbon has been taken out, but it is roughly. There will be a tiered market for that. Okay. Okay. I do not see an oversupply of truly blue- Okay . ammonia because in order to do true blue ammonia, you cannot take a fertilizer plant and convert it. Okay. Okay. You have to capture 100% of the CO2. Okay. Otherwise it's not true. Okay. Fair. I'm not gonna get really cheap ammonia for my farms anytime soon. No. I want to come back to the big projects, but maybe just talk to the today business for a little bit. You had your earnings yesterday. Sure. You know, beat on your second quarter, calendar first quarter for folks. Just step around the world because, again, you've got such a good concurrent view on what's happening. What's your take on the economy, you know, and the different geographies and kind of what we should expect over, you know, the next six to nine months? That's an excellent question, and you're very right. We are making a product that doesn't have any inventory to operate, so we see what's happening on a day-to-day basis. If I start from the eastern part of the world, we saw China coming out of the Lunar New Year better than we expected. They have not gotten back to COVID levels yet. It remains to see if the recovery continues and gets them past the pre-COVID level, or whether it is just going to flatten out. That remains to be seen. The Chinese, the performance in China in the first and second quarter for us was better than we expected. When we come to Europe obviously had the energy issue. Right now, Europe, economic activity in Europe is very weak. We are doing relatively well because we had increased prices. Now we are enjoying the fact that the energy prices are not going as high. The prices are there. You're getting a little bit of the margin. The economic activity is weak. In the U.S., you know, there is another, I mean, not much is happening. We are not jumping into a recession, but it's not robust at all. Fair. Okay. stagnant. Again, I definitely want to get to the big projects, but a lot of times, because the big projects are such a focus, we miss a lot of the small projects, the ones that you don't announce, you know, the $30 million, $40 million, $50 million projects. If you just kind of lump those all together this year and next year for you guys as a whole, above average, below average, kind of right on par with what the historic norm has been, is there any change in kind of the size of those collectively, what it's gonna contribute to each year? Above average. Above average. We have made a point of mentioning that, because there was a narrative. . that was irritating me, that people were saying, "Well, Air Products is focused on the big project. Other companies, we are doing a great job because we are focusing on the small project," giving the perception that we are losing markets. That is obviously not the case. We are focused on everything. Big project, small project, productivity and everything. We announced 30 new small projects just in Asia. Okay. We are gaining and maintaining our fair share, and actually, that has increased because we had a lot of opportunities on the smaller projects in areas like semiconductors glass and all of that. Now, the interesting thing for me is that I've been in the business for 40 years. We called it a small projects. It's at $200 million. I mean, 40 years ago, $200 million was a mega project. Right. Right For industrial gas. Okay. No, we are doing fine. Doing fine. Okay. Maybe let's just kind of roll through some of the large projects. The first one, 'cause I would argue it's good, even though the market might have been. When you canceled the coal gasification plant in Asia, whatever that was, 1 and a half, 2 months ago, you know, to refocus into areas that I would say feel a little bit safer. One, just walk us through that, because at one time, coal gasification was a pretty big chunk of the go-forward plan for Air Products. Is that just that one project didn't work, or coal gasification in Asia generally has kind of moved down the pecking order for you guys, so we shouldn't expect to see, you know, other announcements around coal gasification going forward? I'm very happy that you're asking that question because that's what needs to be clear. We have canceled one specific project. Right . in one specific country. Okay. The reason for that is that we announced the project 3 years ago. We all wear these buttons which says, "Safety, simplicity, and speed. It is, three years that we could not satisfy some of the. . that we have for moving ahead with the project in terms of permits, taxes, and all. After a while, I mean, you can't just wait forever. Right. You say, "Well, if we are not going to get this, we're not going to do the project." It has nothing to do with coal gasification. Okay. It is one specific project that we canceled. Okay. I don't think we handled the announcement of that properly. Okay. The reason we didn't handle it, just to clarify, was that we wanted to announce that when the time was right. Right . and proper, and do it properly. some guy down in Indonesia decided to go. Right Make a public statement. We are caught in the middle of the day, 2:00 P.M., and people are calling me and saying, "Well, there is an article in the newspaper. Right. What do you want to do?" I said, "Well, I mean, in that case, let us- Right. We know what we are going to do rather than waiting, let's make the announcement. Okay. It didn't come across properly. Okay. We obviously have people in this world that some of them you know very well who would really like to advertise what Air Products is doing wrong. I don't know why they do that. They should focus on doing things right and let us do what we do. They started, "Well, you see, I always told you gasification is a bad thing, and look at what happened. That's not the case. Gasification is still a good thing and makes a lot of sense. At the same time, if you don't expect us, that if we have opportunities for investing in the United States, to suddenly right now go and do a $10 billion project in China. Or, you know, we have a certain amount of money. It has nothing to do. Besides that, we have a lot of coal gasification projects in China that are operating- Making us money, and we have some of them which are going to come on stream. Okay. Okay? Okay. Jump to Saudi, because that's been a, since you've come in, a big focus for Air Products. You've made a lot of inroads there, whether it's Jazan or NEOM. Let's talk Jazan first, so we're, you know, fully into, act two of Jazan. Is that steady state from here to eternity, or is there more actually that you can do there? In general, how has that been running, and are we kind of at full contribution as far as P&L goes for Air Products there? With respect to the refinery, we are at almost close to full contribution. There's still another $500 million that we would pay for the additional assets. Which, that project, thank God, is going very smoothly. I hope the investors do the calculations now that we are disclosing, and find out that that's a very profitable. That's a lot better than the 10% that we talked about. That has created the opportunity for us, with our relationship with Saudi Aramco and so on, to now do other things. Which is a pretty big thing, and that is this