Variable Interest Entities

12 Months Ended

Sep. 30, 2023

Consolidated Variable Interest Entities Disclosure [Abstract]

VARIABLE INTEREST ENTITIES

We are the primary beneficiary of the NEOM Green Hydrogen Company joint venture ("NGHC"), which is a variable interest entity ("VIE") that is consolidated in our Middle East and India segment. We are not the primary beneficiary of any other material VIEs. We account for a VIE for which we exercise significant influence but are not the primary beneficiary, such as the Jazan Integrated Gasification and Power Company joint venture ("JIGPC"), as an equity method investment. For additional information on JIGPC, refer to Note 9, Equity Affiliates.

The table below summarizes balances associated with NGHC as reflected on our consolidated balance sheets. For additional information on this joint venture, refer to the "NEOM Green Hydrogen Project" section that follows.


	30 September	30 September
	2023	2022
Assets
Cash and cash items	$78.2	$274.7

Trade receivables, net	—	1.3

Prepaid expenses	21.4	0.1
Other receivables and current assets	181.6	23.3
Total current assets	$281.2	$299.4



Plant and equipment, net	1,396.1	218.8


Operating lease right-of-use assets, net	228.9	—


Other noncurrent assets	350.6	1.5
Total noncurrent assets	$1,975.6	$220.3
Total assets	$2,256.8	$519.7
Liabilities
Payables and accrued liabilities	$141.0	$58.1
Accrued income taxes	0.6	—


Total current liabilities	$141.6	$58.1
Long-term debt	1,274.4	—
Long-term debt – related party(A)	—	447.3
Noncurrent operating lease liabilities	18.9	—
Other noncurrent liabilities	2.1	1.4
Deferred income taxes	24.1	—
Total noncurrent liabilities	$1,319.5	$448.7
Total liabilities	$1,461.1	$506.8
Equity
Accumulated other comprehensive income	$77.7	$—
Noncontrolling interests(A)	723.6	30.0

(A)During the third quarter of fiscal year 2023, outstanding shareholder loans to NGHC were converted to equity in the entity. Accordingly, related party debt outstanding was reclassified to investments attributable to the noncontrolling partners of NGHC. This noncash activity is presented within “Investments by noncontrolling interests” on our consolidated statements of equity for the fiscal year ended 30 September 2023.

NEOM Green Hydrogen Project

In the fourth quarter of fiscal year 2020, we announced the NEOM Green Hydrogen Project (the "NEOM project”), a multi-billion dollar green hydrogen-based ammonia production facility that will be powered by renewable energy in NEOM City, Saudi Arabia. We, along with our joint venture partners, ACWA Power and NEOM Company, are equal owners in NGHC, which will develop, construct, own, operate, and finance the project.

During the third quarter of fiscal year 2022, we entered into an interim agreement with NGHC under which we commenced construction of the NEOM project. In addition, we executed an agreement with NGHC under which we will be the exclusive offtaker of green ammonia produced by the NEOM project under a long-term take-if-tendered agreement. We intend to transport the green ammonia around the world to be dissociated to produce green hydrogen for transportation and industrial markets. In May 2023, NGHC finalized the $6.7 billion engineering, procurement, and construction ("EPC") agreement with Air Products named as the main contractor and system integrator for the facility. As of 30 September 2023, we had unconditional purchase obligations of approximately $5 billion for open purchase orders related to construction of the project.

Air Products has one-third of the voting interests in the NGHC joint venture; however, substantially all the activities of the joint venture involve or are conducted on behalf of Air Products. Since we have disproportionately few voting rights relative to our economic interests in the joint venture, we determined that NGHC is a variable interest entity. In addition, we determined that we are the primary beneficiary of NGHC since we have the power to unilaterally direct certain significant activities, including key design and construction decisions, and we share power with our joint venture partners related to other activities that are significant to the economic performance of NGHC. Therefore, we consolidate NGHC within the Middle East and India segment.

Project Financing

In May 2023, NGHC secured non-recourse project financing of approximately $6.1 billion, which is expected to fund about 73% of the project and will be drawn over the construction period. At the same time, NGHC secured additional non-recourse credit facilities totaling approximately $500 primarily for working capital needs. Under the financing, the assets of NGHC can only be used to settle obligations of the joint venture, and creditors of NGHC do not have recourse to the general credit of Air Products.

The joint venture completed its first drawdown on the project financing in July 2023. The table below summarizes the interest rate, maturity, and carrying amount of borrowings associated with NGHC as of 30 September 2023:


	Fiscal Year Maturities	30 September 2023
Payable in U.S. Dollars
U.S. Dollar variable-rate facilities 6.62%(A)	2027 to 2053	$1,094.9
U.S. Dollar stated-rate facility 5.00%	2027 to 2053	138.5
Total Payable in U.S. Dollars		$1,233.4
Payable in Other Currencies
Saudi Riyal Loan Facility variable-rate 6.69%(B)	2027	131.4
Total Principal Amount		$1,364.8
Less: Unamortized discount and debt issuance costs(C)		(90.4)
Total NGHC Long-term Debt		$1,274.4

(A)Reflects a daily compounded SOFR as of 30 September 2023 plus an annual margin of 1.31%. This does not include the impact of our floating-to-fixed interest rate swaps, which result in an overall lower interest rate for the borrowings. These derivative instruments, which had a notional principal amount of $1,182.5 and an average pay rate of 2.82% as of 30 September 2023, are reflected within the table provided in Note 14, Financial Instruments, on page 85 .

(B)Based on the Saudi Arabian Interbank Offered Rate ("SAIBOR") plus an annual margin of 0.8%.

(C)Our consolidated balance sheet as of 30 September 2023 also includes $58.8 for remaining project financing fees that are eligible for deferral as a noncurrent asset until additional borrowings are drawn, at which time the unamortized balance will be reclassified as an offset to the outstanding debt.

Land Lease

The green hydrogen-based ammonia production facility is being constructed on land owned by our joint venture partner, NEOM Company, for which NGHC signed a 50-year lease agreement. The land lease commenced during the third quarter of fiscal year 2023. Accordingly, we recorded an operating lease with a right-of-use asset and corresponding liability of $223, of which $209 was paid as a lump-sum in August 2023. Additional payments under the lease will occur after the first 30 years of the lease term.