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Avina unveils Midwest ethanol-to-SAF project

Avina revealed more details about a planned SAF project in the Midwest, saying that funding commitments for the project through FID have been secured.

Clean hydrogen developer Avina said this week it is pursuing plans for a sustainable aviation fuel (SAF) plant in the Midwest region set to commence operations in 2027.

The facility, engineered to produce 120 million gallons of SAF annually, will utilize alcohol-to-jet production technology pathway. The SAF produced will have significantly reduced life cycle carbon emissions compared to conventional jet fuel. The end product will be certified to meet ASTM D7566 standards, according to a news release.

Preliminary Front End Engineering Design (Pre-FEED) for the project is complete and FEED is expected to kick off in Q2 2024.

Funding commitments for the project through FID have been secured, and Avina is currently engaged in advanced discussions with various strategic and financial investors to fund the project at FID.

Avina is also pleased to announce that it has entered into long-term supply agreements with leading ethanol suppliers for a significant portion of the low carbon intensity (CI) ethanol feedstock volume requirement, a major milestone in moving the project forward. Substantial volumes of ethanol will be supplied by facilities with operational carbon capture and sequestration. Leveraging this low carbon intensity ethanol feedstock, the project is estimated to avoid around 840,000 metric tons of aviation-related carbon emissions annually. The project will leverage existing rail and pipeline infrastructure to ensure optimal delivery of end product into the Chicago O’Hare and other regional airports.

The US airline industry is experiencing a notable demand for SAF in response to commitments to utilize three billion gallons of SAF by 2030. Avina is proactively collaborating with airline customers and other stakeholders to play a key role in meeting this target.

“The strategic location, scale, and cost-effectiveness offer a significant advantage for our SAF project,” says Vishal Shah, CEO & Founder at Avina Clean Hydrogen. “Aviation sector accounts for 2% of global CO2 emissions. In recent years, emissions from this sector have been increasing at a faster rate compared to those from rail, road, or shipping. Sustainable Aviation Fuels are critical to decarbonizing the aviation sector and the Ethanol-to-Jet production pathway is the most immediate, cost-effective, and scalable option for aviation decarbonization. With the procurement of low CI ethanol from existing production facilities that have CO2 capture and sequestration, we are excited about the project’s potential to drive aviation industry’s decarbonization efforts forward.”

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Vertex Energy sells used motor oil refinery in pivot to energy transition

Vertex Energy sold an Ohio used motor oil refinery for $90m, and will invest further in renewable diesel and potential sustainable aviation fuel opportunities.

Vertex Energy, a specialty refiner and marketer of high-quality refined products, has sold its Heartland used motor oil collection and recycling business to a wholly owned subsidiary of GFL Environmental for total cash consideration of $90m.

Under the terms of the transaction, GFL acquired Vertex’s 20 million gallon per year Heartland used motor oil (UMO) refinery in Ohio and the associated Heartland UMO collections business, according to a news release.

After fees, total net cash proceeds from the transaction are approximately $85m. The company may use some of the transaction proceeds to reduce outstanding debt on its balance sheet.

Houlihan Lokey served as financial advisor to Vertex, and Stroock & Stroock & Lavan LLP served as legal counsel to Vertex for the transaction.

The transaction positions Vertex to redeploy capital into energy transition assets of scale. Vertex continues to examine potential investment opportunities across the sustainable fuels sector, including further development of its renewable diesel production business, as well as potential new opportunities in the rapidly growing Sustainable Aviation Fuel (SAF) market. Management believes the transition to the production of lower-carbon, sustainable fuels and products represents an attractive investment opportunity that positions the Company to achieve meaningful growth in Adjusted EBITDA and free cash flow long-term.

Vertex believes the resulting streamlined asset footprint will enable further operational focus and enhanced efficiencies throughout the company, according to the press release. The improved operational focus on the Mobile refining facility comes almost concurrently with anticipated mechanical completion and subsequent start-up of initial renewable diesel production which is currently expected to be completed in the second quarter 2023.

“We believe that the divestiture of our used motor oil business at Heartland, while a significant element of our company’s history and roots, will reflect another step forward in the greater transformation of our business into an energy transition story of scale. We expect that this transaction will serve us well by enabling the improvement of our balance sheet health, while adding strategic value through the streamlining of our operations. We remain highly focused on the execution of our conventional fuels refining strategy and the development of a large-scale, sustainable fuels production business longer-term. Make no mistake, we are committed to our remaining legacy business, coupled with our new investments in the Mobile refinery and the Gulf Coast, a key pathway to our greater energy transition strategy,” stated Benjamin P. Cowart, president and CEO of Vertex.