Jubail network- . that we are working on. What we want to do is create a Texas Gulf Coast kind of a pipeline. Okay . for hydrogen to serve the many, many, many chemical companies that are there and connect them together make it more efficient. That has created additional opportunities for us. Okay we are very excited about that. What would it take to announce kind of a full-scale pipeline for that area? You know, I mean is it some, you know, in one or two years? Is it a 10-year project? How many other pieces of business, I guess, would you have to have before a pipeline, you know, would make sense to build? Well, we would like to announce things when we have done something. Fair. we are already in the middle of building a plant there to do this. We are doing the pipeline and all of that. We are not yet at the stage that I would like to have a conference call and show people a map and say. Okay . "This is what we are doing," and all that. We will get there in time. Fair enough. NEOM, it's been a big 1, positive, negative on a few different news articles over the last year. Maybe just walk through again the negative part that people took in that when the CapEx increased, how you look at that, how you view that, you know, what you think that does to the returns back to Air Products. You know, importantly, and you've drawn this, you know, fact out, but, you know, your buying from the JV is the critical part. Help walk us through that economics of, you know, the full on Air Products part of buying and selling the blue hydrogen. When we did that joint venture, let's just get to the fundamentals. Why did we do a joint venture? We did the joint venture because that project is wind, solar, hydrogen, ammonia. You have to make it ammonia to transfer. When you look at that scope, I believe in focus. We know nothing about wind and solar, but we know everything about hydrogen and ammonia. We needed a partner, because otherwise, you know. Right. It would have been ideal to have a Saudi partner. ACWA Power company, one of the biggest companies for renewable power, who we made a joint venture with. Now we can design the plan. We can design the plan, we know this, but now we need a piece of land. . and permits and access the to somewhere in the world. When it is in Saudi Arabia, and we went to the Saudi government. Right .T hey looked at that and said, "Okay, we should give you the land and all of that, and this, you're using the sun and the wind that I have, I want a piece of the action. We think this is a good thing. This is the future. Right. That is why they became a partner. Now we have three partners. At this stage, I think what we accomplished was the fact that somebody could have said, "Okay, I'm your partner, I'm your partner, therefore we make the hydrogen, and then, we make the ammonia. . We put it in a ship, we go crack it and all that. I want to participate in the whole supply chain." We didn't want six other people. Right In our business, we, and decide that it wouldn't have worked practically, because how do you separate that from the hydrogen that we make somewhere else? Right. Therefore, we successfully negotiated that, "Look, we are partners. . great, but we are partners for making this stuff. Right. For selling this stuff, we want to be the exclusive agent. Nobody else will have access to this thing, and Air Products, we fix the price. Right. We give you a certain price to make the project profitable. We take it from there. Right And then market it, but the, at the same time, take the risk of selling it. Right. We give you the guarantee that we will take this stuff so that we can project finance it and all that." That was successful negotiation. We did that in 2020. Right. Based on a certain assumptions. later on, the cost of the project went up, some of it inflation, but a lot of it has to do with project financing. With the scope. Right. Because we were expecting to buy a lot of services. . from the city of NEOM- Right Now we decided it's more economic, and we had the cost and the operating cost. Right. Instead of the operating cost, we are expending the capital. It is really the economics didn't change that much. Okay. The optics didn't look that good because people say, "Oh, you told us $5 billion, now you're saying $8 and a half billion." You have to go through the explanation, $1 billion of it is financing costs and all of that. We are financing some of this through Saudi banks. Saudi banks, because of Islamic law, cannot charge interest. They, you pay them a lump sum at the front. Right. There's all of the complication. At the end of the day, the joint venture, NEOM, we call it NEOM Green Hydrogen Company, is going to make money based on the price that they get. Right. Air Products is going to make an additional return, obviously, based on the fact that they use our know-how and all of that, and sell this stuff. Okay. We are very optimistic about that project, and I think in time that is going to prove to be a. . wise investment. The pushback on that I would get is there's two numbers that matter most for that project. What are you paying for that hydrogen to the joint venture, and what do you think you'll get to sell the hydrogen for? The two numbers you don't want to give us are what are you paying, you know. I, how do you get an investor, you know, confidence, you know, without really knowing those numbers or kind of what the ranges of those numbers would be, you know, that this really is gonna be as good a project as you think? The thing is that, number one, they can go on the basis that, well, if the company is saying this is going to be a minimum 10% return. . to believe us, but people like to do their own homework, which is good. One reference point is, well, what is this product going to go to? The hydrogen, let's take one sector which we talked about, mobility. It's going to go into driving trucks. If it goes into driving trucks, it's going to replace diesel. If it goes. Then you look at what we are selling the product publicly. I mean, right now we are selling gray hydrogen liquid in California for $15-$20 a kilogram. Somewhere between, depending on the customer and the distance. somewhere between $11, $12 to $25. One can take something like that and then say, "What does it cost to liquefy it?" On and back into the price of hydrogen gas and back into ammonia. Okay. Back into the shipping, and then go back and say, "What does it take for this thing to have that kind of a return?" I mean, what are we paying for the ammonia? We obviously are not paying $100 a ton, and we are not paying $1,000 a ton. It's somewhere in between. Those prices will kind of gradually become public anyway, no matter what it took. Okay. It's not that difficult to connect the dots. Okay. But, - Right . we obviously don't want to disclose the number because we have a confidential. Sure . agreement with our partners. Terrific. Well, listen, shoot, we ran out of time, as we always do. Melissa and Seifi, thank you guys so much for spending some time with us. Sure. Great story. Good luck with it. Very exciting. You know. Thank you. Exciting in the space, so thank you very much. Thank you very much for all the good questions. Thank you. Appreciate that. Thank you. Thank you. Thank you very much. Okay. Awesome. Oh, you're awesome. Thank you.