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Ara Partners takes majority interest in restructured renewable fuels infrastructure firm

The private equity and infrastructure firm has acquired USD Clean Fuels, a developer of logistics infrastructure in North America that was formed out of the restructured USD Partners.

Ara Partners, a private equity and infrastructure firm that specializes in industrial decarbonization investments, today announced that it has acquired a majority interest in USD Clean Fuels, LLC, a developer of logistics infrastructure in North America for the renewable fuels value chain.

As part of the transaction, USDCF has also acquired the West Colton Rail Terminal, a fully operational biofuels terminal in California. Ara has committed additional capital to support significant expansion of USDCF’s infrastructure footprint.

USD Partners, the seller of USDCF and the West Colton Rail Terminal, will use the proceeds to repay borrowings outstanding under its revolving credit agreement and to pay transaction expenses, according to a separate press release. As of December 22, 2023, the partnership had approximately $181m of borrowings outstanding under its credit agreement, on which it had been in forbearance since earlier this year.

In negotiations with creditors, Gibson, Dunn & Crutcher LLP served as legal advisor to the partnership and Lazard acted as financial advisor.

Previously backed by Energy Capital Partners, USD Partners was de-listed from the NYSE in 2023 after having IPO’d in 2014.

Based in Houston, Texas, USDCF develops, owns, and operates infrastructure to facilitate safe, reliable and economic delivery of renewable fuel feedstocks and biofuels to production facilities and end-market demand centers, according to today’s news release. The USDCF team, led by Chief Executive Officer Dan Borgen and President Bob Copher, has a longstanding track record of developing, commercializing and operating midstream infrastructure across North America, according to a news release.

“We have high conviction that the green molecules economy – whether it’s renewable fuel feedstocks or biofuels – offers disproportionate opportunity for returns and impact,” said George Yong, partner and co-head of infrastructure at Ara Partners. “The USDCF platform is particularly compelling because it combines a best-in-class management team with a portfolio of premiere terminal logistics projects that provide the ideal foundation for a durable and scalable infrastructure business.”

“We are excited to join forces with Ara Partners to bring critical infrastructure solutions to the rapidly growing North American renewable fuel market, beginning with the West Colton Rail Terminal,” said Borgen. “We are proud to be backed by an investor that is completely focused on enabling an accelerated and economical path to a low-carbon economy.”

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Royal Caribbean testing biofuel blends in cruise ships

The cruise vacation provider is testing biofuel blends in several of its ships out of Europe.

Royal Caribbean Group, the vacation cruise provider, has completed more than 12 consecutive weeks of biofuel testing in Europe, according to a news release.

In Barcelona, Royal Caribbean International’s Symphony of the Seas became the first ship in the maritime industry to successfully test and use a biofuel blend to meet part of her fuel needs.

The company confirmed onboard technical systems met operational standards, without quality or safety concerns, demonstrating the biofuel blend is a reliable “drop in” supply of lower emission energy that ships can use to set sail.

The company began testing biofuels last year and expanded the trail this summer in Europe to two additional ships. The biofuel blends tested were produced by purifying renewable raw materials like waste oils and fats and combining them with fuel oil.

The biofuel blends tested are accredited by International Sustainability and Carbon Certification (ISCC), which verifies reductions of fuel emissions, the release states.

 

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Fuel cell startup raises seed capital

The capital will be used to expand on the team’s growth with engineers coming from Siemens Energy, Argonne National Lab, and The US Navy, among other places.

Celadyne, a decarbonization and hydrogen solution company, has raised $4.5m in seed investment funding. The round was co-led by Maniv and Dynamo Ventures, with major participation from EPS Ventures, according to a news release.

The company collaborates with fuel cell and utility firms, offering efficient hydrogen solutions to heavy-duty industries such as energy, manufacturing, and transportation. Celadyne’s advanced technologies effectively convert hydrogen to usable energy through compact, easy-to-use fuel cells that seamlessly integrate.

“At Celadyne, our mission is simple: unlocking the true potential of hydrogen,” says Gary Ong, Ceo & Founder at Celadyne Technologies. “This new funding will accelerate our product in the market as we aim to decarbonize industries like transportation and manufacturing, offering a cost-effective route for green hydrogen production. Our goal is to embrace these industries, helping them contribute positively to the planet.”

Specifically, Celadyne’s materials and technologies replace the proton exchange membrane to create fuel cells that are more durable, and electrolyzers that are more compact and efficient. This newfound durability allows fuel cells to be utilized as an environmentally-friendlier alternative to diesel engines, and makes electrolyzers that produce low cost green hydrogen as fuel.

This latest funding will expand upon capital from Shell Ventures, Sputnik ATX, the Third Derivative Accelerator, and Sandy Spring Climate Partners. Celadyne has been publicly and financially supported for their world-changing hydrogen applications through grants from the US Department of Energy, National Science Foundation, ARPA-E, and Department of Defense – AFWERX. These entities, along with Celadyne’s customers, who are Tier 1 automotive leaders shaping the future of mobility worldwide, believe that advanced materials hold the key to unlock the full potential of hydrogen.

