Innovation, Raising capital

Exclusive: CO2-to-SAF tech firm in new capital raise

A technology company with a novel process to convert CO2 into fuels and chemicals is extending a capital raise that previously closed with inputs from several oil and airline majors.

April 16, 2024

OXCCU, the UK-based clean fuels production company, is extending a Series A raise it closed last year with an eye on growth in the US, CEO Andrew Symes told ReSource.

The raise, characterized as a Series A2 by Symes, is being conducted in-house, he said. It builds on the GBP 18m (USD 22.7m) Series A it finished last year, led by Clean Energy Ventures.

Aramco, ENI and United Airlines are also among the company’s backers.

OXCCU, a spin out of Oxford University, plans to raise additional money to scale its catalytic process converting hydrogen and carbon dioxide into sustainable aviation fuel (SAF) and other products. A patent grant, filed in 2020, is anticipated this year.

“We don’t want to be the project developer, we want to license to the project developer,” Symes said of the company’s business model.

Fuel made combining carbon dioxide (captured from industry or power plants) with green or clean hydrogen will be cheaper based on OXCCU’s iron-catalyst process, Symes said, which requires one step instead of the traditional two-step process.

OXCCU is looking for partners to engage with on sustainable aviation fuel (SAF) projects in the US, Symes said. This year the company will deliver a pilot plant in the US and plans to complete a 160 kilogram-per-day plant in Sheffield, UK in 2026.

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Project finance, Project news, Regulatory

Par Pacific to invest $90m in Hawaii renewable fuels facility

The renewable fuel facility is expected to produce approximately 61 million gallons per year of renewable diesel, sustainable aviation fuel, renewable naphtha and liquified petroleum gases.

Par Pacific Holdings, Inc. plans to invest approximately $90m to develop the state’s largest liquid renewable fuels manufacturing facility at its Kapolei refinery.

The project relies on the Kapolei refinery’s highly experienced operating team, existing tank storage and related logistics, as well as available hydrogen from current refining operations, a key requirement for low-carbon renewable fuels production. As a result, this project is expected to be completed for less than $1.50 per gallon of annual operating capacity and is expected to be commissioned in 2025. The unit can produce up to 60% sustainable aviation fuel in a first step toward decarbonizing Hawaii’s significant air travel market.

“This project represents a key milestone in our renewable fuels strategy, which supplements our conventional fuels production in Hawaii. The expansion ensures that Par Hawaii, with its high-paying local manufacturing jobs, will be the leading supplier of liquid fuels to the Hawaii economy now and into the future,” said William Pate, Par Pacific’s CEO.

In total, the renewable fuel facility is expected to produce approximately 61 million gallons per year of renewable diesel, sustainable aviation fuel (SAF), renewable naphtha and liquified petroleum gases (LPGs). If market conditions are supportive, yield can be shifted to over 90% renewable diesel. These renewable fuels lower greenhouse gas emissions while providing reliable electricity and transportation fuels to Hawaii consumers.

“Given this project’s feedstock requirements, the state is well positioned to drive an additional major economic benefit by creating a market for locally grown oil seed crops. The creative redevelopment of a portion of our refining system is an excellent example of our team’s technical strength to deliver renewable fuel solutions that supplement our existing operations. I am very proud of the team’s contributions and look forward to continuing our efforts to diversify and decarbonize energy sources for our community,” said Eric Wright, president of Par Hawaii, Par Pacific’s local subsidiary.

The announcement coincides with Par Pacific’s authorization from the U.S. Foreign-Trade Zone Board to use foreign-sourced vegetable oil to supplement locally-sourced renewable feedstocks. Par Hawaii is working with Hawaii-based Pono Pacific in the planting of camelina crops to test the suitability of that oil seed for state production. Par Pacific is committed to supporting the state agricultural sector in the development of oil seed crops to support decarbonization of the local economy.

In 2022, Par Pacific and Hawaiian Airlines, the largest air carrier in the state, announced a joint feasibility study to explore ways to make sustainable aviation fuel commercially viable. Today’s announcement marks a significant milestone in our shared efforts to produce renewable fuels in Hawaii. The companies look forward to engaging with stakeholders across the community to advance policies which enable the use of renewable fuels in Hawaii.

Par Pacific also is assessing development opportunities at the former Chevron refinery location in Kapolei, near its current operations, including projects that would further support the state’s efforts to decarbonize its electrical grid.

May 1, 2023

Project finance, Project news, Raising capital

Aemetis closes $25m USDA loan to fund eight additional projects

When completed, the biogas digesters for the combined 15 dairies are designed to produce more than 400,000 MMBtus per year of carbon negative renewable natural gas.

