Good morning and welcome to Chart Industries, Inc.'s Strategic Hydrogen Expansion Conference Call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, there will be a question-and-answer session. The company's supplemental presentation was issued earlier this morning. If you have not received the release, you may access it by visiting Chart's website at www.chartindustries.com. A telephone replay of today's broadcast will be available following the conclusion of the call. It's October 20, 2020. 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 earnings release and latest filings with the SEC. The company undertakes no obligation to update publicly or revise any forward-looking statement.
I would now like to turn the conference over to Jill Evanko, Chart Industries CEO.
Thanks, Sonia, and thank you, everyone, for joining us on this exciting call to discuss today's announcements on our strategic hydrogen expansion. Early this morning, we signed and closed on the acquisition of Worthington Industries' cryogenic trailer and hydrogen trailer business for a purchase price of $10 million. Later this morning, we announced our EUR 30 million investment and strategic commercial MOU with McPhy, a hydrogen pure-play company that specializes in zero-carbon hydrogen production and distribution equipment. We'll walk through our supplemental presentation that was issued with the second press release today, starting on slide three to discuss the strategic and commercial nature of these transactions and how they will expand our addressable near-term market for hydrogen. You're all getting familiar with, or sick of, slide three, our strategy and how we play in the clean energy mission.
Our strategy focuses on leveraging our extensive cryogenic product offering across the high-growth and high-margin applications in clean energy, specialty products, and repair service and leasing. We are often referred to as the arms dealer of equipment for these applications, and we believe a hybrid of power generation sources will result as the clean energy transition continues. Our products are agnostic to whether it's LNG, biogas, CNG, carbon capture, or hydrogen, but we do see a significant acceleration in government, public, and private sector interest and spend in the hydrogen space. It's hard to go an hour, let alone a day, without seeing news on hydrogen. As government's interest rises in this molecule, we stand to benefit from it.
For example, just this past week, the Spanish government approved the country's hydrogen roadmap, a commitment to renewable hydrogen, which includes that by 2030, 25% of industrial hydrogen consumption will be of renewable origin, and also by 2030, they will have a fleet of at least 150 hydrogen buses, 5,000 light and heavy-duty hydrogen vehicles, and two lines of hydrogen-powered trains. Very applicable to today's announcement are the recent French government announcement of the formation of a national hydrogen council, as well as the speech given just a few days ago by the EU Commissioner of Energy. Commissioner Simson stated that the EU's targets for 2020 include a commitment to a reduction of at least 55% of greenhouse gas emissions, and as she stated, this means that we must accelerate the pace of the transition and explore new solutions.
She continued, "Hydrogen has the potential to be a game changer in this context and in Europe." The EU has mapped out three steps in this hydrogen strategy. First, to scale up supply and demand in parallel. To kickstart this process, they have launched first calls to fund such projects from the EU budget. Also, they will work on common standards, certifications, and terminology, which will further advantage Chart as we are a leader in regional certifications for our type of equipment. The second step will be creating competitive markets and infrastructure for cross-border trade of hydrogen, and the third step is their ongoing work to keep industry in Europe, where Chart has 10 manufacturing locations ranging from France to Germany to Italy to the Czech Republic.
These steps link directly to our investment and even more so our commercial strategic agreement to expand both McPhy's and our equipment offerings to geographies that either one of us or both of us has a strong presence in. So moving to slide four, you see our recent announcements of penetrating the hydrogen market, a market that we have provided equipment into for over 50 years. At the end of September, we announced the joint development agreement with FirstElement Fuel and supply agreement with Plug Power. Today, we completed the acquisition of Worthington's trailer business, and this acquisition includes ownership of the Theodore, Alabama manufacturing site, all trailer-related intellectual property, manufacturing capabilities, equipment, and repair backlog.
The facility has approximately 300,000 sq ft under roof adjacent to the Port of Mobile, Alabama, another site with water access that allows us to create additional space in our Minnesota facility for expanding our hydrogen test facility. Additionally, we are excited as this brings another repair service and leasing location to our U.S. footprint. This acquisition will produce strong synergies by combining Chart's deep knowledge of cryogenics and liquid hydrogen storage with the Theodore operation's expertise and experience in the packaging and assembly of liquid hydrogen trailers. The addition of the trailer business to Chart's mobile hydrogen equipment offering increases to larger-sized transports and brings another location already certified by multiple hydrogen customers. Finally, as we have said, it's not always about hydrogen.
