Q&A – Edmond de Rothschild: Cultivating the perfect hydrogen storm

The hydrogen investment landscape continues to face challenges but the industry continues to see growth.

While projects like HH2E's Lubmin project in Germany has been swooped up by H2APEX post-Chapter 11, seven of the UK's biggest companies have clubbed together to invest £6.5 billion in hydrogen mega-project, HySpeed.

Most notably, Norwegian energy company Statkraft, who has been active in the investment of green hydrogen has decided to halt new green hydrogen development due to 'market uncertainty'. 

Similarly, last month Lhyfe has secured €53 million in financing for the construction of four green hydrogen production sites in Europe. 

Among the three debt lenders was Edmond de Rothschild Asset Management, an independent asset management company with an industry agnostic approach to investments.

The transaction marked the company's first investment in green hydrogen, via BRIDGE [VI], the Infrastructure debt platform of Edmond de Rothschild, and comes at a time when many are reassessing investments in the space.

inspiratia spoke to Edmond de Rothschild Asset Management's Jean-Francis Dusch, CIO of BRIDGE, and Shirley Chojnacki, Managing Director and Head of Energy for BRIDGE.

Together they explained why the firm chose Lhyfe for its first green hydrogen investment and how they plan to grow and diversify its infrastructure debt portfolio.

Why did Edmond de Rothschild select Lhyfe's four green hydrogen production sites in France and Germany to invest in?

Dusch: Since we last spoke in 2023, we have continued to invest as a leader in energy transition across all sectors.  

When we set up BRIDGE [the ESG-focused infrastructure debt platform of Edmond de Rothschild Asset Management] in 2014, the energy transition space was part of our investment conviction. For us, hydrogen was a continuity of trying to set trends, being at the forefront of energy transition.

Since Shirley joined us [in 2019], she has invested in the first battery energy storage (BESS) project, invested in biogas, and explored a lot of new areas and companies which we could finance. 

Ultimately, it took us time to make this investment and decide whether we have a project with the right technology, the right underlying industrial definition and the right contractor arrangement.

Chojnacki: Why Lhyfe? There are two crucial points when you select a hydrogen project.

First, the ability of the counterparty to operate the asset. Lhyfe, as of today, is the only one with proven capability in the market, because they already have hydrogen plants that are operational. Even though they are smaller in scale.

The second aspect that is extremely important is the offtake and, again, Lhyfe is one of the very few with mid- to long-term offtakers for their hydrogen plants. When you look at the market, most companies struggle to have those contracts.

Those are the two most important points to start structuring project finance for green hydrogen projects.

Speaking of transportation costs, is there infrastructure in place for this at the four Lhyfe projects?

Chojnacki: If you want to invest in green hydrogen in 2025 you need to be local and at a smaller scale. Lhyfe has their own transportation capabilities, because they own specific trucks to do so.

When you want to look at green hydrogen in 2030 then maybe you look at larger scale plants with pipelines that are cross country.

There are already discussions about connecting France and Germany with pipelines but that is for later on.

So, you have two options, either you wait for the next five to seven years when you can actually mitigate risk for projects, or you look at smaller scale now, start investing, and you build your competencies in that sector.

As far as Edmond de Rothschild is concerned, we like to be at the forefront while of course mitigating as many of the various risks as we can to keep our investment within the risk profile we agreed to with investors; but it is best to invest now in 2025 than waiting for years into the future.

Are further investments in the green hydrogen part of the roadmap for Edmond de Rothschild?

Chojnacki: Yes, definitely. We are also looking at other countries as well. In the Nordics, for example, there are some really good prospects. And we have the track record there.

What comprises your infrastructure debt portfolio and how will you grow this over time?

Dusch: We invest across all sectors, and our team has succeeded in positioning BRIDGE as an early mover in many sectors, enabling us to combine strong debt structures with higher pricing and yield.

If you look at utility circular economy, there is a big effort to decarbonise many assets. If you look at transport, grid and mobility all these areas are equally key.

I am always careful about the right investment choices, despite being an early mover in the sub-sector, for example, we do not invest significantly in EV charging points as there seems to be a mini bubble. Of course, when we see a good investment opportunity, we will consider it.

For now, our assessment is many EV projects may not have the solid business plan and robust capital structure we want to lend against as per our investors' mandate.

As for building out our portfolio, transportation/green mobility, interconnectivity of infrastructure and anything that is linked to social infrastructure with energy efficiencies is where we see a lot of opportunities.

Digital is also a key component of our investment strategy, and it accounts for probably 20 - 25% of our portfolio in the various funds we have. COVID showed that digital infra changed behaviours and overall contributed to the optimisation of the carbon footprint.

We go wide, diversified, and are not shy of exploring new technologies, as long as we can offload the risks to the regulator, to the equity sponsors, and in doing so, structure a debt instrument contribution to the sustainability of the project's financing.

When we last spoke in 2023; the sixth vintage of BRIDGE was approaching final close. Where are you at with that to date?

Dusch: We will make a full announcement later this year [2025] but last we spoke to inspiratia the BRIDGE platform Assets Under Management was at €5 billion, and we are in excess of €6.5 billion, so the fundraising has been going well across all tranches.

In 2024 investors were taking more time to allocate to our asset class. But the beginning of the year [2025] has been strong for us, and we believe we will meet our targets.

As for BRIDGE-VI, we are in line if not above our targets mid-way through our fundraising and believe we will meet or exceed our fundraising targets for this vintage.

Initially led by demand from our investors, we have focused a lot on Europe and some target OECD countries some investors allowed us to invest in, but we are trying to reach first close for our strategy in the Middle East, hopefully in the first half of this year, because it is a very advanced project. 

What are your plans for the next 12-18 months?

Dusch: The strategy is to continue to explore new technologies whilst investing in a the more traditional sectors we have been a first mover in over the last ten years.

We are not shy of supporting the new types of infrastructure trends, but we are not a venture capitalist. We are an infra debt asset manager working within a certain risk profile. So that will be determined by if we are happy with the industrial, operational, technological, and regulatory definitions of the project, as well as the revenue and the contractual arrangements.

It will be within the various debt mandates we have and will not expose our investors to additional risk.

Chojnacki: Consolidating our position in the sub-sectors of energy and energy transition where we have already managed to be an early or first mover. That is going to be key for me over the next six months.

Probably another big thematic of investment will be recycling; specifically, wind turbine recycling and/or repowering, battery recycling, etc.

All those topics are super important, especially in the context of global (US, Asia) supply-chain delays to Europe. As a result, these areas will become paramount for the energy transition in Europe.