Good morning and welcome to the Chart Industries, Inc. Carbon Capture Expansion Conference Call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question-and-answer session. A telephone replay of today's broadcast will be available following the conclusion of the call until Tuesday, February 9, 2021. The replay information is contained in the company's press release. Before we begin, the company would like to remind you that statements made during this call that are not historical, in fact, are forward-looking statements. Please refer to the information regarding forward-looking statements and risk factors included in the company's latest SEC filings. The company undertakes no obligation to update publicly or revise any forward-looking statement. I would now like to turn the call over to Jillian Evanko, Chart Industries CEO.
Thanks, Josh. Good morning, everyone, and thanks for joining on short notice for this discussion on our exciting investment in another carbon capture company, Svante. Yes, today is February 2nd, Groundhog Day, so in keeping with the spirit, you'll hear us beat the same drum of making investments that bring us more market share, new customers, and multiple options in what will certainly be a hybrid of solutions in the high-growth areas of specialty markets, today in particular carbon capture, for the clean energy, food, and industrial nexuses. There isn't going to be only one source of power or one way to store it or to use it. So he, or in our case she, who has the broadest set of equipment and process for all of the possibilities in the hybrid of solutions to the need for clean, will be best positioned.
That's what we continue to build out: a broad offering that is molecule-agnostic and can be chosen as a full solution or as an à la carte menu. Svante offers companies in emissions-intensive industries a commercially viable way to capture large-scale CO2 emissions from existing infrastructure, either for safe storage or to be recycled for further industrial use in a closed loop. Svante provides the ability to capture CO2 directly from industrial sources at less than half the capital cost of first-generation solutions. And a fun fact: Svante is named after Nobel laureate Svante Arrhenius, one of the first scientists to identify the atmospheric-carbon climate change connection. This morning, we close on a $15 million investment in Svante as part of their Series D offering.
This gives us just under 10% ownership of the company, but more importantly, it brings us another option in our portfolio of growing carbon capture technology, equipment, and solutions. First, it adds another option for our customers to choose from when deciding what solution they want to go with, and further corners the carbon capture market by giving us access to projects and blue-chip customers that have already committed to them. And second, or rather additionally, there is either further optimization potential in combination with our recent acquisition of SES to create a high-powered combination of low CapEx cost with the highest purity, two key needs of CCUS customers. This investment in a Canadian company builds upon our Canadian clean energy network, which got a jump start with our December 2020 HTEC investment, as shown on slide three of the supplemental presentation.
As a reminder, HTEC is also Vancouver-headquartered and designs, builds, and operates hydrogen fuel supply solutions to support the deployment of hydrogen fuel cell electric vehicles. So now, with access to HTEC, which has significant hydrogen contracts for numerous projects across the country, and Svante with numerous North American carbon capture opportunities, we are well positioned to have content on the project opportunities in this region that come from either company, in particular with SMR Blue Hydrogen. Our strategy is to continue to have the broadest product and technology offering for energy and industrial gas applications, and we expect the clean energy transition and destination to be a hybrid of multiple molecules and solutions. What sets us apart at Chart is that we are molecule-agnostic and have equipment and solutions that address LNG, CNG, hydrogen, biogas, carbon capture, water, just to name a few.
Today, we continue to build on that strategy. With this and other recent investments, plus what is commercially happening in the market lately, I'm finally breaking down, for those of you who keep asking why I won't say specialty is going to grow more than 10%. Today, I'll tell you that our expectation is that our specialty product segment sales will grow over 20% in 2021. Now, you're going to have to wait for another couple of weeks until our February 18th earnings call to get into the nitty-gritty on how that is built up, and I promise you we will share details at that point.
As with all of our investments and acquisitions, Svante checks the box of our two key investment elements, which are that it brings Chart first, customers and commercial projects that could not be accessed without significant organic investment, and second, geographies that otherwise could not readily be accessed due to lack of product experience in the region, certification requirements, or government funding and relationships. Sustainability is the overarching macro trend driving interest in investment in clean energy, water, food, and industrials. As you can see on slide four, we are well positioned to take advantage of those connections, which are becoming more and more prominent. There is a direct link between carbon capture and industrial manufacturing. Clean power linked to clean industrial.
Heavy industry is responsible for over 20% of global emissions, and 70% of emissions in China, Europe, and the United States are within 100 kilometers of potential storage sites. And let's not forget the macro trend of sustainability is supported by government and private dollars, evidenced by, just to name a few examples, the Low Carbon Fuel Standard, or LCFS, which is perhaps the most prominent program to reduce carbon in fuels and supports the hydrogen refueling infrastructure credit, and the 45Q, which provides tax credit to companies that sequester CO2 through geological sequestration, EOR, or enhanced oil recovery, chemical or biological sequestration. But possibly, more people started to pay attention to carbon capture when Elon Musk tweeted his $100 million prize for the best carbon capture technology about two weeks ago. Slide five provides an overview of what carbon capture is and does.