The Alabama site that comes with this deal gives us space to keep LNG ISO container inventory close to our North, Latin, and Central American customers, where ISO shorter lead times are a critical aspect of our customers' project schedules. Our investment in McPhy is a significant strategic move, in particular surrounding our anticipated commercial opportunities across Europe and globally. In conjunction with the investment, we have executed a commercial memorandum of understanding, which will generate a flow-through of our and McPhy's products and capabilities. Our respective teams will collaborate on a number of already identified projects, some of which I will share in a moment. Moreover, the complement of their activities with our own puts us in an optimal position to work on large projects in industry, mobility, and energy.
We also expect not only our investment to help McPhy scale up industrial capabilities, but also to leverage Chart's extensive global manufacturing footprint to continue to make hydrogen cost-competitive by manufacturing closer to the end users. We expect this partnership will result in both companies playing a leadership role in the global build-out of competitive zero-carbon hydrogen and on the decarbonization of industrial processes, energy storage, and mobility. One thing we have consistently stated is that partnerships and collaborations commercially to offer the full hydrogen value chain without having to own production or end use outright is part of our hydrogen strategy and also will help accomplish the reduction of cost, one of hydrogen's challenges in the current state. The McPhy strategic partnership not only offers much commercial pull-through directly with them, but also brings with it other partners in the value chain as shown on slide five.
These include anchor investors EDF, Ecot echnologies Fund managed by Bpifrance, and Technip Energies. EDF provides a direct link to the French public utility, while Technip will provide the elements of EPC to joint projects, a much-needed aspect of full-construction installation through to first gas or liquid. Together, along with our other partners and customers, we're excited to bring integrated production and liquefaction, liquid hydrogen backup options at on-site electrolysis locations, and mobility offerings straight through from production to trailer filling. And yes, those would be our trailers too. Slide six illustrates our approach to staying disciplined and being the arms dealer of equipment, again, similar to our LNG strategy.
I won't go through this again, as many of you are familiar with this slide by now, but I would pause here as it's important that you understand the extent of what we have provided in hydrogen over the past five decades. Said differently, we're not a new entrant to this arena. We have built over 800 hydrogen storage tanks through our history in sizes from 3,000 gallons to 170,000 gallons. We have supplied tanks into many applications, including FCEV fuel stations, fuel cell forklift fueling, liquefaction, aerospace, and industrial. We built a number of liquid hydrogen trailers starting around 25 years ago, and now we'll do even more with the addition of the trailer business from this morning's acquisition. We designed and built the largest liquid hydrogen storage tank in India, and our flow instruments, meters, and measurement devices are utilized in fueling applications globally.
But not to be left out are our brazed aluminum heat exchangers for hydrogen services. These units are custom-designed for applications around hydrogen purification, recovery, and liquefaction. And we did sell one of these into hydrogen in the third quarter, which we'll share more about next week on our earnings call. The addition of the trailer business expands our capacity, our customer base, backlog, and size options of available trailers in our offering. This is shown on slide seven, and we want to reiterate that we continue to progress on our organic product development as well and expect that within the next three to four quarters, we'll have production-ready expanded equipment for mobility, transport, and automotive applications. On the next slide, you can see our updated addressable market for our hydrogen offering across the next three years.
It is now estimated to be $1.1 billion, increased through these deals by approximately $500 million. We originally estimated that trailers and transports were approximately $20-$25 million of addressable market. The trailer acquisition tripled that opportunity. The other significantly expanded opportunity through the McPhy transaction is around storage tanks and equipment that can be used in liquefaction, regardless of what process technology is used. One aspect of the hydrogen transition is the movement from gray to blue to green, and I think to pink and purple hydrogen at this point. Our equipment can handle it all. Another aspect of the transition is also from gaseous to liquid hydrogen. The reasons for this include the fact that liquid hydrogen is more volumetrically efficient than gaseous hydrogen. Specifically, liquid is approximately three times denser than the common gaseous transports and FCEVs.
This increases payload for hydrogen and increases the range of hydrogen fuel cell vehicles. Liquid hydrogen is also much easier to transfer between containers since it is a liquid that can be pumped much more quickly in larger quantities than gaseous hydrogen, which typically requires pressure transfer or a slower, more costly compressor. And finally, liquid hydrogen storage fuel stations can store more fuel and deliver to more vehicles in a smaller footprint than the equivalent gaseous hydrogen storage stations. As this transition to liquid occurs, we expect our addressable market to further expand beyond what is shown here. Realizing that sometimes it's difficult to understand what types of commercial opportunities exist through partnerships, we included slide nine, which shows some examples of those types of opportunities. In these examples, McPhy's customer base opens up opportunities for Chart equipment.