This latest funding will expand upon previous capital from Shell Ventures, Sputnik ATX, and the Third Derivative Accelerator and Sandy Spring Climate Partners. The capital will be used to expand on the team’s growth with engineers coming from Siemens Energy, Argonne National Lab, The US Navy, Micron Technologies, Hyzon Motors, and Northwestern University. The team will support the ongoing development of Celadyne’s materials technology, to create even better fuel cells and expand its usage in electrolysis across its growing list of clients across the US. By year end, Celadyne expects to double its customer base and these developments will open up a whole new world for green energy applications in industries that are historically some of the harshest on the environment.

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Power plant manager seeking capital for Boston acquisitions

A manager of natural gas power plants is seeking capital to acquire two facilities in the Boston area and convert them into low-carbon generation assets.

US Grid Company, an owner and operator of electric generation assets in US cities, is seeking to raise capital to make a pair of acquisitions in Boston.

The New York-based plant manager is targeting facilities owned by Calpine and Constellation, CEO Jacob Worenklein said.

Calpine owns the Fore River Energy Center, a 731 MW, combined-cycle plant located 12 miles southeast of Boston, while Constellation owns Mystic Generating Station, a 1,413 MW natural gas-fired plant in Everett, Massachusetts.

Worenklein would acquire the assets and seek to implement lower-carbon generation solutions such as batteries, renewables, or clean fuels, he said.

He has held conversations with both Calpine and Constellation about acquiring the assets, and would need approximately $100m of equity capital to make an acquisition, he said, with the balance coming in the form of debt capital.

US Grid Company previously had investment backing from EnCap Energy Transition and Yorktown Partners, but the funds for the deal were pulled.

Worenklein has had a storied career in the US power sector, serving as a global head in roles at SocGen and Lehman Brothers. He was also founder and head of the power and projects law practice at Milbank.

From 2017 to 2020 he served as chairman of Ravenswood Power Holdings, the owner and operator of a 2,000 MW gas-fired plant in Queens, New York.

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Exclusive: Inside Strata’s P2X strategy

Strata Clean Energy is seeking to engage with global chemical, energy, and shipping companies as a potential partner for a pipeline of green hydrogen projects that will have FIDs in 2025 and CODs later this decade.

Strata Clean Energy is developing a pipeline of green hydrogen projects that will produce large amounts of green ammonia and other hydrogen derivatives later this decade.

Mike Grunow, executive vice president and general manager of Strata’s Power-to-X platform, said in an interview that the company is investing in the development of proprietary modeling and optimization software that forms part of its strategy to de-risk Power-to-X projects for compliance with strict 45V tax credit standards.

“We’re anticipating having the ability to produce substantial amounts of low-carbon ammonia in the back half of this decade from a maturing pipeline of projects that we’ve been developing, and we’re looking to collaborate with global chemical, energy, and shipping companies on the next steps for these projects,” he said.

Strata’s approach to potential strategic offtakers could also include the partner taking an equity stake in projects, “with the right partner,” Grunow said. The projects are expected to reach FID in 2025.

Grunow declined to comment on the specific size or regional focus of the projects.

“We aspire for the projects to be as large as possible,” he said. “All of the projects are in deep discussions with the regional transmission providers to determine the schedule at which more and more transmission capacity can be made available.”

Strata will apply its expertise in renewable energy to the green hydrogen industry, he said, which involves the deployment of unique combinations of renewable energy, energy storage, and energy trading to deliver structured products to large industrial clients, municipal utilities and regulated utilities.

The company “commits to providing 100% hourly matched renewable energy over a guaranteed set of hours over the course of an entire year for 10 – 20 years,” Grunow said.

“It’s our expectation that the European regulations and more of the global regulations, and the guidance from the US Treasury will require that the clean energy supply projects are additional, deliverable within the same ISO/RTO, and that, eventually, the load of the electrolyzer will need to follow the production of the generation,” he said.

Strata’s strategy for de-risking compliance with the Inflation Reduction Act’s 45V revenue stream for green hydrogen will give asset-level lenders certainty on the delivery of a project’s IRA incentives.

“Right now, if I’m looking at a project with an hourly matched 45V revenue stream, I have substantial doubt about that project’s ability to actually staple the hourly matched RECs to the amount of hydrogen produced in an hour, to the ton of hydrogen derivative,” he said.

During the design phase, developers evaluate multiple electrolyzer technologies, hourly matching of variable generation, price uncertainty and carbon intensity of the grid, plant availability and maintenance costs along with evolving 45V compliance requirements.

Meanwhile, during the operational phase, complex revenue streams need to be optimized. In certain markets with massive electrical loads, an operator has the opportunity to earn demand response and ancillary service revenues, Grunow said.

