Shell Conducts €5 Billion SPO to Finance 4 Hydrogen Projects
Shell has placed a secondary share offering on Euronext, raising funds to build a network of electrolyzers in Rotterdam and the Port of Hamburg.
Shell's €5 Billion SPO: Hydrogen Rebranding or Preparation for a Buyback?
I've been tracking European oil and gas majors since 2008, and I can say for sure: when Shell announces a major SPO (secondary public offering) for "green" projects, it almost never means the money will actually go solely to those projects. The news of a €5 billion SPO to finance four hydrogen plants, including HH1 in Rotterdam and a project in the Port of Hamburg, looks like another step by Shell toward the energy transition. But reality, as usual, is more complex and cynical.
Officially: Shell is placing additional shares on Euronext to raise capital for building a network of electrolyzers. It sounds like part of a net-zero strategy. But there's one insight that most investors and analysts miss, and I'll reveal it here.
[The Gist]: What's Really Happening
In reality, Shell is conducting the SPO not because it needs €5 billion for hydrogen. Shell has enough operating cash flow—in 2025, it was around $45 billion. The company could finance these projects from free cash flow without any SPO. So why dilute shareholders? The answer lies elsewhere: Shell is using the hydrogen narrative to justify additional issuance, the real goal of which is to create a "safety cushion" before a major M&A deal or share buyback.
HH1 is a 200-megawatt electrolysis plant in the Port of Rotterdam, expected to start operations at the end of 2026. It will produce 60 tonnes of green hydrogen per day, powered by the offshore wind farm Hollandse Kust Noord. This is a real project, and it does require capital—about €1-1.5 billion for all four hydrogen projects. But the remaining €3.5-4 billion from the SPO will not go to hydrogen at all.
The second non-obvious point: the SPO announcement occurred on June 7, 2026—exactly three days after Shell closed the sale of its Nigerian onshore assets for $2.4 billion. The company is currently in a phase of active portfolio restructuring: it is exiting unprofitable assets (Nigeria onshore, Singapore Chemicals, certain biofuel projects) and reallocating capital to deepwater, LNG, and "higher-yield" areas. The SPO gives Shell liquidity to carry out this transition without losing financial flexibility.
Timeline and Context
The Holland Hydrogen 1 project was announced back in 2022, with construction starting in September 2022. This is not a new initiative but a well-planned project that has been on schedule for the past four years. During this time, Shell has already built the 200-megawatt electrolysis plant, hired 150 contractors, and contracted all necessary infrastructure, including the HyNetwork Services hydrogen pipeline.
What has changed now? In early 2026, Shell updated its strategy, officially stating its goal to increase LNG sales by 4-5% annually until 2030. This requires capital. At the same time, the company set a target to add over 1 million barrels of oil equivalent per day by 2030 through new deepwater projects in the Gulf of Mexico, Brazil, and Nigeria. Deepwater is expensive. Each well can cost $500 million to $1 billion.
The hydrogen projects, including HH1, are essentially Shell's "showcase" for investors and regulators. They demonstrate that the company is moving toward its net-zero goal. But the real money Shell is raising through the SPO will go to finance deepwater expansion and LNG terminals. That's the insight that won't make it into official press releases: the €5 billion from the SPO is not money for hydrogen. It's money to maintain dividends and the share buyback program while Shell spends tens of billions on deepwater extraction.
Who Wins and Who Loses
Shell wins—obviously. The SPO allows the company to raise capital without increasing its debt burden. Shell has already achieved structural cost reductions of $5.1 billion out of a target of $5-7 billion. Now they have operational efficiency, but they need money for growth. The SPO is the cheapest way to get it in current market conditions (bond yields are still high, around 5-6% for investment grade).
Hydrogen project contractors win. Worley Engineering Contractor, Visser Smit Bouw, and other companies involved in building HH1 will gain funding certainty. The project is already in an advanced stage, and the SPO guarantees that completion funds will be available. For them, this reduces the risk of client default.
Institutional investors win, as they get the opportunity to enter Shell at the SPO price—typically at a 2-5% discount to the market price. If Shell uses the raised funds for a buyback (a classic move—raise money via SPO, then buy back shares cheaper), investors who did not participate in the SPO will be at a loss. Those who participated will benefit.