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Enbridge enters JV for Permian to Gulf Coast pipeline

The JV with Whitewater/I Squared Capital and MPLX will develop, construct, and operate natural gas pipeline and storage assets connecting the Permian Basin natural to growing LNG and U.S. Gulf Coast demand.

Enbridge Inc. has entered into a definitive agreement with WhiteWater/I Squared Capital and MPLX LP (“MPLX”) to form a joint-venture that will develop, construct, own, and operate natural gas pipeline and storage assets connecting Permian Basin natural gas supply to growing LNG and U.S. Gulf Coast demand, according to a news release.

Highlights:
  • Acquiring a meaningful, strategic equity interest in the joint venture
  • Immediately accretive to DCF per share, with ~90% contracted cash flows
  • Receiving immediate, recurring, and growing cash flow from operating assets with minimal commodity exposure
  • Optimizes balance sheet by increasing EBITDA and reducing Enbridge’s share of future Rio Bravo pipeline project capex proportional to its economic interest in that project
  • Embedded organic expansion opportunities provides attractive growth options and diversifies offtake

The joint venture will be owned by WhiteWater/I Squared (50.6%), MPLX (30.4%), and Enbridge (19.0%) and will include the following assets:

  • 100% interest in Whistler pipeline, a ~450-mile, 42-inch intrastate pipeline transporting natural gas from an interconnect with the Waha Header in the Permian Basin to Agua Dulce, TX, near the starting point of the proposed Rio Bravo pipeline
  • 100% interest in the Rio Bravo pipeline project, ~137-miles of new 42-inch and 48-inch pipelines transporting natural gas from the Agua Dulce supply area to NextDecade’s Rio Grande LNG project in Brownsville, Texas
  • 70% interest in ADCC pipeline, a ~40-mile, 42-inch proposed intrastate pipeline designed to transport 1.7 Bcf/d of natural gas from the terminus of the Whistler pipeline in Agua Dulce, TX to Cheniere’s Corpus Christi LNG export facility (the pipeline is expected to be in-service in Q3 2024 and is expandable up to 2.5 Bcf/d)
  • 50% interest in Waha Gas Storage, a ~2.0 Bcf gas storage cavern facility, with additional topside facilities capable of injection and withdrawal

Approximately 98% of capacity is contracted under long-term, take-or-pay contracts with an average contract length greater than 10 years. Approximately 90% of counterparties are investment grade and include leading operators in the Permian Basin.

Upon closing of the transaction, Enbridge will contribute its wholly-owned Rio Bravo pipeline project and $350m in cash to the joint venture, and will fund the first $150m of the post-closing capex to complete the Rio Bravo pipeline project. Enbridge will receive a 19% equity interest in the joint venture and retain a 25% economic interest in the Rio Bravo pipeline project (subject to certain redemption rights of the joint venture partners).

“Acquiring a meaningful equity interest in an integrated Permian natural gas pipeline and storage network that is directly connected to our existing infrastructure at Agua Dulce through this JV with WhiteWater/I Squared and MPLX is very exciting. This is a great way to enhance our super-system approach, bringing energy supply to places where it is needed most and providing last mile connectivity to domestic and export customers,” said Cynthia Hansen, EVP and President, Gas Transmission and Midstream of Enbridge.

Enbridge will be contributing its Rio Bravo pipeline project, which will extend the joint venture’s current infrastructure to serve LNG and other customers on the USGC. Enbridge’s share of the post-closing capex to complete the Rio Bravo pipeline project will be 100% of the first $150m and, thereafter, proportionate to its aggregate economic interest in that project.

This transaction is expected to unlock future growth opportunities for Enbridge to connect sustainable natural gas production to export markets as part of its USGC strategy.

“The transaction optimizes our investment capacity by increasing the efficiency of our capital. We will begin receiving immediate cash flow and will share in future growth opportunities,” said Pat Murray, EVP and Chief Financial Officer of Enbridge. “Having access to new Permian natural gas infrastructure enhances and increases the visibility of our medium-term growth outlook, while being accretive to our balance sheet.”

Closing is expected in the second quarter of 2024, subject to receipt of required regulatory approvals and satisfaction of other customary closing conditions.

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Brookfield-backed CCS developer raises CAD 200m

BMO Capital Markets advised Canada Growth Fund on a CAD 200m investment in Entropy, which was coupled with a fixed-price carbon credit purchase agreement of up to one million tonnes per annum.

Canada Growth Fund Inc. has entered into a strategic investment agreement with Entropy Inc., a Calgary-based developer of carbon capture and sequestration projects.

CGF has agreed to a CAD 200m investment in Entropy coupled with a fixed-price carbon credit purchase agreement of up to one million tonnes per annum, according to a news release.