Beyond the two shown here, our respective teams have identified 15 more opportunities in the next three years to go after together. I'll end my prepared remarks with exactly how global, and shall I even say blessed, hydrogen is right now. Even Pope Francis has a hydrogen-powered car. He received a specially made hydrogen-powered Toyota Mirai from the Catholic Bishops' Conference of Japan just this past week. All right, now with that, Sonia, we can open it up for some Q&A now.
Thank you. As a reminder to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Any additional questions, please re-enter the queue. Our first question comes from Chase Mulvehill of Bank of America.
Your line is now open.
Hey, Jill. Congratulations on the deal. Thank you. It's a nice opportunity here. I just wanted to ask before I kind of talk specifically about the deal with McPhy. I guess first, you talked about the advantages of gas versus liquid hydrogen when you think about transportation and storage. So when we look out over the next five, 10, 20 years, and we think about how much hydrogen will be consumed out there, how much do you actually think, what percentage do you think will actually be liquefied?
So it really depends on the geography that you're talking about. In the U.S., there's more liquid hydrogen than there is in some of these other geographies, but the trend is really moving that direction.
We've had some conversations with folks that are linked to the governments within the EU, and that's become one of the hottest topics of conversation in the last two to three months is how do we move to liquid hydrogen, primarily because of the long haul. It's less around storage than it is really around I can transport a heavier-duty vehicle over a longer distance and also be able to fill it in a more efficient manner, so I'm not going to go and venture a guess, but I would say that the topic is moving very quickly from gaseous to liquid hydrogen across the globe, and there's also the ability to have the combination thereof, and I think that you'll start to see some folks that previously had done gaseous hydrogen stations, as an example, move to liquid, so lots of opportunity on the horizon.
I also think that gaseous hydrogen is a key part of the here and the now. As hydrogen, again, continues to make its way up the right direction on the cost curve, gaseous hydrogen's a key part of that as well.
Yeah. If we started to massage more of kind of the liquid hydrogen opportunity into kind of your addressable market, you put a $1.1 billion number out there. How much upside? I don't know if you could frame the upside if you were to kind of start including some of the opportunities there as it relates to liquid hydrogen.
There's liquid hydrogen included in our addressable market since our equipment is utilized for that in many cases already.
I would say that the key is going to be around this addressable market, which is definitely going to grow beyond year three and beyond the $1.1 billion that we've put out there. The question is, how quickly can this become more prominent, a bigger scale, higher infrastructure across the world? That's the hesitation I have with the larger number out there: this isn't going to happen in one year. It's going to take a few years to get to that point. So I can say it's definitely going to be a lot larger than the $1.1 billion, but it's very difficult to put a size to that until we see how the commercial production unfolds from today until year three.
Okay.
And the MOU with McPhy, obviously, that expands you to the production side of the value chain, but it also probably pulls through a lot of your current offering in other geographical markets that you did not maybe have much of a presence in. So maybe if you could talk to the geographic footprint expansion that the MOU actually brings you.
Yes. And we've said, Chase, all along that we are going to stay disciplined on being the arms dealer of the equipment, and we don't want to own the electrolysis outright. But this is a great way for our equipment to pull through to some of the larger plants and these projects that are underway. So it's really a win-win, both from pulling our equipment onto applications that previously it didn't go onto, but also, as you point out, the geographic opportunities.
McPhy is very, very well positioned in Europe. We're very well positioned in Europe from a manufacturing standpoint. So the combination of the two companies pulls the cost curve down, but also opens up a lot of opportunity for them to pull our equipment through. And then, in many cases, we have customers that they didn't have access to and vice versa. So Europe is by far the biggest opportunity for us and our equipment pull-through. And I'd reiterate the point I made in my prepared remarks around the other partners that McPhy has as strategic partners, inclusive of EDF. EDF will be a really big player in France in particular as the hydrogen strategy unrolls. And then vice versa. McPhy. Chart has quite a broad customer base in hydrogen in the United States, and this is a geography that McPhy would like to get more involved in.