In a few moments, I'll go into the differences of the types of capture and the content for Chart Equipment, SES, and Svante Technologies both together and separate. Slide six is meant to remind everyone about the extensive value chain of carbon dioxide that our existing equipment is heavily used in. Piggybacking the point I just made around heavy industry, other industries and applications use CO2. Our equipment is used for carbon dioxide in food and beverage, all the way through to cannabis and dry ice for vaccine storage and firefighting. The common denominator here is the equipment stores CO2. These applications all require CO2, and this past year, the market saw a CO2 shortage.
Another way to think about carbon capture, not just around clean energy, but rather around an economical way to address a growing need in the everyday applications of carbon dioxide, is important to understand the types of carbon and air capture processes to understand which ones will be used where. So, moving to slide seven, post-combustion CO2 capture processes can use a cryogenic process that delivers high-purity liquid CO2 ready for use, or amine processes that deliver gaseous CO2. These are referred to generally as carbon capture processes and are typically used when capturing CO2 from existing assets that are currently emitting carbon dioxide into the air. Chart Equipment, and focus here on equipment alone, not technology or process, for cryogenic process, which both SES and Svante are, comprises between 15%-20% of the total plant cost. So that's equipment alone.
It is noteworthy that our total equipment and process content significantly increases when technology is involved. In a demonstration-sized project, which is somewhere between 10 and 30 tons per day, our equipment content could be approximately $5-$7 million per project. Adding the process to that, in many cases, would make our total content three to four times that, and this is the case, whether it's Svante, SES, or the potential combination thereof. Now, in amine processes, air-cooled heat exchangers represent the majority of the plot plan and represent 20%-25% of the total cost of a project. The second type of capture is direct air capture. This removes carbon dioxide directly from the atmosphere, and depending on which process technology is applied, air movers, similar to our air coolers, are the most significant portion of project cost, approximately 50%.
Both SES and Svante's processes, either separately or combined, can be used in direct air capture. Before we get into any specifics, a little history about Svante is on slide eight. Established in 2007, Svante has 80 employees, including CEO Claude Letourneau. As with all inorganic investments that we do, we only want to be involved with stellar management teams and leaderships, and I can tell you that is exactly what Claude is. He's an industrial project veteran who brings to Svante a broad range of experience, leading large world-class projects. Claude's 30 years of experience in advanced technology development and commercialization gives us high confidence that the company will be a global leader in building a CO2 marketplace. Like hydrogen and other clean options, economics are important for carbon capture in CCUS.
So the technology and equipment has to do its job in as small a footprint as possible, with as low a cost as possible, all the while ensuring the highest purity CO2 for commercial sale. Svante brings a unique, demonstrated, and proven solution to the market with a solid sorbent that is over 50% less capital-intensive than first-generation amine options. We love both the Svante and SES technologies as they fall into the post-combustion CO2 process category, as well as offering two very good solutions for direct air capture, again, leveraging our à la carte menu of choices for the clean energy transition. The efficiency and purity of the SES CCC process that we talked about in December, compared to traditional amines, is a differentiator, while the low-cost CapEx of Svante sorbent beds, compared to traditional solutions, is another differentiator.
Put the best of both together, plus Chart Equipment, and we think it can be quite a combination upon joint development, which is part of our plan. Alternatively, each can be an answer on its own, and like I've said previously, there won't be just one solution. So having a broad menu of options is a key part of our strategy. So how do we continue to stay differentiated? Intellectual property. Slide 10 shows a few new stats for you and also the highly differentiated nature of our various involvement in carbon capture. First, at Chart, 82% of our existing equipment and solutions have IP associated with them. SES is 61 patents, plus another 20 patents pending between the founders, Andy and Larry Baxter, who remain with Chart to continue to innovate.
Finally, through our investment and MOU, Chart and Svante, which, by the way, has over 130 patents worldwide, now have a joint development agreement. One of the things I really like about Svante's approach is that they are being pragmatic about how to get the ball rolling on projects versus looking at the greenest and cleanest. Their commercial focus, as shown on slide 11, is on three areas that have a current need to address CO2. Basically, let's address an existing problem with existing assets versus starting from scratch. Hence, you get natural gas, SMR, blue, and cement as target industrial markets. These three areas alone already have 27 potential commercial opportunities for Svante across 16 individual customers with expected shovel-ready work between now and 2025. Just with these alone, there is opportunity to achieve a significant portion of our $600 million addressable market for carbon capture.
Couple that with SES and Chart pipelines that each respectively bring to the table, and market penetration becomes deeper, faster. As a reminder, Chart's pre-SES acquisition and pre-Svante investment is currently bidding on over 20 projects globally for CCUS equipment. One example of Svante in action is shown on slide 12, where a 30-ton per day plant has been operating at Husky Energy in Canada since 2019. Also achieved by Svante already are the CO2MENT project at Lafarge in Richmond, British Columbia, capturing 1 ton per day for its use in building materials, a laboratory test unit of 100 kilograms per day installed at Total S.A. R&D Center in France. Just a couple of examples. Also worth noting is that the U.S. Department of Energy awarded funding support to Chevron to deploy a 25-ton per day demo plant at Chevron's oil field in San Joaquin Valley in California.