Once fully drawn, the investment could result in CGF owning approximately 20% of Entropy. Brookfield will continue to invest the balance of its existing CAD 300m hybrid security into the business, by which point it would be the largest shareholder and control Entropy.

Osler, Hoskin & Harcourt LLP and BMO Capital Markets acted as advisors to Canada Growth Fund Inc.

Burnet, Duckworth & Palmer LLP and TD Securities Inc. acted as advisors to Entropy Inc.

According to the release, the strategic growth partnership represents an important new investment in Canadian carbon markets. The features of the CCO—notably its large scale and its long-term fixed-price—represent a global first in compliance markets. This financeable structure helps to de-risk and accelerate private CCS investment by establishing carbon price certainty for Canadian projects.

One pillar of CGF’s mandate is to invest in projects and technologies, including CCS, that hold significant potential to reduce emissions across the Canadian economy. A second pillar is to scale promising Canadian clean technology champions that can help create value for Canadians.

In March 2022, Entropy announced a strategic CAD 300 million investment agreement with Brookfield, via the Brookfield Global Transition Fund, to scale up the deployment of Entropy’s CCS technology globally. Today’s announcement builds on this strong foundation and provides greater revenue certainty to accelerate Entropy’s major investments in Canada.

Transaction Highlights

  • Definitive agreements between Entropy and CGF to accelerate the decarbonization of hard-to-abate industries in Canada;
  • CGF to invest CAD 200m in Entropy for the development of Canadian CCS projects and for corporate purposes which, once fully drawn, could result in CGF owning approximately 20% of Entropy;
  • Brookfield will continue to invest the balance of its existing CAD 300 million hybrid security into the business, by which point it would be the largest shareholder and control Entropy;
  • CGF to provide the first ever large-scale, long-term, fixed-price CCO in a compliance carbon market, committing to purchase up to one million tpa of carbon credits for 15 years;
  • The initial allocation of CCO commitment will allow Entropy to proceed with its Glacier Phase 2 project, targeting the sale of up to 185,000 tpa of Alberta TIER carbon credits at an initial price of $86.50 per tonne for a term of 15 years;
  • The balance of the remaining CCO will be available for Entropy to underwrite additional third-party projects on similar terms in Canada;
  • Post-investment, Entropy will have approximately CAD 460 million of capital available which, together with investment tax credits, carbon capture incentives and project financing, establishes a path to execute over CAD 1 billion of CCS projects and abate more than 1 million metric tonnes per annum (“MMTPA”) of emissions, with a focus on the Canadian market.

Deal Structure Overview 

CGF’s investment in Entropy is via a hybrid security similar to the prior investment from Brookfield (please see Entropy news release dated March 28, 2022), though at a valuation that reflects the numerous advancements of the business in the last two years. The flexible structure ensures access to capital for Entropy and retains flexible liquidity options for all major investors including Brookfield, CGF and Advantage (the Company’s controlling shareholder). Funding draws from Brookfield and CGF for Canadian projects and corporate purposes will proceed in tandem.

Coupled with the CGF investment, Entropy and CGF have entered into a CCO agreement whereby CGF has committed to purchase up to 9 million tonnes (up to 600,000 tpa over a 15-year term) of TIER or equivalent carbon credits from Entropy projects. The initial project to benefit from the CCO is intended to be Advantage Glacier Phase 2, drawing up to 185,000 tpa at an initial price of $86.50 per tonne, for a total of approximately 2.8 million tonnes over the 15-year term. With this CCO agreement in place, CGF has absorbed the carbon pricing risk for the project. Entropy is therefore pleased to announce provisional final investment decision of Glacier Phase 2.

Beyond Glacier Phase 2, CGF and Entropy intend to enter into separate CCO agreements for other Canadian projects, on terms that are expected to provide similar investment returns. Upon successful deployment of the initial 600,000 tpa of CCO, CGF may make available a further 400,000 tpa of CCOs for additional Entropy Canadian CCS projects.

CGF will nominate one member to the Entropy Board of Directors and is pleased to participate in the growth and evolution of this Canadian clean technology leader. Advantage and Brookfield will retain their existing Entropy board representation.

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Midwestern SAF developer in capital raise

A municipal solid waste solutions firm based in the midwestern US is undergoing a $30m capital raise ahead of its first SAF project with plans to launch another raise late this year or early next.

Illinois Clean Fuels, the municipal solid waste solutions firm in Deerfield, Illinois, has mandated two advisors to run a capital raise, according to two sources familiar with the matter.

Chabina Energy Partners and Weild & Co. are assisting on the process, which the company plans to have finished by October, the sources said.