Optimal operations

“The key to maximizing the value of these assets is optimal operations,” he said, noting project optionality between buying and selling energy, making and storing hydrogen, and using hydrogen to make a derivative such as ammonia or methanol.

Using its software, Strata can make a complete digital twin of a proposed plant in the design phase, which accounts for the specifications of the commercially available electrolyzer families.

Strata analyzes an hourly energy supply schedule for every project it evaluates, across 8,760 hours a year and 20 years of expected operating life. It can then cue up that digital project twin – with everything known about the technology options, their ability to ramp and turn down, and the drivers of degradation – and analyze optimization for different electrolyzer operating formats. 

“It’s fascinating right now because the technology development cycle is happening in less than 12 months, so every year you need to check back in with all the vendors,” he said. “This software tool allows us to do that in a hyper-efficient way.”

A major hurdle the green hydrogen industry still needs to overcome, according to Grunow, is aligning the commercial aspects of electrolysis with its advances in technological innovation.

“The lender at the project level needs the technology vendor to take technology and operational risk for 10 years,” he said. “So you need a long-term service agreement, an availability guarantee, key performance metric guarantees on conversion efficiency,” he said, “and those guarantees must have liquidated damages for underperformance, and those liquidated damages must be backstopped by a limitation of liability and a domestic entity with substantial credit. Otherwise these projects won’t get financed.”

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Exclusive: Ammonia plant sale paused until commercial operations

The sale process for a Texas ammonia plant has been paused until the facility reaches commercial operations.

Gulf Coast Ammonia, the developer of a world-scale ammonia plant in Texas City, Texas, has paused a sale process until the plant reaches commercial operations, according to two sources familiar with the matter.

The process to sell the plant, which will produce 1.3 million tons of ammonia per year, was underway earlier this year, led by Jefferies as sellside advisor. The plant was expected to reach COD in 2023, according to documentation.

The project was initiated by Agrifos Partners LLC and advanced to FID in collaboration with joint venture development partners Mabanaft and Macquarie Capital. Following the FID taken in late 2019, GCA is wholly owned by a joint venture of Mabanaft and Lotus Infrastructure (formerly known as Starwood Energy).

GCA is investing $600m towards the construction, operation, and ownership of the ammonia plant, which is situated on land owned by Eastman Chemical Company within Texas City’s industrial park. It includes a portion of Eastman’s port access. 

In tandem with the ammonia plant construction, Air Products is building a $500m steam methane reformer to provide hydrogen to the plant via pipeline. Air Products noted in a recent investor presentation that the SMR project recently came onstream.

Officials at Lotus, Mabanaft, and Jefferies did not reply to inquiries seeking comment.

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exclusive

Low-carbon crude refinery developer lining up project cap stack

The developer of a low-carbon crude refinery is in talks with banks and strategics to line up project financing for a $5.5bn project in Oklahoma.

Texas-based Southern Rock Energy Partners is holding discussions with banks and potential strategic investors with the aim of shaping a $5.5bn capital stack to build a low-carbon crude refinery in Cushing, Oklahoma.

The project, a first-of-its-kind 250,000 barrel-per-day crude refinery, would make it the first crude facility of that size built in the United States in several decades.

The company is evaluating a project finance route with a debt and equity structure for the project, and has held talks with several major investment banks as well as “industry-leading” strategics in midstream, industrial gas, and electricity generation, Southern Rock Managing Partner Steven Ward said in an interview.

In support of the refinery, the city of Cushing and the Cushing Economic Development Foundation approved $75m in tax-exempt private activity bonds, Ward noted. He added that the company could also tap industrial revenue bonds as well as PACE equity financing.

Seed capital for project development has so far come from strategic partners, some of which are operational partners, Ward said. He declined to comment further on the capital raise, noting that engagement letters have yet to be signed.

Engineering firm KBR is conducting a feasibility study for the Cushing project, and the company is moving through land acquisition, air permit preparation, and EPC selection, Ward said.

While most crude refineries consume natural gas, off-gasses, and ambient air, Southern Rock’s proposed refinery would use oxygen along with blue hydrogen produced from the refining off-gasses and green hydrogen from electrolysis. The process would eliminate 95% of greenhouse gas emissions at the proposed refinery.

“Our furnaces and our process heating units are fed 100% hydrogen and oxygen,” Ward said, noting that this type of system does not currently exist in the market. The company is expanding on technology it licenses from Great Southern Flameless, he said.

The size of the refinery would make it the largest to be built in the US since Marathon Petroleum built a 200,000 barrels-per-day facility in 1976.

Certain other low-carbon crude projects have been in the market for several years. Meridian Energy has been seeking to build cleaner crude refineries in North Dakota. Raven Petroleum ran up against environmental concerns while seeking to build a clean refinery in Texas. And MMEX is aiming to build an “ultra clean” crude refinery in West Texas.

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