It is also worth noting that there are additional committed projects in the pipeline for Svante, which are shown on the bottom right-hand side of the slide, including a large-scale facility in Colorado. We are pleased to participate on these upcoming projects as an aspect of the commercial MOU, so turning to slide 13 to discuss that. In line with how we like to achieve commercial penetration, we're very pleased to announce our commercial MOU with Svante that was signed in conjunction with our investment. You can see the benefits of this commercial agreement on the slide, and we also are pleased to join other Svante shareholders and partners that give us the opportunity to penetrate existing facilities with our equipment, as well as build commercial relationships for other applications that these parties work on, not necessarily only in carbon capture.
As we commented about HTEC on the hydrogen side, direct linkage and communication with government policymakers is a great benefit that comes from both HTEC and Svante in Canada. We continue to stay focused on our balance sheet by executing on strong cash flow generation, as well as increasing earnings while playing PAC-MAN and gobbling up strategic investments that fit naturally into our high-growth spaces. Our position on maintaining a low net leverage ratio, i.e., sub two times, is unchanged. As you can see on slide 14, our year-end 2020 net leverage ratio is reported at 1.70, down from 1.97 at the end of November 2020 when including the pro forma December spend for SES and HTEC.
The significant debt paydown is, in part, the result of the fourth quarter of 2020 being our second highest free cash flow quarter in the history of our business, with or without big LNG. When you pro forma December 31st for the Svante investment, the net leverage ratio is 1.77. Given the complementary nature of our existing carbon capture and Svante, what we expect to be able to do combined, we are increasingly confident in achieving a significant portion of our total addressable market for carbon capture and direct air capture of $600 million in the near term, as shown on slide 15. So I wanted to pick and choose a few data points to whet your appetite for our upcoming earnings call, and if slide 14 on our net leverage ratio didn't do it, let's hope slide 16 and record backlog as of December 31st, 2020 does.
We'll share detailed order activity from the fourth quarter of 2020 in a couple of weeks. But in the meantime, a few data points for you. Full year 2020 specialty market orders were a record. This contributed to the record specialty product backlog, which also included record backlogs in HLNG vehicle tanks, hydrogen, water treatment, and food and beverage. Food and beverage was a sleeper surprise given the drastic slowdown in the second quarter of 2020 due to COVID. The former Distribution and Storage segments, both east and west, had stellar second halves of 2020 from an order perspective, contributing to records for each, as well as record Cryo Tank Solutions backlog. I'm certain you noted the comment in the press release about anticipating an increase to our 2020 outlook on our earnings call.
I would have been remiss not to have included that today, as I'm certain many of you would have asked. So yes, there will be a change to guidance, but don't attempt to update your models before we share the 2020 results. Or you might cause me to resegment again. Before I open it up to questions, there are three key takeaways from this and our other recent organic and inorganic investments. These three takeaways are the exact same ones I said on our December acquisition update call, but they deserve repeating. First, we have no peers. Our extremely unique and differentiated equipment and technology offering touches all of the interlinkages between clean energy, water, food, and industrials. Second, we are staying with our strategy of expanding our high-growth, high-margin clean energy specialty markets and repair, service, and leasing businesses through technology, commercial, and geographic investments.
There isn't going to be one source of power or one way to store it or to use it. So as I mentioned in my opening remarks, he or she who has the broadest set of equipment and process for all of the possibilities in what will certainly be a hybrid answer to the need for clean will be best positioned. And that's what we will continue to build out. A broad offering that is molecule agnostic and can be chosen as a full solution or as an à la carte menu. And third, carbon neutrality targets cannot be achieved without carbon capture projects, and the most optimized project will take advantage of the combination of energy, water, industrial, and storage. I'll now turn it over to Josh for Q&A, but please note there's an additional quick announcement I will make post-Q&A, so please stay on if possible.
Josh, back to you. Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Eric Stine with Craig-Hallum. You may proceed with your question.
Hey, Joe. Good morning.
Hey, Eric. Morning.
So I know in the release and also here on the call, you mentioned some of these pilot projects with Total and Chevron. Just digging into this a little bit, it looks like there's also a pretty sizable direct air capture project in Palm Springs. I know this is an area that you have certainly been focused on as this market's starting to come together. So maybe just talk about that, maybe that specific project, but also that application and what you see for that going forward.
Absolutely. Yeah. Direct air capture is an area in addition to the post-combustion carbon capture that our equipment is just a very natural fit for. So like anything else, we love when the equipment is a key part of the project, but also gives us a unique advantage where we have the smallest size so we can fit on smaller plots, etc. So we really love what Svante is doing in this area. And if you look at direct air capture for Chart equipment, these are heavily around large banks of air movers similar to the air-cooled heat exchanger. And this can be, as I commented, up to 50% of the total project cost. So we're continuing that pipeline out. We're working on multiple different projects on the direct air capture side, and Svante just brings us access to multiple more options.
