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Calumet receiving interest from strategics for SAF business

The specialty products maker is working with a banker as it fields interest from strategics for its sustainable aviation fuel business.

Specialty products maker Calumet is working with Lazard as it evaluates investment inquiries from strategics that are interested in the company’s sustainable aviation fuel (SAF) business.

Calumet has already contracted for 2,000 barrels per day of SAF with a blue-chip offtaker through its subsidiary Montana Renewables, based in Great Falls, Montana. That amount would make Calumet the largest SAF producer in North America once engineering modifications are complete in early 2023, said Louis Borgmann, CFO and EVP at Calumet.

Meanwhile, preliminary engineering work has been done to expand SAF production to as much as 15,000 barrels per day, a “world-class position [that] has generated considerable interest from strategic investors,” Borgmann added on the company’s 3Q22 earnings call.

Calumet had engaged Lazard to conduct a process that culminated in a $250m investment in Montana Renewables from Warburg Pincus in August, 2022. The investment, in the form of a participating preferred equity security, valued Montana Renewables at a pre-commissioning enterprise value of $2.25bn.

“Lazard remains retained. They’re out there. They’re very opportunistic,” Borgmann said. “And inbound honestly picked up with SAF. So, we don’t feel a rush, but there could be an opportunistic deal here that we could consider.”

Borgmann added that Montana Renewables’ SAF capacity was quickly contracted at a premium to renewable diesel prices.

The company is positioned to be a first mover in the high-growth West Coast and Canadian markets for SAF, Borgmann said, noting Montana Renewables’ proximity to western airports.

“Montana Renewables’ proximity to end product markets is exceptional,” he said. “We serve renewable markets on the West Coast with direct BNSF Rail access. And we’re perfectly positioned to support the continuously growing low-carbon markets in Canada.”

The company and other renewable diesel producers “that have invested in the ability to produce SAF could expect a lasting advantage” compared to new, more expensive technologies for producing SAF, he said. “And Montana Renewables is expected to have an additional transportation cost advantage relative to its Gulf Coast competition.”

Montana Renewables reached a supply and offtake agreement with Macquarie, announced last week.

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Avangrid and Vitol reach tax credit transfer deal

The agreement marks one of the largest publicly announced PTC transfer deals to-date since the passage of the Inflation Reduction Act.

Avangrid, Inc., a sustainable energy company and member of the Iberdrola Group, and Vitol Inc. have reached a landmark transfer agreement for an estimated $100m of 2023 production tax credits (PTCs) from eight operating wind farms, totaling 1,134 MW of generating capacity, according to a news release.

Basis Climate served as advisor to Avangrid in the transfer, according to a separate press release.

The IRA created a new transferable credit framework to help developers monetize PTCs. Under the IRA, renewable energy owners like Avangrid who qualify for tax credits but are not able to use them immediately can transfer credits to a third-party investor, such as Vitol. Prior to the IRA, this was only possible through a tax equity partnership, which requires a lengthy diligence and negotiation process as well as significant transaction costs.

“The Inflation Reduction Act offers an unprecedented stable framework, enhancing the attractiveness of renewables,” said Pedro Azagra, Avangrid CEO. “It has created a tax credit transfer process that is streamlined and removes the bottleneck that existed with the tax equity investment structure. We expect this transaction to serve as a reference point in this rapidly expanding market. The transfer ensures that we receive greater value from our renewable energy projects, and it will allow us to pay down debt and make further capital investments to benefit our customers.”

“We are delighted to partner with Avangrid through this tax credit investment, part of Vitol’s broader strategic investment in renewable resources and the energy transition,” said Rick Evans, CFO of Vitol Inc. “This new tax credit transfer mechanism promises to unlock significant pools of new capital to support investment in renewable resources.”

In its press release, Basis Climate noted that the seller had multiple potential buyers, while a simple 10-page contract reduced friction and costs.

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Sumitomo and Hoegh Autoliners studying ammonia bunkering

The parties have signed an LOI to study the supply of clean ammonia as a bunker fuel at the ports of Singapore and Jacksonville, USA from 2027 onwards.

Sumitomo Corporation and Höegh Autoliners have signed a Letter of Intent to collaborate on the supply and delivery of clean ammonia as a next-generation sustainable maritime fuel for Höegh Autoliners’ upcoming Aurora Class PCTC vessels.