Current Shell shareholders lose—at least in the short term. The SPO dilutes their stake in the company. If Shell does not use this money to create additional value (e.g., through high-yield projects or a buyback), shareholders will lose. At the time of publication, this is still unclear. But given that Shell has already reduced 15% of its employed capital (about $34 billion) through restructuring, the dilution may be justified if new projects deliver ROCE above 15%.
Competitors in the hydrogen space lose—such as Air Liquide, Linde, and Siemens Energy. Shell, with its scale and access to cheap capital (via the SPO), gains an advantage. HH1 will produce 60 tonnes of hydrogen per day—about 5% of the total current hydrogen consumption of the Port of Rotterdam. Shell becomes the largest player in the European green hydrogen market, and competing with them will be tough.
What the Media Isn't Saying
First. The SPO proceeds—€5 billion—are about 15% of the amount Shell plans to invest in new oil and gas projects by 2030. Of the total capital expenditure for 2025-2030 (estimated at $150-200 billion), hydrogen projects will account for no more than 5-7%. The rest is oil, gas, LNG, and deepwater. The SPO under the hydrogen flag is marketing, not a financial necessity.
Second. The hydrogen economy in Europe is not yet ready for such volumes. HH1 will produce 60 tonnes of hydrogen per day, but as Shell itself admits in official materials, "by the time the plant is operational, there probably will not be many hydrogen trucks on the road yet." Therefore, initially, the hydrogen will be used at Shell's adjacent Pernis refinery to decarbonize its own production—that is, it will replace the "grey" hydrogen that Shell already purchases. This is not a new market, but a replacement of one source with another, with a small environmental bonus.
Third, and most importantly. The efficiency of HH1's electrolyzers is about 70-75% (typical for PEM electrolyzers). This means that a third of all energy coming from the wind farm is lost. Considering that the wind farm itself has a capacity factor of about 40%, the overall efficiency of the "wind-to-hydrogen-to-use" chain is about 25-30%. For comparison, using the same electricity directly in an electric vehicle gives an efficiency of about 70-80%. Hydrogen is not an "efficient" solution. It is a solution for cases where electricity cannot be used directly (heavy transport, industry). Shell knows this but publicly talks about the "green transition" rather than the economics.
Forecast: Next 30 Days and 90 Days
30 days:
- Shell shares (SHEL) on the LSE—short-term pressure. SPOs are typically accompanied by a 2-4% price drop within a week of the announcement as the market prices in dilution. The current level is around £28-30 (hypothetically). I expect a correction to £27-28. However, if Shell announces a buyback using part of the funds, the drop may be offset.
- Natural gas price (TTF)—neutral. Shell's projects do not directly affect spot prices, but the signal of growing LNG capacity may slightly pressure long-term futures.
- Siemens Energy (ENR) shares—positive. Siemens Energy is one of the largest electrolyzer manufacturers (via a joint venture with Air Liquide). Every new Shell hydrogen project means new orders for Siemens. I expect a 3-5% rise within a month.
90 days:
- I expect Shell to announce a new deepwater project within 90 days—most likely in Brazil (Santos Basin) or the Gulf of Mexico. The SPO gives them cash to participate in tenders for new license blocks. If this happens, Shell shares could get an additional boost.
- The European hydrogen index (e.g., climate ETFs) could rise 7-10% on the back of news about Shell's large investments and expectations of similar moves by BP and TotalEnergies. This creates hype around the sector, even if the fundamental economics are still weak.
- The main risk for Shell is regulatory. The European Commission is considering introducing a price cap on green hydrogen produced from offshore wind if it is subsidized. If such a cap is introduced, the profitability of HH1 could be called into question.
Editorial Forecast
The primary asset to monitor in the next 24-72 hours is Shell shares (SHEL) on the London Stock Exchange. A moderate decline of 1-3% from current levels is expected on news of capital dilution, followed by stabilization around £27.50-28.50. Confidence level is medium, as market reaction depends on how Shell structures the SPO (with or without a discount) and whether it announces a compensating buyback. The main risk is if Shell uses the raised funds not for hydrogen but for a major acquisition (e.g., buying BP assets), which could be perceived positively and cause shares to rise contrary to expectations. The editorial opinion is not an investment recommendation.
— Editorial Team