And their relationships on the direct air side expand that commercial penetration for us beyond what was in our pipeline originally.
Got it. And then I'm just curious what I know it's early here, but I'm sure you've had some interaction with some of these companies who, I mean, Total, Chevron, others who are your current customers, maybe in other parts of your business. Any feedback you can share from them?
Definitely. As you know, because you've been around us a long time, Eric, that we talk with these customers on a very regular basis. And it's really important to us to kind of be their one-stop shop for whatever molecule that they're working on at any given time because they all have multiple facets happening, not just one particular play. And the discussions that we've had with these customers have been very, very positive.
They see carbon capture as a very important part of how they're going to solve their carbon neutrality targets. And in many cases, they don't actually have a solution. And so having the partnerships is really important to them. And they view Chart as a key part of those partnerships. And that's primarily, I think, because you get the combination of the process and the equipment is what we hear. So overall, very positive feedback. And their experience with Svante so far has been extremely positive. We've heard no negative market feedback, which was very important to us as well.
Okay. Thanks a lot, Joe.
Thanks, Eric.
Thank you. Our next question comes from Ian MacPherson with Simmons. You may proceed with your question.
Thanks. Good morning, Joe. Congratulations. I wanted to ask a little bit, probably around the pipeline of projects. I think you said there are about 20 projects that you're bidding presently. I presume that's predominantly. Is it entirely North America? And then are the 25 - 30 million ton projects, is that indicative of what a big project looks like? Do you anticipate that scaling larger or maybe a larger subset of projects that are smaller? Just kind of wanted to get a better sense of the nature of that big pipeline.
Absolutely. Good morning, Ian. So the first part of your question, our pipeline pre-SES or pre-Svante was the 20 there. And it's about two-thirds North American and a third EMEA region. And if you tack on the Svante potential pipeline in the next five years, you're looking at those shovel-ready in that time period, somewhere between 25 and 30 different projects, of which seven of those would be non-North American.
But I would caveat that comment in the talking points I had during the prepared remarks focused on that low CapEx cost solution. And that's really important to the Svante advantage. And that's very targeted to North America in terms of the economics that come into play there. The economics are different in Europe and EMEA, and that's really around whether you can store underground or not. So there's different factors in play regionally. And I think that those will be further enhanced by our product offering in Europe, given some of the work that we're doing with our equipment on the heat exchanger side to have the smallest footprint for plot size. So there's quite a lot of nuances to these answers. I apologize for that. But generally speaking, you can say kind of 60% North American, 40% non across the combined investment and organic pipeline that we have.
In terms of the size of the projects, 20-30 tons per day is really. I would consider that small scale or demonstration size. That's what's happening to really prove the concepts out. You're seeing that in various different locations, as evidenced by some of the work that's already out there. In that 20-30 ton per day, these projects can be somewhere in the $15-$50 million price tag range. Very quickly, these are going to scale up to be larger. When I say larger, you're talking thousands of ton per day type of applications. That's really to handle the industrial side, the cement and the natural gas. What I would consider a large scale is in that range.
On the SMR blue hydrogen side, at the small end, it's kind of 400 to 800 TPD, and at the high end, in the 2,000s. When you start getting in the thousands, now you're in the hundreds and hundreds of millions of dollars for a project. So a few thousand tons per day project is somewhere in the $300-$400 million range. Okay.
That's super hel pful. Thank you. So now with this investment complete, how do you assess your toolbox for carbon capture? Are there more parts of the solution that you would like to add in organically, or do you feel like you're well positioned now for that end market?
We feel like we're very, very well positioned on carbon capture now. This was a key piece of the puzzle that we had had in our sights for a while.
So we have a really strong combination between owning the SES, having the investment in Svante, and our equipment profile. So there's not any particular other one that we absolutely must go and get. And we also continue to see the optimizations with this joint development that we're working on will further differentiate our offering on carbon capture. So there's other clean investments out there that would work very nicely in the linkage that we see of carbon capture with industrialization and water in particular, and link all of that with whether you want to pick hydrogen or LNG or biogas. So this interlinkage concept is not going away, but our toolkit on carbon capture specifically is very full.
Very good. Thanks, Joe.
Thank you.
Thank you. Our next question comes from Rob Brown with Lake Street Capital. You may proceed with your question.
Morning, Joe.
Hey, Rob.
Just following up on the last question, what's sort of your view on the timeline of moving from demo projects to larger industrial scale projects? What does that look like at this point? And are there any sort of gating items to getting that transition started?
I think the large scale projects will be commercially happening in about three years. So I think we still have a couple more years of the demonstration projects. Although I would put a specific caveat to that, that there's going to be more and more demonstration projects. So you can still handle multiples of those in this next couple of years as the scale-up happens for the larger projects. And it's really around understanding what the customer wants. So the comment that I made about a lot of confidence in Svante building the CO2 marketplace is an important one.