The twelve state-of-the-art vessels are set to become the largest and most eco-friendly car carriers ever built, with the capability to run on zero-carbon ammonia or carbon-neutral methanol, according to a news release.

Under the agreement, the parties will look into the supply of clean ammonia as a bunker fuel at the ports of Singapore and Jacksonville, USA from 2027 onwards.

Moving forward, the companies will embark on a comprehensive evaluation of the compatibility between the PCTC vessels and the ammonia bunkering facilities at the identified bunker ports. They endeavor to make necessary adjustments to specifications for both “shore-to-ship” and “ship-to-ship” bunkering operations and undertake safety assessments to establish standardized operational protocols and regulations in close coordination with pertinent government agencies.

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SAF developer planning Kansas facility

Azure is targeting a final investment decision by early 2025.

Azure 2023 Inc., a SAF developer, is planning development of a production facility in Cherryvale, Kansas.

Since June 2023, Azure has been progressing a FEED study, which is on track for completion in 2024.

Azure is targeting a final investment decision by early 2025; if approved, the company is targeting to reach first production in 2027, according to a news release.

The facility would use commercially proven technology, allowing for efficiency in speed to market and future expansion. Once fully operational, the facility will produce approximately 135 million gallons per year of renewable fuels, primarily SAF. The use of Azure’s SAF will reduce global aviation emissions by approximately 1 million tons per year, equivalent to removing emissions from roughly 200,000 cars annually.

Azure has received significant support from the local government. On December 18, the Montgomery County Commission approved various tax incentives to help support the project. These incentives include a 10-year property tax exemption and an exemption on sales tax on construction materials and labor.

Azure’s goal of producing SAF with the lowest emissions is further supported through an executed letter of intent with CapturePoint Solutions to explore the opportunity to tie-in to its existing and operating carbon dioxide (CO2) sequestration network and infrastructure.

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Exclusive: Seattle biomass-to-chemical firm planning equity round

A firm with plans for a biorefinery in Washington state will raise its first large equity round early next year.

Planted Materials, a Seattle-based biomass-to-chemicals company, is in early design stages for its first biorefinery in eastern Washington state and planning to raise an equity round in early 2025, co-founders Noah Belkhous and Greg Jenson said in an interview.

The company will seek to raise between $10m and $20m ahead of FID on the biorefinery, Belkhous said. The four-year-old company has raised $500k from angel investors to date and is currently raising another $1m from high net worth individuals in the Seattle region.

Planted Materials does not have a relationship with a financial advisor but is open to one, Belkhous said.

The company’s recycling model takes municipal landfill waste and converts it to chemical materials for pharmaceutical, paper, plastic and other manufacturing industries.

The proprietary recycling process is something the company would like to license to municipalities in the US and abroad, in addition to building biorefineries in the Pacific Northwest, Belkhous said. The company’s lab is currently based in the Ballard neighborhood of Seattle.

Early design work on the first biorefinery is underway. The duo expects CapEx to cap at $50m, reaching FID in 2026 and beginning construction that year.

While the majority of the company’s feedstock will likely come from the major metropolitan regions in the western PNW, refining capacity is more attractive in the east for reasons of space and existing waste management infrastructure. Jenson noted the presence of the relevant research campus of Washington State University in Pullman, as well as the Pacific Northwest National Laboratory in Richland.

Recently, the team accompanied Washington Governor Jay Inslee and members of the Washington State Department of Commerce on a trip to Sydney and Melbourne in Australia. The company has applied to a pair of $350k grants from the state.
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Exclusive: California IPP considering hydrogen options for gas generation portfolio

A California-based IPP is considering burning hydrogen in the thermal plants it acquires, as well as in a portfolio of gas peaking assets it is developing in Texas and the western US.

Nightpeak Energy, the Oakland-based IPP backed by Energy Spectrum Capital, is planning to have wide optionality to burn hydrogen in the gas plants it acquires, as well as in quick-start peaking natural gas assets it is developing in Texas and the western US, CEO Paris Hays said in an interview.

“There’s just not a lot of places in this country where you can procure enough hydrogen at a reasonable price to actually serve wholesale electricity customers,” Hays said of the existing hydrogen landscape.

Still, OEMs are figuring out in real time which of their deployed fleet can burn hydrogen, he said. Studies on blending seem to be yielding positive results.

“That’s great news for a business like ours, because we can have optionality,” Hays said. When interacting with equipment providers, conversion to hydrogen is an important, if expensive, discussion point.