Aemetis, Inc., a renewable natural gas and renewable fuels company focused on negative carbon intensity products, has closed its second $25m, 20-year term loan guaranteed by the U.S. Department of Agriculture (USDA) for a total of $50m of Aemetis Biogas project financing arranged by Greater Commercial Lending (GCL) in the past nine months.

The Aemetis Biogas Central Dairy RNG Project is now fully funded to build biogas digesters and related assets for eight additional dairies using the $9.4m of equity financing already provided by Aemetis and the $25m of new debt financing guaranteed by the USDA. Magnolia Bank of Elizabethtown, Kentucky provided the primary funding for the $25 million loan to Aemetis Biogas 2, LLC (AB-2), a wholly-owned subsidiary of Aemetis, Inc, according to a news release.

“The USDA Renewable Energy for America Program (REAP) provides long term, 20-year financing that enables the construction of projects that improve air quality and reduce carbon pollution such as the Aemetis Biogas Central Dairy Digester Project,” stated Eric McAfee, Chairman and CEO of Aemetis. “We appreciate the good working relationship that has been developed with the team at Greater Commercial Lending and we are pleased to have Magnolia Bank as the new primary lender for the AB-2 phase of the project.”

Aemetis Biogas has built and is fully operating dairy biogas digesters for seven dairies, a 40-mile biogas pipeline, the central biogas-to-RNG production facility and the PG&E gas utility interconnection unit. When completed, the biogas digesters for the combined 15 dairies are designed to produce more than 400,000 MMBtus per year of carbon negative renewable natural gas.

The long-term, 20-year project financing was guaranteed by the USDA through the Rural Energy for America Program (REAP) and carries approximately an 8.75% fixed interest rate for the first five years. With two REAP loans closed and three more REAP loans in process, Aemetis Biogas is currently arranging $125 million of 20-year debt funding for the development, construction and operation of the Aemetis Central Dairy Digester project which has already signed 37 dairies and plans to build digesters for 65 dairies within the next 60 months.

Aemetis Biogas is building passive solar anaerobic digesters at dairies to capture biomethane from animal waste. After removal of key contaminants and gas pressurization at the dairy, a biogas pipeline connects the dairies to a central facility located at the Keyes ethanol plant where the biogas is converted into below zero carbon intensity RNG. The RNG is tested and odorized in an interconnection unit, then injected into the Pacific Gas and Electric (PG&E) gas pipeline for delivery to transportation fuel customers throughout California. In addition to delivery of RNG through third parties, Aemetis is building an onsite RNG fueling station to fuel local trucks.

About 25% of the methane emissions in California are emitted from dairy waste lagoons. When fully built, the Aemetis biogas project plans to connect dairy digesters spanning more than 65 dairy farms, producing more than 1,650,000 MMBtu of renewable natural gas from captured dairy methane each year. The project is designed to reduce greenhouse gas emissions equivalent to an estimated 6.8 million metric tonnes of carbon dioxide over ten years, equal to removing the emissions from approximately 150,000 cars per year.

July 31, 2023

Innovation, Project news, Raising capital

HyTerra raising money for Kansas geologic hydrogen activities

Funds will finance drilling exploration for geologic hydrogen on the Nemaha Ridge in Kansas.

Australia-based HyTerra is raising AUD 6.1m for geologic hydrogen activities along the Nemaha Ridge in Kansas, according to an investor release.

Ther firm “is undertaking a capital raising of approximately AUD $6.1 million (before costs) through a placement to sophisticated
and professional investors and a subsequent fully underwritten non-renounceable rights issue to eligible shareholders,” with the funds allocated to execute a multi-well drilling program in Kansas.

HyTerra’s exploration acreage covers over 9,600 acres and is 100% owned and operated.

Hydrogen and helium occurrences have been recovered previously from wellbores within these leases. They are near agricultural and manufacturing facilities that are connected by rail, road and/or pipelines. Within these areas, the Company has identified multiple drilling targets covering a diverse range of geological plays.

HyTerra plans to continue leasing of high-priority acreage and drill two exploration wells. The timing of the drilling program is subject to regulatory and landowner approvals, as well as third-party contractor availability. However, it is HyTerra’s goal to commence drilling in 3Q24, according to the release.

April 1, 2024

Innovation, Project finance, Project news, Raising capital

Exclusive: Verde Clean Fuels seeking project finance for gas refineries

Publicly listed Verde Clean Fuels plans to seek equity and debt investors for low-carbon gasoline refineries it expects to deploy across the US. We spoke to CEO Ernest Miller about the strategy.