The equity will be put toward six recovery facilities to supply feedstock for an unannounced project located in the Chicagoland region, one of the sources said. Following two years or so of engineering and permitting, that project should enter construction.

In December or early 1Q24 ICF plans to launch another equity raise for development capital.

ICF, Chabina and Weild & Co. declined to comment.

Illinois Clean Fuels has a synthetic fuel plant under development that will convert municipal solid waste into sustainable aviation fuel in combination with carbon capture and storage, according to its website.

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Exclusive: Hydrocarbon recycling firm raising pre-IPO equity

An early-stage company capturing and recycling CO2 from hydrocarbon engines in the northeastern US and Germany has hired an investment bank to help them with a public listing and is raising pre-IPO platform equity.

ESG Clean Energy, a Massachusetts-based carbon capture and recycling firm formed in 2016, plans to go public in 2025 but will first raise pre-IPO platform equity, CEO Nick Scuderi said in an interview.

ESG Clean Energy will change its name in a re-brand and has hired an investment bank to help with the IPO, which does not yet have a targeted quarter, Scuderi said. He declined to name the advisor.

After the name change but prior to the public listing, ESG is seeking to raise between $20m and $40m in platform equity, he said. The company is interested in a traditional IPO, not a SPAC or private debut opportunity.

Angel investors have backed the company to date, with some $40m total raised, Scuderi said. He owns a controlling stake in the company.

Power, water and CO2

ESG Clean Energy, billed as a thermal dynamics and fluid mechanics engineering company, has patented technology for use in fossil combustion engines – both piston-driven engines and bottoming cycles (secondary thermal dynamic waste-to-energy systems). Exhaust is treated to produce CO2 and water.

The technology is commercialized, producing power at a facility in Holyoke, Massachusetts under a 5 MW/20-year PPA with Holyoke Gas & Electric. The 5,000 square-foot plant in the city proper has two Caterpillar G3520 natural gas engines each producing 2 MW of power running on natural gas during peak hours.

The waste-heat from Holyoke One is used to create commodities, including distilled water.

“What we have is a design, a system, where we utilize our technology to separate the water from the exhaust,” Scuderi said. “We can utilize this technology in any power plant in the US that’s running on natural gas.”

In arid regions, the distilled water aspect has obvious potential. The Holyoke One facility makes up to 14,000 gallons of distilled water per day, Scuderi said.

The system is also applicable in ICE engines, Suderi said. The company has been in discussions with auto manufacturers to license ESG’s IP; he declined to name which auto companies.

The CO2 is sold to offtakers who do not re-emit it into the atmosphere, such as cannabis growers and CO2 beverage makers. ESG is also able to sell carbon credits.

Bankable opportunities in the US and Germany

Holyoke One, at a cost of $20m, can be replicated throughout the US and, post-IPO, ESG has eyes on power projects in New England, California and Florida, Scuderi said.

Power plants that produce from 100 MWh to 200 MWh will cost between $400m and $450m, and each of those projects will be set up as a separate LLC, Scuderi said. The demand is particularly large in powering data storage.

“We have different [investment] funds that are very large that are willing to put up the money” to fund the projects, Scuderi said. “It’s bankable because the power sales agreement is tied to a data storage company that’s triple-A rated.”

Data-heavy geographies like Virginia are targets for this kind of development, and ESG plans to sharpen its focus on these projects, as well as project finance efforts, following the IPO.

Now, the company has six large scale projects in development in Germany, including one advanced project serving a cloud computing offtaker in the Berlin area, needing 150 MW to 200 MW of power per hour, Scuderi said.

“In Germany, we’re very far along with getting power sales agreements,” he said. “Once we deploy this technology in one location, the world’s going to want it.”

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Hydrogen liquefaction provider looking for growth equity

An emerging liquid hydrogen and liquefaction management company is seeking equity to support manufacturing expansion in Europe and the US.

Absolut Hydrogen, a French liquid hydrogen and liquefaction company based in Grenoble, is looking for equity to scale up production following operations of their demonstration project in France, CEO Jerome Lacapere said in an interview.

Absolut has a partnership with SAF firm ZeroAvia to develop refueling infrastructure for aircraft, and is primarily focused on serving the mobility sector.

A subsidiary of Groupe Absolut, the company offers a full LH2 product range with an entry small-scale hydrogen liquefaction system (< 50 kg/day), a 100 kg/day Turbo-Brayton based H2 liquefier and a 1T/day liquefier based on the same technology.The company's liquefaction demonstration plant in France should produce 100 kg per day, Lacapere said. After that Absolut will need new investment to scale production.Longer term the company has its sites on the US transport market, Lacapere said.“We need to grow in the United States,” Lacapere said. The company will need US-based advisory services and offices in the country to do that, he said.

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