So it's a really nice match, both directions, and lots of complements, which is what we were looking for in the partner that would be on that side of the value chain.
Perfect. Appreciate the color. Thanks, Jill.
Thank you.
Thank you. And our next question comes from Rob Brown of Lake Street Capital Markets. Your line is now open.
Hi, Jill. Thanks for taking my call.
Hi, Rob.
Just on the project sizes you're kind of looking at with the McPhy relationship, could you give us a sense of what the project size is in terms of equipment for Chart?
Yes. One of the things that we went through in terms of the addressable market to understand how our equipment could get broader as a result of the relationship with McPhy.
We didn't provide this in our materials, a little bit of competitive data and also a competitive advantage around how we see this unfolding. But it depends on the size of the plant. So these are large megawatt-style plants. Or in the case of mobility, it would be similar to the equipment that we provide now for a fueling station, so somewhere in the $1-$2 million range per station. But the larger plants and the megawatt sites could get in the tens and tens of millions for Chart equipment where you have on-site storage, and then you also have the related transport, depending if it's off-site or on-site production. So significant increase from more one-off componentry sales that we have been having with our equipment to a larger package similar in nature to what I would characterize as a small-scale LNG terminal project. Okay. Great.
Thank you. That's a great overview. And then on the Worthington acquisition, basically, how much does that add to your current hydrogen trailer business or hydrogen business? And what sort of does that do in terms of technology that it brings you relative to what you had?
Yeah. This is just a wonderful acquisition for us. And I'll tick through three or four things because it's not easy to answer in one. Last year, their hydrogen business was just under $10 million in revenue. Now, keeping in mind they have a fiscal year end of May 31st, we sized next year's opportunity at somewhere in that kind of $15 million type range in a base case. They have a broader set of customers on the transport side than we had had.
And so it immediately opens up the book of business for us through those relationships and what's in their backlog already. We also see quite a bit of additional opportunity on facilities that they serve. They have served trailers too in the past, in the U.S. in particular, primarily in the western and southwestern United States, where there'll be opportunities somewhere between 5 and 20 trailers per site with a direct line of sight to three of those locations. And just by comparison, we might sell one or two trailers a year historically for hydrogen applications, and they're selling somewhere in the four to eight historically, and that's growing very quickly. The other element I would be remiss to not share is around the other equipment, the efficiencies that we get through putting other equipment into that Theodore site.
It gives us quite a bit of additional space for some of our larger production. Perhaps we would put some of the ISOs, as I mentioned, be looking at rail car repair, LNG tender cars, some of our larger bulk tanks. And what that would also do is allow us to create some pass-through to our customers where historically it's a big challenge to get a large bulk tank out of New Prague transported across the road. In some cases, you got to take the stoplights down in the town to get it out and then get it to water. So we have a pretty thoughtful strategic plan in terms of manufacturing changes as well that I think will increase other elements of the Chart business. Okay.
Thank you. I'll turn it over. Thank you.
Thank you. And our next question comes from Connor Lynagh of Morgan Stanley.
Your line is now open.
Yes. Thanks. Afternoon.
Hey, Connor.
I was wondering, I think you were alluding to this in one of your answers to Chase's question, but the addressable market uptick, can you discuss? We had previously been thinking of that as relatively back-end loaded as things sort of take time to ramp up and get the orders in. Would you say that that is still the right way to think about this and it's sort of everything sort of increases ratably? Do you think that your acquisitions have accelerated the timeline on any of that? How should we think about the shape of that $1.1 billion of potential revenue?
From a macro answer, it's absolutely the same as it's been. So it's toward the back end of that timeframe.
There's a couple of nearer terms that the Worthington trailer acquisition did for us, which is around the transport. So where historically we would do one or two a year, now we're really looking at kind of somewhere between five and 10 a year. And so that is the here and now. I mean, there's quoting activity happening in that business that there's multiples of that number I just described to you, and those are shorter lead time from order to delivery. So that could have a nice positive upside to 2021, but it's not in the hundreds of millions of dollars. It's in that kind of additional $20-$30 million type of range. On the strategic relationship with McPhy and other partners, these are much larger projects, and these take a little bit longer to get going to the point where it's actually revenue impact to us.
So we see that ramp accelerating quickly starting in 2022 and certainly goes from there in 2023 and beyond. And that's really just around lead time and the point in the project engineering studies that many of these are. But I think that if anything, it'll accelerate from my timeframe. I think I'm being reasonable, if not a tad bit conservative, but I don't want anybody to get out over their skis for 2021.
