Energy Transition, Part V – Industrial Gases & Hydrogen

THE COWEN INSIGHT

We think Industrial Gas companies have unique domain expertise in hydrogen and CCUS and that they will be key integrators of investment in Energy Transition over the coming decades. We are initiating coverage on industrial gas companies. As such, we’ll explore the growing set of investment opportunities in Energy Transition and specifically green hydrogen.

Industrial Gas & the Energy Transition

We view Energy Transition to be among the most important macro themes affecting the investment landscape. Cowen has been expanding its sustainability research efforts. Our colleagues recently launched coverage of Battery Technology, EV Charging, and Next-Gen Materials.

Consistent with this effort, we are launching coverage of the industrial gas sector. We see these companies having unique domain expertise and barriers to entry in hydrogen and carbon capture. These are areas that we expect to receive significant investment in the coming years.

What is unique and proprietary about our viewpoint on industrial gas?

We believe this report offers several unique perspectives. First, our experience as Energy analysts gives us unique insight into the broader pace of Energy Transition and the competitive landscape, particularly in hydrogen and carbon capture. Second, Cowen’s sustainability team spans multiple analysts and subsectors exposed to Energy Transition, enabling what we believe is a more informed view of market growth and relevant datapoints. Third, we believe our analysis of electrolyzer and hydrogen transportation costs presented in this report offers a proprietary perspective

Our coverage of Industrial Gas companies provides a holistic view of the market. We present a thorough analysis of the hydrogen and carbon capture markets. We think they could grow by factors of 10-20x and 20-140x, respectively through 2050. In addition, we discuss why industrial gas companies are uniquely positioned to participate in this growth and how their strategies differ.

How are industrial gas companies uniquely positioned?

Industrial Gas companies enjoy a consolidated industry, generate stable cash flows and have a solid opportunity set of growth investments driven by population growth, industrialization and secular growth in healthcare and electronics. The companies also play an important role as enablers of Energy Transition, particularly in Hydrogen and Carbon Capture.

Hydrogen is viewed as a key component of the world’s quest to reach net zero emissions and avoid climate change. Projections are calling for a 10-20x increase vs current volumes requiring trillions of dollars of investment.

While an attractive energy carrier, hydrogen can be difficult to handle in a safe and cost-effective manner. Industrial Gas companies possess significant domain expertise in hydrogen and have been heavily involved in both traditional uses and Energy Transition uses of hydrogen since their inception. We believe the Industrial Gas companies will be key project integrators in the build out of green hydrogen infrastructure, providing decades of growth investment potential.

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