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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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Developer taps ING to raise project finance for Texas H2 plant

Clean Energy Holdings is assembling a roster of advisors to advance its Clear Fork green hydrogen project.

ING Americas will take the lead in securing project financing for Clean Energy Holding’s 250 MW Clear Fork, Texas renewable energy supplied green hydrogen and liquefaction project.

The project has a baseline schedule slated to enter commercial operations in the third quarter of 2024. The project is expected to produce a levelized average of 30,000 kg a day of liquefied green hydrogen. The CEH Platform is designed to attract leading edge and emerging technologies to integrate into our projects for validation and certification.

CEH is assembling a Renewable Energy and Technology Alliance, which now includes Equix Inc., a well-established and highly respected infrastructure firm. Bair Energy, LLC (BE) joins The Alliance as the Program Management Construction Management (PMCM) and serves as The Alliance Representative for the CEH Platform. The Alliance is working with an experienced commodities group to market and lead offtake negotiations for its projects.

CEO of Clean Energy Holdings, Nicholas Bair, stated: “Our Alliance is leading energy transformation, and we are committed to continue to lead the North American market in the production and implementation of green hydrogen for industrial, chemical, and mobility applications. We are also driving technological advancements developed through our projects. We have assembled a group of industry leaders as well as local and state governments to navigate through the potential challenges as we deliver our projects from concept to delivery and provide turnkey projects with a complete basis for design. Our Alliance delivers on contract and safety, with guaranties. This project is a strategic priority for The Alliance to showcase its turnkey design, long term operations and production guaranties.”

CEH President, Cornelius Fitzgerald, added, “These early, large-scale, projects will help define the green hydrogen industry in North America. Our Alliance partners and advisors have been carefully selected as both best-in-class for their respective roles and dedication to make these projects a success.”

Chair of Bair Energy, Candice McGuire stated, “flawless project delivery is the focus of the CEH Platform and The Alliance to lead the nation in energy security.”

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SLB acquires majority ownership in carbon capture firm

SLB will pay $380m to purchase 80% of Aker Carbon Capture Holding AS (ACCH), which holds the business of ACC, and will contribute the SLB carbon capture business to the combined entity.

NYSE-listed SLB has agreed to combine its carbon capture business with Aker Carbon Capture (ACC) to support accelerated industrial decarbonization at scale.

The combination will leverage ACC’s commercial carbon capture product offering and SLB’s new technology developments and industrialization capability, according to a news release. It will create a vehicle for accelerating the introduction of disruptive early-stage technology into the global market on a commercial, proven platform. Following the transaction, SLB will own 80% of the combined business and ACC will own 20%.

SLB will pay NOK 4.12 billion ($380m) to purchase 80% of Aker Carbon Capture Holding AS (ACCH), which holds the business of ACC, and will contribute the SLB carbon capture business to the combined entity. SLB may also make additional payments of up to NOK 1.36 billion over the next three years based on the performance of the business.

The transaction is subject to regulatory approvals and is expected to close by the end of the second quarter, 2024.

“For CCUS to have the expected impact on supporting global net-zero ambitions, it will need to scale up 100-200 times in less than three decades,” said Olivier Le Peuch, chief executive officer, SLB. “Crucial to this scale-up is the ability to lower capture costs, which often represent as much as 50-70% of the total spend of a CCUS project. We are excited to create this business with ACC to accelerate the deployment of carbon capture technologies that will shift the economics of carbon capture across high-emitting industrial sectors.”

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KBR awarded tech contract for Texas blue ammonia plant

KBR has been awarded a technology contract by Tecnimont S.p.A. for OCI NV’s low-carbon blue ammonia project in Texas.

KBR has been awarded a technology contract by Tecnimont S.p.A. for Holland-based OCI NV’s low-carbon blue ammonia project in Texas, according to a news release.

Under the terms of the contract, KBR will supply the technology license, basic engineering design, proprietary equipment and catalyst for the 1.1 million ton per annum blue ammonia plant. Targeting completion by 2025, the project will be designed to transition from blue to green ammonia production as green hydrogen becomes available at larger scale in the future.

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Hydrogen carrier technology firm H2Fuel is seeking to raise approximately $25m to build a pilot project, according to sources familiar with the company’s plans.

The Dutch-based company has mandated a UK-based financial advisor to engage potential investors, with capital needs in the $12.5m range of a $25m project cost, the sources added.

In an interview, H2Fuel CEO Peter Huisman said the firm is “location agnostic” in looking for a site for a pilot project, but would prefer the US. Europe and India are also possibilities.

“We are early stage, in our view,” Huisman said. “[An investor will] need to have a long-term view of the market.”

Huisman declined to say which bank his company has hired but referred to it as a “top five” institution.

H2Fuel’s process combines hydrogen to salt, forming an energy-dense solid compound that can be transported and stored in dry conditions without complex requirements. A patented energy release process requires no extra energy, Huisman said.

The company has talked with some large strategics but has been told they are too early, Huisman said. The company views the near-term capital opportunities as one for pension funds or a venture capital.

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Exclusive: Biofuels developer interviewing bankers for capital raise

The developer of a renewable diesel and SAF plant in East Texas is seeking a banker for assistance raising development and FID capital.

Santa Maria Renewable Resources, a biofuels developer with a project in East Texas, is interviewing bankers for an upcoming capital raise.

The Houston-based firm is seeking a banker to help it raise some $40m in development capital, in a role that would then pivot to arranging project finance for a final investment decision, CEO Pat Sanchez said in an interview.

