Charbone Hydrogen expands holdings, preps for Q4 production

IMAGE: Breaking ground at the Charbone facility

Breaking ground at Charbone’s Sorel-Tracy, Que. green hydrogen facility, slated for Q4 production. (Courtesy CHARBONE Hydrogen Corporation)

CHARBONE Hydrogen Corp. has spent August busily expanding its green hydrogen business as it prepares to start production at its Quebec plant in the fourth quarter of this year.

First, its fully-owned subsidiary Charbone Systems Inc. entered into a non-binding term sheet with the Netherlands’ Resato Hydrogen Technology B.V., for the exclusive sales, marketing, distribution and servicing of Resato’s hydrogen refuelling station technologies in Canada.

Shortly after, Charbone also announced a non-binding memorandum of understanding between its Delaware-based subsidiary Charbone Corp. USA and Northwoods Hydropower Inc. for the acquisition of Wolf River Hydro LP, which owns a 700 kW hydropower plant in Shawano, Wis.

“We’re on the industrial side, we want to decarbonize the planet like everybody else,” said Stephane Dallaire, Charbone’s head of corporate finance. “We want to start by hitting the industrial sector, which is a $200-billion market.

“(Plus) the fact that we have a distributor. Everybody in management has worked in renewables . . . that’s pretty much where we’re at and we should start producing green hydrogen in Q4 of 2022.”

It is also in the midst of acquiring two other limited partnerships — Tower Kleber and Black River — which operate a 2,760 kW portfolio of three hydropower plants located in the Onaway region in Michigan.

Hydroelectric power for hydrogen plants

Charbone (CH-V), based in Brossard, Que., is focused on developing modular and expandable hydrogen facilities. To support this, it also buys and operates small- to medium-sized hydroelectric stations and pairs them to its hydrogen production units.

Founded in May 2019 by CEO Dave B. Gagnon and originally known as the CHARBONE Corporation, it became the first green hydrogen company to go public on the TSXV in May 2022.

Since then, the company has raised $4.5 million in equity.

At about the same time, Charbone signed a supply and logistics agreement with Superior Propane, a division of Superior Plus Corp. (SPB-T) to provide green hydrogen to commercial and industrial customers, initially in Quebec, from its Sorel-Tracy, Que. facility.

Charbone Systems will initially import the hydrogen refuelling stations from Europe, and would have an option to acquire the rights to manufacture and assemble them locally in Canada under the Resato trademark.

Benefits of the Resato partnership

Under the term sheet, Charbone will also dedicate resources to marketing and sales in Canada, while Resato will train and supervise Charbone Systems teams.

Dallaire said a hydrogen gas pump costs about $2 million to $2.5 million. With exclusive rights under the Resato term sheet, Charbone sidesteps this issue.

“We control distribution by the pump, and we sell the gas,” Dallaire said. “So that’s the beauty with Resato.”

Completion of the transaction is subject to further negotiation and execution of a definitive agreement.

With Charbone’s team being comprised of many Europeans, or those who spent significant time on the continent, it was natural its research would lead to Resato.

“Europe is 10 years ahead of North America in renewables, and Scandinavia probably 15. They’ve been doing renewables for the longest time and taking care of the environment a lot more than we have in North America. We have oil, that’s what we have,” Dallaire said. “Because of the history in renewables (and) the contacts, it’s a lot easier for us to have access to the European suppliers, European markets.”

Green hydrogen is produced via electrolysis, using water and hydropower. Charbone states its hydrogen has a purity grade of 99.999 per cent.

Eighty per cent of all produced hydrogen is used in the manufacturing of ammonia, which is a core component in many industries.

The Northwoods MOU

Charbone and the three limited partnerships will conclude the acquisitions in the next few months, beginning with Wolf River by November 15. The two other partnerships will be concluded on or before December 15.

All three have been operating their respective plants for over 20 years. The Wolf River acquisition came about via Charbone’s COO Daniel Charette, who had known the family running the plant for some time.

Northwoods’ management and operation team will assist Charbone’s engineering team to implement optimization, modernization with new hydro turbines, and automation projects at each of the plants.

“The major cost in hydrogen comes from your power. When you own the power, you control the costs,” Dallaire explained. “We’re still getting them cheap right now, in five to 10 years from now, they’re not going to be cheap.”

Charbone’s hydrogen future

A release states Charbone intends to be the first green hydrogen producer in the Midwestern U.S. It has already purchased a 0.2 MW hydropower plant in Vermont for $474,000.

Its Sorel-Tracy facility in Quebec, which includes a 0.5 MW plant, sits on 390,687 square feet of land with an annual rent of $78,000. The land is on a 25-year lease with a 10-year renewal option. For the fourth quarter this year, Charbone plans to scale up.

“We must scale it up, we’ll probably do five megawatts. Take it up to five megawatts and take the smaller one, the 0.5 and put it either in Manitoba or in Nova Scotia,” Dallaire said, though the firm still needs to work out financing.

He predicts the five MW upgraded facility will break even by Q2 2024. His conservative estimate for a five MW facility is between $8 million and $10 million per year in revenue.

In June, Charbone executed a lease between subsidiary Charbone Hydrogen Manitoba Inc., and the City of Selkirk, Man. for three to five acres of land on which to build a 0.5 MW green hydrogen facility. Commercial operations are targeted for Q2 2023.

More recently, Charbone extended an existing supply agreement with Superior Propane to include the future Selkirk facility.

The long-term plan for Charbone lies south. It plans to acquire 0.2 MW to 25 MW hydropower plants in the U.S. where it has identified over 1,500 MW of potential assets to be acquired. Dallaire said there are few opportunities to acquire hydropower plants in Canada due to provincial monopolies such as B.C. Hydro and Hydro Quebec.

“The U.S. is the better market for us . . . but where we think the most potential to develop is the West Coast first,” he said.

“Why? Because California (is) already selling a lot of people into hydrogen. Everything else does stem from California, and then comes the East Coast.”

Nicholas Sokic is a freelance, Toronto-based journalist. He has covered a number of sectors, including business, finance, crypto, health, cannabis and culture. He graduated from Western University's Master of Media…

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Nicholas Sokic is a freelance, Toronto-based journalist. He has covered a number of sectors, including business, finance, crypto, health, cannabis and culture. He graduated from Western University's Master of Media…

Read more

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