Yeah. Understood. And just so you can clarify, I think we've discussed this, but the addressable market, as you guys are framing it, is that a total industry addressable market? What is the market share that you think would be reasonable for us or investors to apply to that opportunity set?
So that's an industry addressable market for our types of equipment and liquefaction.
So in that are stations, trailers, tanks, which typically are storage tanks, liquefiers. There's a few $5 million bucks of marine activity in there. The majority of this is where we will win. I would guess 70% of it would be on the stations, trailers, and tanks. And that is about $700 million of that $1.1 billion. And then the rest of that's the marine and the liquefaction side. And I think we're really well positioned from a liquefaction standpoint, but we're also extremely cognizant that there are others that have liquefaction capabilities, and we get more bang for our buck on equipment than we do just directly on a liquefier. So I would say you could take 70% of $700 million and get pretty darn close.
That's probably a little bit at the high end in the short-term period, but becomes pretty viable at the end of this three years and certainly in years four through seven. If you ask my commercial team that's hydrogen specific, they would size this thing much larger than I have for you guys. I told them once they hit a certain number in terms of orders in our order book, then I'll start incrementally increasing it. So stop making theoretical numbers and go sell something. Bob, Reed, Joe, that was for you if you're listening.
All right. Sounds good. I'll turn it back. Thank you.
Okay. Thanks.
Thank you. Our next question comes from Eric Stine of Craig-Hallum Capital Group. Line is now open.
Hi, Jill.
Hey, Eric.
Hey. So I was just curious. I mean, now you've made this acquisition, you've got three partnerships in place.
I mean, is this something that we should expect you to keep doing this as part of your strategy? And then as I look at your organic development targets, I mean, is there anything there? I mean, I know you've talked about the pumps, for instance. Is there anything there that could be accelerated by some potential other partnerships out there?
So there might be one or two. More likely what you'll see us do is continue to work with the end user side and do supply agreements and broader agreements in that sense versus additional partners because you start to step on each other a little bit. But with that said, our organic development certainly is going to be accelerated with a couple of these partners that we just recently announced, primarily on the automotive side and the mobility side.
That's not just ones today, but also from the couple of ones we announced for September 30th. Pumps is extremely important to us to develop because that really starts adding a broader and more complete product offering to the applications that are the here and now on transport and fueling. On the automotive side as well, there's a heavy amount of interest from Class 8 commercial truck companies for HLH2 is what we call it, but it's the equivalent of HLNG vehicle tanks for liquid hydrogen on board. That might be, again, that might be a few years away.
I think these two things happen in parallel where vehicle tanks continue to grow exponentially over the next three years, but HLH2 development is happening in the background so that there's an offering for a hydrogen-fueled Class 8 vehicle that is in production stage in the next three years or so. Those are probably the top two organic developments. The only other comment I'd add to answer your question is around collaborations, partnerships, and acquisitions. There are some other elements of our specialty products and specialty markets that are unrelated to hydrogen where you'll see us do similar types of deals in the next six months because we do see really high growth opportunities in spaces like food and beverage, in spaces like water treatment. We've talked on the vehicle tanks and hydrogen as well.
Got it. Very helpful. Then last one for me.
I mean, I know this is more about growth than anything else, but I don't know if you can disclose whether you expect this to be accretive at the start or break even, or how do we think about it?
Well, so let me take the two by themselves. Worthington, we expect to be accretive. I should say Worthington. They'd kill me if I said that. Worthington trailer business. We expect to be accretive out of the gate for us. And that's based on backlog and the production that we have on the horizon there. The McPhy investment is handled a little bit differently. The investment itself is just marked to market on a quarterly basis. And we would expect it to commercially return to us from a revenue and earnings perspective starting really in terms of materiality in 2022.
It'll start helping the order book in 2021, but financially, 2022.
Okay. Thank you.
Thanks, Eric.
Thank you. And our next question comes from Martin Malloy of Johnson Rice. Your line is now open.
Good afternoon.
Hey, Marty.
Congratulations on the arrangements here. Thank you. First question is not related to hydrogen. Out of the Mobile, Alabama facility, could you maybe talk about this in the ISO container LNG market and New Fortress Energy? Will this help you service that type of market?