“We want to be in a position to be able to do that for our customers,” Hays said. “We can offer a premium product, which is kind of rare in our business.”

Nightpeak recently purchased Saguaro Power Co., which owns a 90 MW combined cycle power plant in Nevada. That facility is a candidate for hydrogen repowering, Hays said, though that’s just one option for an asset that is currently cash-flowing well.

The Nevada facility is close to California, which notably is a market with a demonstrated appetite for paying green premiums, Hays said.

“We wouldn’t manufacture hydrogen ourselves, we would be a buyer,” he said. “This is one path that any plants we own or develop could take in the future.”

Nightpeak has yet to announce any greenfield projects. But Hays said the company is developing a portfolio of “quick-start” natural gas generation projects in ERCOT and WECC. Those assets, 100 MW or more, are to be developed with the concept of hydrogen conversion or blending in mind.

Proposition 7, which recently passed in Texas, could present an opportunity for Nightpeak as the legislation’s significant provisions for natural gas development has pundits and some lawmakers calling for the assets to be hydrogen-ready.

Investor interest in being able to convert gas assets to burn hydrogen reflect an important decision-making process for Nightpeak, Hays said.

“Does it makes sense to just buy a turbine that only burns natural gas and may be a stranded asset at some point, or would we rather pay and select a turbine that already has the optionality?” Hays said. “Putting price aside, you’re always going to go for optionality.”

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Mitsubishi laying groundwork for additional equity raise

Mitsubishi Power Americas and its JV partners are preparing to raise additional equity for the ACES Delta project in Utah, as well as for other hydrogen developments in the Americas.

Mitsubishi Power Americas is conferring with its financial partners to raise equity from existing investors in the Advanced Clean Energy Storage (ACES) Delta green hydrogen project in Utah, Senior Vice President, Investment and Business Development Ricky Sakai said in an interview.

Haddington Ventures formed Haddington ESP I and raised $650m in June 2022 from institutional investors to fund projects developed by ACES Delta, which is a joint venture between Mitsubishi Power Americas and Haddington portfolio company Magnum Development.

The investors — AIMCo, GIC, Manulife Financial Corporation, and Ontario Teachers’ Pension Plan Board — have additional rights to increase their collective investment to $1.5bn, according to a press release announcing the deal.

The first phase of the project in Utah will be to produce 100 tons of hydrogen per day. Once that is complete, existing investors can scale up their investment, Sakai said.

ACES Delta rendering

Mitsubishi is involved in several regional hydrogen hubs applying for funding from the US Department of Energy.

Hydrogen capable

Depending on how that $7bn is ultimately allocated, Mitsubishi is interested in replicating the Utah project in other regions, a source familiar with the company said.

MPA and Magnum recently closed on a $504.4m loan guarantee from the DOE for ACES Delta, electrolyzers for which will be supplied by Norway-based HydrogenPro.

ACES Delta will support the Intermountain Power Agency’s IPP Renewed Project — upgrading to an 840 MW hydrogen-capable gas turbine combined cycle power plant using Mitsubishi’s M501JAC gas turbines. The plant will initially run on a blend of 30% green hydrogen and 70% natural gas starting in 2025 and incrementally expand to 100% green hydrogen by 2045.

Mitsubishi is also supplying the hydrogen-capable gas turbines to Entergy’s Orange County Advanced Power Station; to an Alberta coal plant owned by Capital Power; and to J-Power’s Jackson Generation Project in Illinois, which reached commercial operations last year.

Mitsubishi Power

Investing in startups

Mitsubishi is doubling down on a strategy of investing in startup producers and technology in renewable fuels, Sakai said.

Recent investments in the space include: C-Zero, a drop-in decarbonization tech startup in California; Cemvita Factory, a Houston-based synthetic biology firm focused on the decarbonization of heavy industries; Infinium, an electrofuels company innovator in California forming decarbonization solutions for industries in Japan; and Starfire Energy, a modular green ammonia solution provider in Denver.

Series A and Series B valuations for US companies are much higher now than they were a few years ago, Sakai said. Still, the US is the leading climate tech startup ecosystem in the world and provides rich opportunity for capital deployment, Sakai said. Biofuels, SAF and waste-to-energy are leading sectors for MHI investment moving forward.

“We have several hundred of these in the pipeline that we are looking at right now,” he said. “In the next few years, we will increase the number of these portfolio companies.”

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