So, you've got solution on the low CapEx cost. You have development around ensuring that you have the highest purity for commercial use CO2. And then you have the parties and the end users in this marketplace that now have been coupled up. And what I mean by that is you've got the equipment providers, you have the technology providers, you have the end users that want to solve their problem. And now it's really about getting the equipment made, getting the facility ready, getting the location ready, and then doing your proof of concept testing and so on. But I think it's a near-term move to large scale.
Okay. Great. And then what's the competitive environment at this point in the carbon capture market with these two technologies sort of teamed up with you? What's the competitive environment look like?
We are very well positioned in the competitive environment for, I would say, three different reasons. The first is you have to have highly efficient, low CapEx, and high purity as a solution for this to be economically viable for your end users. And that combination is something that we have now. If you compare it to kind of first generation and/or traditional amine solutions, that's really the competition to the cryogenic carbon capture side of things. And in the case of Svante, you're talking about solid sorbent versus liquid. And that's a lot around that CapEx cost. In the case of Chart equipment, we can handle either. So we're really well positioned to take on whatever a customer and user is looking to do.
The other thing I would say that is probably a differentiator to us, the second, is the fact that we, amongst our investments, ownership, and equipment, have experience in this. And with Svante's example that I briefly listed and didn't even give the full resume, having a demonstration plant that's been operating and you're able to take customers to is very similar to what you saw happen in small scale LNG, where you needed to have a showcase location for people to come and see. And most people don't want to be the first, right? They don't want to be the test guinea pig.
And so having that out there and operating and showing the metrics and the efficiencies compared to other solutions is a considerable advantage to other companies that are in startup mode or see kind of investments in these various different types of technologies, which all I'm certain will be competitive as this becomes much more commercially viable. But having an operating facility that's using the technology and equipment is a huge differentiator. And then third, literally, a lot of this goes to the commercial relationships and the parties involved and how they're viewing where they've kind of placed their bets. And as you heard me talk about with Andy and Larry's SES business, they have a decade-plus of experience with key stakeholders in carbon capture ranging anywhere from the United States, states, the governments, to utility companies in Europe.
That's the same situation that we have with our investment in Svante, where they have blue chip relationships and blue chip customers that have placed their bets on their solution. So those three things give us a significant leg up when you start looking at what the alternatives are.
Okay. Great. Thanks for that overview.
Thanks, Rob.
Thank you. Our next question comes from James West with Evercore ISI. You may proceed with your question.
Hey. Good morning, Joe.
Hey, James.
So we saw the announcement from Exxon last night. Chevron bought into a carbon capture company a couple of two weeks ago. It seems like we're hitting this inflection point for carbon capture. You guys have been at the forefront of this as you push forward with your organic and inorganic strategy here. I mean, do you believe that we're in this kind of crescendo where CCUS is starting to really take off as the transition kind of accelerates here? I mean, I know you talked about demonstration projects, but are we now in the phase where we're kind of, "Okay, we got some demo projects here and there, but we're going to kick off some major projects here in the near term as well"?
I couldn't agree more with that comment, James. And I equate it to what we saw happen in April, May of 2020 for hydrogen. It was here and there, and you had to be a hydrogen kind of company or in the industry to have seen it happening a little bit ahead of time. But boom, it started happening, and it happened fast.
And it went from these theoretical concepts and demonstration projects, which there's still some of that happening, right? So there's still that optimization for demonstration. But actually, people buying stuff, right? I mean, we saw a ton of equipment being sold for hydrogen more than we ever had before in the second half. So I think carbon capture is kind of where it sits right now to exactly that. So it's going to accelerate. It's going to happen quickly. Probably the best example I can give is while there's demonstration projects on the horizon and some of these commercial opportunities are exactly that in our pipeline, there's also dozens that are large scale. And they already have sites picked, right? And they already have. Take a cement customer who has 100 sites in the U.S. and 1,000 sites in China and 250 in Europe, right?
That's a real customer, and they've got all these sites, and they need to start addressing this particular issue. So I think that just the sheer fact of that we're looking at scoping on that size on literal locations gives you a sense that it's almost bursting through.
Right. Okay. That's what I thought. And so maybe a follow-up here. As the mix of the carbon capture things that you're looking at, how much is related to hydrogen and blue hydrogen? How much is just pure industrial? We got to do something with this carbon and sequester it and put it into storage?
I'd say it's probably-ish. This is my 60/40 again. 60 around industrial and the rest around kind of blue hydrogen. And I do think that while there's a lot of work happening on green hydrogen, there is a pragmatism that's starting to happen in the market that blue hydrogen is better than some traditional fossil fuels. And so let's start working with that.
Right. Okay. Great. Thanks, Joe. Congrats.
Thanks, James. Thank you.
Thank you. Our next question comes from Martin Malloy with Johnson Rice. He may proceed with your question.
Good morning, Joe.
Hey, Marty.