It absolutely will. Great question. And I appreciate you asking something on hydrogen. Anyway, a lot of the discussions we've had with New Fortress is a great example, but other folks in the LNG space, ISO containers are hot right now. They're in need for these. It's broadly based. So it's in the U.S., North America, and as I mentioned, Latin, Central, and South America.
But also, we're seeing it even related to our LNG virtual pipeline project with ExxonMobil LNG and IOCL where we're going to be building ISO containers in our Sri City, India facility, and the biggest challenge is that regardless of project, these are high numbers that are required to go into these applications, so in the case of we announced the New Fortress one in July where we actually gave a number and said it was 100 ISOs. That's just the tip of the iceberg for the projects that they have on the horizon.
But you can't say, "I'll give you 100, but it's going to take me three years to make them." You have to say, "I can do it in X amount of time to make it competitive, and it has to be cost competitive." So I'm happy to share this publicly because it's not a strategy that we wouldn't share, and we want our customers to hear it, that we look at making standard bottles and then customizing and deploying around it. And by being able to do standard bottles in our locations such as India or China, and then keeping that inventory on hand in places like North America or Europe, you cut down on the lead time when a customer is ready to go. I mean, you can cut down that lead time, in some cases, even to a month or two.
That could have been a year if you're looking to start the manufacturing from the point you get the order to delivery. So it's pretty meaningful in terms of the space there and what we can keep there. And then the other piece is really how we're creating more opportunity for ourselves in our Minnesota factory with the strategy of moving some of this larger type of build to Alabama and cutting down on that transport time and cost.
Okay. Great. And then just trying to learn more about the brazed aluminum heat exchangers and how they fit into the liquefaction process for hydrogen. Could you maybe talk about if there are any differences between the brazed aluminum heat exchangers used in LNG liquefaction versus hydrogen liquefaction? And I know hydrogen liquefies at a lower temperature.
Is there any major change in terms of the amount of brazed aluminum heat exchanger capacity that you need for a similar amount of energy?
So yeah, so hydrogen at negative 423 degrees Fahrenheit. These are custom-designed applications for hydrogen. So it's not a standard brazed aluminum heat exchanger, but the core capability that we have and the core IP that we have on the cores, pun intended, is definitely similar to the traditional brazed aluminum heat exchangers that we make. And this is really around the heat exchangers for hydrogen liquefaction and recovery and purification. Something we haven't talked a lot about is through our VRV acquisition, we actually got capability in Italy to do heat exchangers. In their case, it's shell and tube and brazed aluminum heat exchangers that have been used in hydrogen facilities in Southeast Asia.
And we expect that that's going to be a considerable area of growth for us as well through that. So ultimately, very similar in terms of how we build it and the IP around it with some customization, but our heat exchangers can handle that molecule with a very similar lead time and cost associated with the heat exchanger to what you would hear us sell it into an LNG or a natural ga s processing type of application.
Great. Thank you very much. I'll turn it back.
Thank you.
Thank you. And our next question comes from Ben Nolan of Stifel. Your line is now open. And again, our next question comes from Ben Nolan of Stifel. Your line is now open.
Oh, sorry. I was on mute.
So I guess my first question, Jill, is as it relates to this JV with McPhy, how does it affect or is there any impact maybe on your other commercial relationships with NEL or whoever else that might be developing hydrogen production?
So just to clarify, it's not a JV with McPhy. Right. Yeah. It's an investment in. And then a commercial MOU. And we were extremely careful and thorough in ensuring that we didn't step on other potential customers' toes. And that's part of why we don't want to own production outright. And we really thought of this as a way to have commercial pull-through and strategic partners in both McPhy as well as Technip Energies. Not to mention, again, I can't stress enough the relationship with EDF in that particular geography.
So the way the commercial MOU is structured doesn't preclude us from working with other customers that are interested in our equipment. And that's certainly something that we'll continue to do.
Okay. That's helpful. Thanks. And then I guess for my second question, and first of all, I appreciate the color that you gave in terms of breaking out how the TAM is or what you think you might be able to get out of that number. But I was hoping to maybe back up just a step and say, "Okay. Well, it's $1.1 billion in three years." What would you say is that number today? What is the actual 2020 addressable market relative to that $1.1 billion?
Oh, I would say it's probably 200-250, somewhere in there.