Verde Clean Fuels, a publicly listed developer of clean fuels technology and projects, is planning to seek project debt and equity investors to finance a series of low-carbon gasoline refineries it expects to deploy across the US.

Houston-based Verde, which employs syngas-to-gasoline refining technology, recently announced an agreement with Diamondback Energy to construct a facility in the Permian Basin that will utilize stranded natural gas to produce 3,000 barrels per day of gasoline.

The company is also pursuing a carbon-negative gasoline project on the premises of California Resources’ Net Zero Industrial Park in Bakersfield, California. The California project will produce approximately 500 barrels of RBOB renewable gasoline per day from agricultural waste, while capturing and sequestering around 125,000 tons of CO2 per year.

Verde is capitalized following a private investment in public equity (PIPE) injection of $54m as part of a reverse merger last year, allowing the company to take the Bakersfield and West Texas projects through the FEED phase, CEO Ernest Miller said in an interview.

Underpinning Verde’s business model is the view that gasoline will persist as a transportation fuel for many years to come, and that very few parties are working to decarbonize the gasoline supply chain.

“Between renewable diesel, renewable natural gas, and sustainable aviation fuel, there is very little awareness that renewable gasoline is even a thing,” Miller said. “The addressable market is enormous, and the impact that can be made by taking even a sliver of that market is enormous.”

Miller says that many market participants believe that electric vehicles will solve the emissions problem from road transport.

“The fact is that gasoline has a very, very long runway ahead of it,” he said. “Regardless of the assumptions you want to make about EV penetration, the volume of gasoline that we continue to use for the foreseeable future is huge.”

Verde’s projects are sized in the 500 – 3,000 barrels per day range, making them a unique player at the smaller end of the production range. The only other companies with similar methanol-to-gas technology are ExxonMobil and Danish-based Topsoe, which operate at a much larger scale, according to Miller.

Miller recognizes that low-carbon, or negative-carbon, gasoline operates within a complex ecosystem, with the California project potentially playing in that state’s LCFS and D3 RIN markets, in addition to the market for gasoline.

“What I would like to see us do is have an offtaker that plays in all three of those products – so if I can go to Shell Trading, or bp, or Vitol, and get one of them to say, ‘here’s a price,’ and they take all of that exposure and optionality,” Miller said, “that allows me to finance the project without having to manage a whole bunch of different commodity exposures and risk.”

Bakersfield

The Bakersfield project, estimated to cost $235m to build, will utilize 450 tons per day of agricultural waste to produce gasoline, and sequester CO2 via California Resources’ carbon management company, Carbon TerraVault, a joint venture with Brookfield Renewable.

Because of the carbon sequestration, the project will qualify for incentives under 45Q, but since it is producing, in Miller’s words, “deeply carbon-negative gasoline,” most of the value for the project will come from California’s LCFS program.

In order to qualify for LCFS credits, the Bakersfield facility goes through the full GREET modeling process – including transport of feedstock, processing and refining, and transport away from the facility – returning a negative 125 grams equivalent per MJ carbon intensity score for the project, according to Miller.

As for investors, Verde “would like to see both California Resources and Brookfield Renewable in the project, either individually or through the Carbon TerraVault JV,” Miller said.

Verde is also in discussions with a handful of financial players, including infrastructure and pension funds that are looking for bond-like cash flow that a project finance model can provide. The company has also explored the municipal bond market in California, which would bring to bear a favorable capital structure for the project, Miller said.

Verde is not currently working with a project finance advisor, Miller said, noting that they have in-house project finance experience. In Texas, Verde is working with Vinson & Elkins as its law firm; and in California Verde is working with Orrick as counsel.

Gasoline runway

For the Diamondback facility in West Texas, which requires roughly $325m of capex, both Verde and Diamondback will take equity stakes in the project, and Verde will seek to bring in debt financing to fund the rest of the project costs in a non-recourse project finance deal, Miller said.

The Permian project seeks to provide a pathway to monetize stranded gas in the basin by taking advantage of and alleviating its lack of takeaway capacity, which causes gas prices at the Waha Hub in West Texas to trade at a significant discount to the Henry Hub price.

“Diamondback would take the position that any gas that’s getting consumed in the Permian Basin is gas that’s not getting flared in the Permian Basin,” Miller said, thus making the project a emissions-mitigating option. “There will never be enough natural gas takeaway capacity out of the Permian Basin,” he added, noting that driller profiles are only going to get gassier as time goes on.