On slide 11, where it talks about the 13 projects with startups by 2025 on the natural gas side, can you maybe talk a little bit more about the type of projects there? Is this gas processing? Can this be applied to LNG power?
Yes and yes to that on the natural gas side. And these projects would be ranging from EOR and sequestration to vented. So you're talking about that closed loop versus releasing into the atmosphere and what you do with it at that point. Most of the customers on the natural gas side, potential customers on the natural gas side, I should say, are in traditional kind of oil field service. And so they're looking at the utilization of carbon capture to address emissions with existing assets.
So like on a gas processing type plant?
Correct. That's one example of a couple of them.
Okay. Okay. Great. And then maybe just from your relationships with the industrial gas customers, can you maybe give some anecdotes about their interest in this type of application on their facilities?
Yes. There's a growing interest in this application, some of which is the result of localized rules.
So in the case of, take New York City, where there's commercial building requirements of what you can release into the atmosphere. And I think that's going to become more and more prominent around cities across the globe. So you're starting to see more interest from industrials. And I wouldn't just narrow it to the industrial gas guys. I think the industrial gas customers are very, very well in tune with the options out there, and they're moving around cleaner answers. So they're certainly also at the forefront of this type of transition. But even industrial customers, even six months ago, you wouldn't have had a situation where a water treatment facility was looking at contemplating doing carbon capture adjacent to it. We constantly are talking with our customers that do concrete curing around CO2. And so this is becoming a much broader talked about.
I still think there's that tipping point to get to action from some of them, and that's also the CO2 marketplace concept that Svante has of, "Hey, industrial guy A isn't really going to do this on his own. So how do we bring the parties together and have this be a full operating, efficient, and ultimately economical solution for you to address this carbon emission reduction target that you have?" So bringing the right parties to the table and demonstrating the economics is going to be a key part of having the pull versus the push.
Great. Thank you. Congratulations on the announcement.
Thanks, Marty.
Thank you. Our next question comes from Pavel Molchanov with Raymond James. You may proceed with your question.
Thanks for taking the question. Since the last carbon capture call you guys hosted last fall, we had the 45Q tax credit extended in this country. But I have heard the criticism that $50 a ton is still on the low side as kind of necessary incentives go. I'm curious if you think 45Q is adequate, suited for purpose, or if it still needs improvement.
I think that overall, the credit system could stand to have further improvements done. And that's not necessarily specific to the 45Q, but how the credit system works, making sure that the parties involved understand kind of the parameters of the scope and the value chain of the credits and how they're applied. But certainly, we're seeing a lot of activity in states within the U.S. and also in Canada, although I think the provinces are looking at this more as a total country. In the states that have the credit systems and have had them in place, there's definitely commercial activity happening. I can't say that it's not working, but an overall kind of optimization of the credit program for carbon reduction would further accelerate this, in my opinion.
Same question in relation to Europe. With the European Climate Law getting approved about six weeks ago, and a number of the EU members like Sweden and Ireland have $100 a ton or EUR 100 a ton carbon taxes, is it fair to say that the economics on the other side of the Atlantic are even better than what they would be in North America?
I think that's very fair to say, Pavel. I think you're spot on that comment. And I think if you couple that with the social element, meaning the population's mindset toward carbon reduction, the other side of the pond is a little bit further ahead, in my opinion.
Okay. Any other geographies beyond kind of those obvious ones that give you a sense of excitement right now as addressable markets?
I lump the Middle East into EMEA as a whole, but I probably shouldn't in this particular scenario where the EU, as you've described, has certain parameters. But the Middle East, in particular, industrial customers in the Saudi area, are very much moving ahead with carbon capture facilities beyond demonstration. So I think that's a region you're going to see some breakthrough happening. I also do think that in China, there's going to be some use in applications, especially as you start to see Blue Hydrogen being utilized in more remote regions of China.
Very interesting. Appreciate it. Thank you.
Thanks, Pavel. Appreciate you.
Thank you. Our next question comes from J.B. Lowe with Citi. You may proceed with your question.
Hey. Morning, Joe.
Hey, J.B.
I have a few, so just cut me off whenever you want. But just to clarify, the $600 million target market opportunity, it doesn't look like it changed between the last time we spoke and today. Is that right?
That is correct. Yeah. So we are thinking of it as this is another step toward us being confident in being able to achieve a significant portion of that addressable market in the near term.
Okay. And then just looking at some of my previous notes, in terms of the project sizes, you're talking about in the current kind of pilot stages, you could get $5-$7 million per project, and then a certain percentage of a project's cost is your equipment. Does that change? Is that going to change significantly in terms of on a percentage basis as the projects get a lot bigger?
It does. Yes. So certainly, increasingly from an equipment and a process combination side, we would have more content as they get bigger. If you also look at five to seven, it's on a small scale or a demo project for us; it's just equipment. If it would be the combination of SES and our equipment, you're looking more at $15-20$ million per project. If it's Svante utilizing our equipment, we'd have that five to seven, and they would get the remainder of the plant dollars onto their financials.