It may have even gotten bigger than that with the California funding of the stations in early September, but it's a third type of number. Gotcha. So effectively, you're expecting or that number anticipates the market to triple or quadruple in the next three years is sort of how you're thinking about it. Yes. Absolutely. The market needs to go the direction we believe it will to have that be real.
Okay. Perfect. No, I appreciate it. Thanks, Jill.
Absolutely. Thanks, Ben.
Our next question comes from J.B. Lowe of Citi. Your line is now open.
Hey, Jill.
Hey, J.B..
Just wanted to follow up on the liquefaction side. Can you kind of frame out your competitive positioning within hydrogen liquefaction? What's the competitive landscape like in terms of heat exchangers for that market specifically?
Yeah. So there's really two pieces of liquefaction to answer your question.
The one is the process itself or the process technology if you were equating it to IPSMR for LNG. And then the brazed aluminum heat exchangers. And really, the landscape is identical on the latter, so on the equipment itself, to what we see in all of the competitive nature for brazed aluminum heat exchangers. There are four competitors globally that can do a brazed aluminum heat exchanger. Two in Japan, one's German, and one's French. And all of their heat exchangers would have that capability to participate in hydrogen liquefaction. To be frank, I only know of two of them that have that equipment in use, but that doesn't mean that you can enter into the space rather quickly with that technology. The process technology piece is actually a little more complicated. And I stressed in my prepared remarks purposely that our equipment is agnostic to process technology.
While we have a process for liquefaction, which is very efficient, similar in nature to IPSMR, we will win more if our equipment goes on to projects versus just having liquefaction and losing equipment on other associated projects. So we're kind of opportunistic on the process side of things, whereas on the actual equipment, we're very conscious of how we differentiate ourselves. And then the third point I'd just throw in that mix is similar to what we talked about over the last couple of years with our investment in the world's largest brazing furnace in La Crosse, Wisconsin, that gives us multiple size cores larger, is going to be a critical differentiator for us in the hydrogen space as well, especially as you start to see large projects unfold that are in the now you're talking 10 or 20 megawatt type of production facilities.
But there's end users, industrial ones in particular, around steel production that are talking about 100-plus megawatt facilities. And as those facilities get more into production, you're going to need a certain size core that will be the only company in the current state to be able to do that.
Okay. That's great. My other question was on how you kind of lay out the value chain as you guys are looking to attack it in terms of the liquefaction to distribution to storage. I guess which pieces of that value chain do you think you have the greatest opportunity? Where is your competitive advantage the highest? And is there any bit of that value chain that you still need to address, be it whether you come up with your own piece of equipment to kind of plug the gap or to go out and look to add to your portfolio?
Yes. I'm going to answer it directly on the equipment side. And then I'm going to answer it kind of from a backdoor perspective on the use side of things because I think they're both. It's kind of in my mind, there's two axes that you have to think through in order to really identify where those gaps might be. In terms of our strength, we are certainly very well positioned at this point on storage as well as on distribution. Today's acquisition on the trailer and transport side really shored that up for us in addition to taking out what I would deem to be one of our best, if not best, competitors in this particular product offering. So those would be the top two that we have a really big gap between us and the next guys in terms of the total offering and where we sit.
The liquefaction side is still fairly new in industry around how frequently it's being used, so a little more to be determined on how often we get called upon and pulled upon for brazed, but even, for example, take Plug Power's acquisition of United Hydrogen. As they start to build their network out and have a more frequency around larger scale and refurbishment and repair, that's where you start to see the Chart equipment get pulled through quicker and more frequently, so it's really the liquefaction and the brazed will be tied more and more to the size and scale of the infrastructure itself. The other one I would point out on our equipment is very much underappreciated, is our hydrogen flow, and that's manufactured out of our Monheim, Germany facility, where the flow meter and measurement devices are extremely difficult to make.
And there's a lot of engineering that goes into them. And lots of times, we get our first commercial touchpoint simply because of a need for a flow meter at a station. And that's a great way for us to expand our other equipment to these types of applications. So then the other piece that was really yeah. Sorry. This is a long answer, but kind of important in terms of understanding where we're directionally going to go is around the marine, the transport, the refining, the industrial, the power generation, the storage, all of the end uses that the list is just huge that are going to be using this. And so when we think through what else might we want, the two that we've commented on that we're developing organically are important to us already. And we'll start to fill in some of those gaps.