Diamondback, for example, produces more in the Permian than it can take out via pipeline, therefore “finding a use, a different exposure, for that gas by turning it into gasoline, is of value for them,” Miller said.

“It’s the same dynamic in the Marcellus and Bakken and Uinta – all the pipeline-constrained basins,” he added, alluding to possible future expansion to those basins.

February 23, 2024

exclusive

M&A, Project finance, Project news, Raising capital

Pennsylvania blue hydrogen DevCo planning project equity raise

A natural gas company has tapped an advisor and is planning to launch a process to raise project equity in the fall for a blue hydrogen production facility with contracted offtake in Pennsylvania.

KeyState Energy, a Pennsylvania-based development company, has engaged a financial advisor to launch a $60m equity process in September, according to two sources familiar with the matter.

Young America Capital is advising on the forthcoming process, the sources said.

The capital raise is for the company’s marquee Natural Gas Synthesis blue hydrogen project in Clinton County, one of the sources said. CapEx for the project is estimated at $1.5bn. OCGI is a pre-FEED investor in the project and the coming equity raise is meant to attract a FEED investor.

The 200 mtpd project has contracted offtake with Nikola Corporation, one of the sources said. In October it was reported that Nikola and KeyState were working towards a definitive agreement to expand the hydrogen supply for Nikola’s zero-emissions heavy-duty fuel cell electric vehicles.

The 7,000-acre natural gas and geologic storage site was formerly known for coal, iron and rail, according to the company’s website.

KeyState Energy did not respond to a request for comment. YAC declined to comment.

June 20, 2023

Project finance, Regulatory

Exclusive: American Clean Power to advocate for ‘grandfathering’ in 45V rules

The clean energy trade group plans to continue promoting the concept of “grandfathering” for early-mover green hydrogen projects in response to IRS guidance for 45V rules, according to industry sources familiar with the plans.

Clean energy industry trade group American Clean Power (ACP) plans to continue championing the concept of “grandfathering” in the green hydrogen sector, arguing that it is critical for the economic viability of early green hydrogen projects under the Inflation Reduction Act’s clean hydrogen tax credits, according to sources familiar with the group’s plans.

Grandfathering would allow these projects to adhere to less stringent annual time-matching requirements before transitioning to an hourly regime.

ACP, through its previously released Green Hydrogen Framework, has proposed to grandfather in the early-mover projects under annual time-matching as long as they start construction before January 1, 2029. That’s in contrast to guidance for the 45V clean hydrogen tax credit that would require renewable energy generation associated with green hydrogen projects to be matched hourly beginning in 2028.

The trade group, which consists of 800 clean energy companies, previously argued against too-soon hourly matching in a November white paper. Representatives of ACP did not immediately respond to requests for comment.

In response to the IRS guidance, ACP is seeking to underscore that, without grandfathering, early projects will have to be designed from the start to meet hourly matching requirements, significantly increasing costs and negating the benefits of annual time matching, sources said.

The notice of public rulemaking on 45V was issued on December 26, and is open for public comment for 60 days. The tax credit rules, which would require strict adherence to the so-called three pillars approach for incrementality, temporal matching, and deliverability, are viewed by some in the industry as overly burdensome.

ACP’s position is that the project finance market can handle some changes midstream in long-term agreements, but not fundamental shifts like transitioning from annual to hourly time matching.

This switch could lead to a dramatic decrease in green hydrogen production and a concurrent exponential increase in production costs. Investors, anticipating these risks, might finance green hydrogen production agreements as if they were under an hourly regime from the beginning, thereby eliminating the initial benefits of annual time matching, according to the sources familiar.

A Wood Mackenzie study estimates that hourly time matching requirements could result in a price increase of 68% in Texas and 175% in Arizona, for example.

ACP, according to sources, stresses that the absence of grandfathering would create an economic cliff for agreements straddling both accounting systems. This would add to project costs, potentially discourage customer interest in green hydrogen, and hinder the industry’s maturation, the sources explained. In contrast, grandfathering first-mover projects under an annual time matching regime would ensure competitive production costs, driving demand for green hydrogen, the trade group believes.

Moreover, sources explained that ACP’s position is that the transition from annual to hourly matching without grandfathering would likely necessitate assuming hourly matching from the onset in power purchase agreements, leading to higher hydrogen costs from the start. This could delay green hydrogen industry development and give an advantage to blue hydrogen with early adopters, potentially excluding green hydrogen from the market.

January 19, 2024