The company recently announced its selection of Topsoe as technology provider for the 3,000-barrels-per-day facility, which will produce renewable diesel and sustainable aviation fuel. It also tapped Chemex to conduct the FEED study.

Sanchez is the former COO of Sanchez Midstream Partners, having left in 2020 after preferred shareholder Stonepeak took over the company.

He perceives headwinds for capital raising in the biofuels space, but believes the project profile he is promoting is superior to peers due to its hedged profile and the incorporation of a sustainable agriculture component that extracts additional value from an oilseed.

The superior returns, which he claims are north of 25% on an unlevered basis, “come from the integration of two industries” – biofuels and agricultural commodities – “on one site.”

Using Topsoe technology, the proposed plant can swing between 100% SAF to 100% renewable diesel, depending on the needs of the offtaker.

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Only one company in the U.S. closed on a development capital raise for a bio-based fuel project in 2023. That company was DG Fuels, and it raised up to $30m in development capital for a woody biomass-based Louisiana SAF plant expected to cost $4.2bn and reach FID in 2024.

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Exclusive: Australian fuels producer looking for US development partners

An Australian fuels producer and concentrated solar power developer partnered with German and US fossil interests is developing its first US clean fuels project in Texas, and is looking for development partners with eyes on the greater southwest.

Vast Energy, the Australia-based and NASDAQ-listed concentrated solar power (CSP) developer and fuels producer, is in the early stages of developing a project near El Paso, Texas – the company’s first in the US – and is seeking US development partners to generate a pipeline of projects throughout the country, CEO Craig Wood said in an interview.

Vast is in process with two projects in Port Augusta, South Australia: VS1, a 30 MW solar/8 MWh storage plant, and SM1, a demonstration solar-to-methanol plant co-located with VS1, producing up to 7,500 mtpa of green methanol from VS1 electricity and heat with extra power available on the grid.

VS1 is scheduled for FID in 3Q24 with FID on SM1 coming the following quarter, Wood said.

Vast recently announced funding agreements with German partner Mabanaft for up to AUD $40m for SM1, after the SM1 project was selected last year as a part of the German-Australian Hydrogen Innovation and Technology Incubator (HyGATE).

Methanol from the $80m SM1 will in part be exported to Germany. Vast is also working with EDF to provide additional financing, Wood said.

“Essentially it’s going to be debt free and on balance sheet,” Wood said.

German container shipping company Hapag-Lloyd recently signed an MOU with Mabanaft to explore options for the supply of ammonia as bunker fuel to Hapag-Lloyd in the Port of Houston.

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In the US, where Vast listed to be primed for opportunistic growth, the company has a shortlist of locations around El Paso, has engaged with regional economic development leaders, and held early talks with EPC providers, Wood said.

The El Paso project is being developed in conjunction with Houston-based oil and gas drilling business Nabors Industries, Wood said. Nabors backed the SPAC that took Vast public at a valuation of up to $586m in early 2023. Its current market cap is $64m.

There are ongoing discussions on whether to produce eSAF or methanol in El Paso, Wood said.

To produce eSAF, Vast would use a solid-oxide electrolyzer coupled with the Fischer-Tropsch process, Wood said. Meanwhile, the methanol distillation process lends itself well to Vast’s ability to produce low-cost heat.

CSP has a lower level of embedded carbon than any renewables technology other than wind, Wood said.

“The work that we have done to date indicated that you would most likely power an eFuels project with a CSP plant that was configured to operate in the day and night,” Wood said.

As for project costs, envisioning a project producing some 200 million liters per annum, roughly $3bn would be needed for the power station, and then half that for the infrastructure to make the fuels.

Preliminary offtake for the El Paso project is going to be critical for attracting investment, Wood said. Offtake will depend on the type of fuel produced, though conversations are ongoing with shipping companies (methanol) and airlines (eSAF).

“We’re not expecting to have any problem placing the product,” Wood said. Offtake would likely be targeted for the Port of Los Angeles, LAX airport, the ports of the Gulf Coast, or Dallas Fort Worth International Airport.

Development of CSP makes sense anywhere climate is sunny and hot, Wood said. The company could logically expand into more of West Texas, New Mexico, Arizona and southern California.

The region around Farmington, New Mexico is particularly attractive for CSP development, Wood said. As a huge amount of coal-fired capacity in that area is retired, those interconnections, workforces and resources are ripe for repowering.

The turbines that one of those coal fired power stations would have is the same turbine at the core of Vast’s technology, Wood said. One difference is that Vast’s can be turned on and off quickly.

Development partnerships 

There is an opportunity for Vast to find a development partner, or partners, to stand up a pipeline of projects in two to three years’ time, Wood said.

“Almost everyone wants to wait until our project in Port Augusta reaches COD,” Wood said. “But we don’t want to wait that long to be developing projects in the US.”

Vast is capable of building CSP plants, which can be configured to operate in the day and night, co-located with existing larger-scale solar pv to provide additional generation and, critically, storage, Wood said. By directing sunlight to receivers and heating molten salt, CSP can store energy for 12-to-20 hours overnight to alleviate solar pv’s intermittency issues.

“Coming along and essentially retrofitting complementary CSP next to those [pv plants], we think is a very sensible way to go, both in terms of shared cost but also in terms of managing incremental transmission build,” Wood said. “We’re looking for people we can have conversations with.”

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