But the other thing that we're going to think very carefully through is around some additional marine capabilities, in particular, because marine is one that I think possibly looks to leapfrog LNG, whereas everything else was in there. LNG is happening. It's growing. It's really important to Chart. In the background, hydrogen is growing also. And the two of them are going to play the next couple of decades. But marine, this is about picking a fuel and sticking with it. And I think there's some areas of our equipment that we need to expand to have a full offering for ship propulsion systems to be a real player in that. So very long answer, but it's a great question.
No, I mean, listen, we could talk about this all day, but I'll leave it there. And I have several follow-ups. I'll just catch up with you guys offline. Thanks.
Sounds great. Thank you.
Thank you. Our next question comes from Marc Bianchi of Cowen. Your line is now open.
Hey, thank you. I wanted to go back to the $1.1 billion addressable market just to make sure everybody's clear on this because I got a couple of questions from people during the call. We're talking about $1.1 billion of total hydrogen market over three years. So it's a cumulative figure for 2021, 2022, and 2023. Is that correct?
That's correct. We see it moving toward an annual figure as it expands. But as I answered somebody else's question earlier, that's hard for me to really size and put a timeframe to. So your understanding is correct in that the addressable market for the equipment that we have in our portfolio as of this moment in time.
Yep. Great. Thanks for clarifying that.
And then just thinking about you've got this opportunity for hydrogen. You've previously talked about over $2 billion of opportunity for LNG. As you kind of progress towards those types of numbers in your business, what should we see in terms of overhead increase? I mean, is there a significant G&A component that goes along with this? How does this affect your business on a gross margin basis? Should we think about it being kind of consistent with what your current gross margin is? Or is there some kind of premium gross margin we should be thinking about? Just curious if you can talk through that.
So on the first part of the question related to adding additional resourcing, we don't see any incremental additions outside of what we've laid out in the current state around the engineering side of things, which we're currently hiring for.
I think we've already hired five of the eight, and there is also the possibility of some additional engineering support to ensure that we take care of our base business, industrial gas, and ensure that quotes are getting back and forth on that, so if anything, it adds that would be part of our normal business as we grow. The direct labor side is where we would need to scale up and down. I would go so far as to say that I think we're pretty decent at kind of having a good line of sight to when we need to increase headcount and when we need to make sure that we take headcount out as demand is softening. Sadly, that's the result of having historically been a cyclical business, but that's something that would be direct to volume and so wouldn't have a negative impact on your gross margin.
We view the additional volume as well as the types of areas that are growing at the rates that they are as margin accretive. So the combination of good absorption, so technical accounting type of thing, with these are higher margin markets in general that are going to be growing at higher than GDP type rates.
Makes sense.
Thanks very much. Turn it back.
Thank you.
Thank you and our next question comes from Greg Lewis of BTIG. Your line is now open.
Yeah. Thank you and good afternoon. Realizing it's getting a little bit late here. Really just quick for me. Jill, you mentioned about the potential to kind of build out the facility outside of Mobile and kind of move stuff there.
Is there any? I mean, realizing this happened or was announced a couple of hours ago, is there any thoughts about investment in the facility to kind of get it where you need to be?
Yeah. We've done a lot of homework over our diligence period. So thankfully, we've had the opportunity to have Worthington just been fantastic through this and given us great access to the resources and understanding the equipment that's needed there. So I would estimate that in year one, we probably spend about $1.5 million in CapEx in that facility to get some of the lines set up the way that we want them to. There's a couple of other moving pieces that could equate to maybe $500,000 more that we have a line of sight to. But that's going to result in considerable additional revenue coming out of that facility.
So hopefully, that answers your question directly.
Yeah. And then just the other one for me was this acquisition, was this something that you guys were kind of targeting kind of to build out your portfolio, or was this something that kind of just fell in your lap?
No, this was a target of ours. We have wanted this particular piece of their business. It really became a go-after when we were able to execute on the CryBio piece sale of our business because typically, we would go head-to-head with them on the CryBio side. So they have a nice CryBio offering as well. Once we said, "All right, we're done with that. We've announced the divestiture. Let's have a real adult conversation about this product line in your business," we were able to move that forward.
Okay. Perfect. Hey, great. Thank you very much.
Thank you.
Thank you.
And ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to Jill Evanko for any closing remarks.
Thanks, everybody, for your time today. And just as a reminder, next Thursday, October 22nd at 9:30 A.M. Eastern Time is our third quarter earnings call. So we'll talk to you then. Yeah. Goodbye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.