Okay. And then lastly, is there any significant aftermarket opportunity with the carbon capture equipment that you're going to be putting into some of these things? How does that affect the repair and leasing side of your business?
It does. So we actually have expanded our repair and leasing business for air-cooled heat exchangers in anticipation of this market growing exponentially here.
An air-cooled heat exchanger is going to run fine in the field, but if it has a challenge, you either have to replace the core of it or replace it in its entirety. And so we've come up with some ways that we can retrofit, bring back existing heat exchangers. We've also offered in specific instances on some of these larger scale carbon capture or direct air capture quoting that we would have a leasing option for the air coolers. And that also makes the economics more viable for someone who's contemplating when to get started. So there's definitely a nice aftermarket to this. And Svante will also have a nice aftermarket for the solid sorbent beds. But again, that would benefit their financials, but it's a nice feature to kind of the ongoing recurring revenue stream.
Perfect. Thank you.
Thank you.
Thank you. Our next question comes from Marc Bianchi with Cowen. You may proceed with your question.
Hey, thank you. I guess first off, so this deal today is the third in the last six months where you've made an investment. And if I have my notes right, we're probably $65 million or so of investments like this in that six months. What's the appetite to have investments like this? Is there a threshold where you don't want to go beyond in terms of total investment dollars, or how are you thinking about that as a part of the strategy going forward?
The way we think about it is around our net leverage ratio and ensuring that we have enough cash on hand and we're not over-levered. So considering that we're throwing off a lot of cash flow from an organic perspective, we haven't set a specific number around the inorganic side.
Obviously, these have to meet the foundational tenets that we've talked about around the commercial penetration side and the access to geographies, as well as certain levels of financials in a certain period of time. But our pipeline is still pretty active, and it's varied between acquisitions or investments. They're all in the similar range in terms of dollars and cents. And part of that as well is there's not any one particular company that we feel we strategically need to own at this point that's a really big player. The ones that are very complementary in nature that we would like to own are more bolt-ons and just build out these product offerings that we've indicated are strategically important to our growth profile.
Okay. Great. And then the other one I had is kind of on the technology or the addressable market for the solid sorbent. You mentioned earlier in the prepared remarks about kind of a more North America focus or just more applicability to North America. But I was hoping you could just dig into that a little bit more, explain kind of what the scope for solid sorbents could be globally and what some of the limitations might be. I guess where this is coming from for me is I look at a kind of implied valuation of $150 million for something that's got a 50% lower cost versus the incumbent technology. I would think that it would perhaps garner a much higher valuation in this marketplace. So I'm wondering if there's some limitations that we should be aware of?
I think what you're just seeing in general is because these are still in embryonic days and not yet fully commercialized, this is kind of the time to do an investment and help get these companies to the commercial point. So I think there's, I definitely think this company is going to be worth a heck of a lot more. And that's the result of the serviceable market becoming significantly larger as we go from demonstration or industrialization to kind of full deployment in the second half of this decade. So the opportunity and the target scale for Svante can be upward of $6 billion in the second half of this decade. We've kind of provided a tempered view in the next few years because there is this period of time that it takes to get from demonstration or first site to multiples.
At that economic point of the 2,000-3,000 ton per day size, where you start to really reduce the cost and the scale impact comes into play. So I think that this business is going to be worth a heck of a lot more in five years. You just have to help get over that first couple of years to kind of full production.
Got it. I think you just said $6 billion in the sort of second half of the decade would be the addressable market for Svante. What would be the total market just to give us a sense of what they're sort of applicable to?
Oh, gosh. You're talking in the dozens, call it $20 billion, $20-$30 billion at that point in time. Over the course of time, as this becomes commoditized, it starts to look like hydrogen and it gets into the trillions. But I'm trying to give you kind of a realistic sense of what we think is 10 years, in the next 10 years type of time.
Yep. Great. Thanks so much, Joe.
Thank you.
Thank you. And as a reminder, to ask a question, you'll need to press star one on your telephone. Our next question comes from Greg Lewis with BTIG. You may proceed with your question.
Yes, hey. Thank you and good morning. And thanks for fitting me in here. Joe, I kind of had a big picture question. Clearly, carbon capture is gaining momentum, yet it's been around for a very long time, still a nascent industry. I mean, what, last week Elon Musk talked about a $100 million prize for the best carbon capture technology. So clearly, things still need to get done to really make this economically viable. As you look around the carbon capture landscape market, is it more just a question of turning these pilot projects into large scale projects to make them more economically viable, or is there a kind of a step change that really needs to happen to really accelerate the pace at which we see CCS grow?
I think scale is the number one thing. So yes, as you commented, Greg, moving from the 20-30 ton per day into these thousands, at least into the hundreds, helps that total cost become much more economical for an end user.
I also think that there's an element of, it's similar to my answer around what we saw with hydrogen eight or so months ago, where there was an element of trying to solve for the most perfect solution, the greenest answer in its entirety, and now we're talking about, okay, let's take steps to get to the greenest answer, but you're never going to blow out all the existing assets and start from scratch, which is really the only way you can solve for that greenest, greenest, greenest answer.
and I think that you're starting to see that turn on the carbon capture side too, where instead of saying, "I'm going to do this extremely intricate and linked up to the greenest possible molecule, and what do I do with the CO2?" Now you're saying, "All right, I'm going to solve problem A, and then let's figure out how we can optimize it to become even greener." So scale number one and number two, just an element of reality kind of setting in to those who have these targets, and I got to get started and start doing something.
Okay. Great. Thank you very much.
Thanks, Greg.
Thank you. Our next question comes from Chase Mulvehill with Bank of America. You may proceed with your question.
Hey, good morning, Joe. Thanks for squeezing me in. So I got on a little late, so apologies if this was discussed earlier. But carbon capture seems like it's going to be a big component of kind of LNG projects as we kind of go forward. So I don't know if maybe you can kind of take a minute and kind of discuss what kind of carbon capture solutions you think are more applicable for LNG. And then of the $600 million kind of addressable market, how much of that is really kind of allocated towards the LNG market?
Sure. So definitely the utilization of the post-combustion carbon capture is most applicable to NGL and LNG facilities and also coal and gas fired power plants. So overall, the post-combustion carbon capture being for anything that's an existing asset, whereas the direct air capture taking CO2 directly from the atmosphere.
So really talking about either a cryogenic process or an amine process, our view on this is on the cryogenic process side for LNG facilities, and whether that's SES or Svante or someone else, that's probably more applicable to an LNG facility. And that's around delivering liquid CO2 where you can actually utilize it as well. And again, it depends on the structure. It depends on if it's a closed loop system. So there's a lot of things that go into that. If you looked at, like you said, the $600 million, we have it lumped kind of between industrial and hydrogen and then direct air capture. So LNG would be in that industrial bucket. And that industrial bucket is about 30% of that $600 million. Okay.
And then when people are thinking about sanctioning LNG projects going forward, do you have a sense of kind of what a cost they're including in kind of the project economics for carbon?
Oh, it's extremely widespread. So there's not a we've seen, yes, we have a sense, but it hasn't been consistent where I could say it's even in this range. It's anywhere from zero to a reasonable cost to 20% of the total cost of the project.
Okay. Last one, kind of quick follow-up here on one of Marc's questions. So I guess if we think about some investments you made in particular, kind of Svante here, can you talk us through kind of your decision process of minority ownerships versus a bigger kind of maybe majority ownership in some of these companies?
So it really goes to whether we already have something that we own from a process perspective and also how the target would view our involvement on joint development. So in the case of Svante, their leadership team's very amenable to continuing to develop and do so together for an even optimized solution. So in my prepared remarks, I talked around the low CapEx options that Svante has and kind of the need for high purity when you're looking at commercial use for CO2. And that was really important to us. So A, Svante wasn't ready to sell. And B, it worked really well for us to have an investment and have other shareholders and other partners that also have other activities happening in the clean world.
So between the joint development element and then the other partners that were involved, this made a lot of sense to have an investment position, even if they had looked at a full sale. And that's how we think about various different investments that we make versus full purchases. We also think about it from a competitive dynamic, meaning if it's a real natural fit to us from equipment or process, and we don't want others involved because we absolutely have that lock on the customer set already, and this just brings us completely more content, we would really target that as a 100% acquisition versus an investment. So that's some of our thought process. Obviously, I'm not going to give much more beyond that because then I start giving away the secret sauce. But those are some of the things that go into the whys behind minority versus full.
Awesome. All righty. Appreciate the call. I'll turn it back over.
Thanks, Chase.
Thank you, and I'm not showing any further questions at this time. I would now like to turn the call back over to Jillian Evanko for any further remarks,
so before I conclude, I'd like to point you to another release that came out earlier today regarding our involvement in developing the hydrogen economy in the United States. We, along with 10 other companies, launched Hydrogen Forward. As you know, Chart and our Hydrogen Forward partner companies, including Air Liquide, Anglo American, Bloom Energy, CF Industries, Cummins, Hyundai, Linde, McDermott, Shell, and Toyota, are united under a shared belief in the environmental and economic benefits of hydrogen technologies. All 11 of our companies believe that accelerating investment in hydrogen in the US delivers on its climate goals while creating a stronger economy with new good-paying jobs.
Through Hydrogen Forward, myself and my fellow CEOs of these other 10 founding companies that represent all links of the hydrogen value chain from source to service will showcase hydrogen's unique value proposition to Washington, DC policymakers and other stakeholders to decisively accelerate adoption of hydrogen solutions and related infrastructure build-out. And like everything we do, this is a direct link to our current and potential new hydrogen customers. So I'm looking forward to sharing more about our fourth quarter of 2020 on our earnings call on February 18th. Until then, for Joe Belling and Curtis Stubbings, we're going to go chase $100 million with our customers versus with Elon's company. So thank you all for your time, and we'll talk to you very soon. Thanks, Josh.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.