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Capital Power appoints new CEO

The Canadian-based power producer has appointed Avik Dey as its next CEO.

Capital Power Corporation’s board of directors has unanimously selected Avik Dey to be its next President and CEO and become a member of the board of directors, effective May 8, 2023.

The appointment follows the planned retirement of Brian Vaasjo who will support Dey to ensure a seamless transition, according to a news release.

The selection follows a rigorous North American search process conducted by a special committee of the Board, with the support of a leading executive recruiting firm. The board met with a wide range of high-quality internal and external candidates.

“Avik is a highly capable leader with deep experience in the energy and power sectors and has built a number of successful companies and teams,” said Board Chair, Jill Gardiner. “I am confident that through his knowledge, passion, and creativity he will inspire the Capital Power team to accelerate the company’s current strategic drive towards net zero. The Board looks forward to working with Avik as we continue to engage with our stakeholders and grow shareholder value. Avik will champion the team, driving the vision with our people who will own the outcomes well into the future.”

Dey spent more than two decades in executive, operational, investing and strategic advisory roles. He has invested over $12bn in growing long term value for energy and energy transition companies. Most recently Mr. Dey held key executive leadership roles with The Carlyle Group, NOVA Chemicals, and Canada Pension Plan Investment Board. Prior to these roles, he was President & CEO of Remvest Energy Partners in Houston, Texas and a Founder serving as Chief Financial Officer of Remora Energy.

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North Dakota CCS project enters final development stages

Closing on financing for Project Tundra at the coal-fired Milton R. Young Station power plant is expected in early 2024.

Minnkota Power Cooperative has solidified agreements with TC Energy, Mitsubishi Heavy Industries, and Kiewit to move a North Dakota carbon capture project into its final stage of development, according to a news release.

Under the arrangements, Minnkota will continue to lead development activities for “Project Tundra” at the Milton R. Young Station power plant, as well as coordination with landowners and community members in the project area near Center, N.D.

Closing on financing and the notice to move forward with construction of Project Tundra are anticipated in early 2024. The project remains subject to closing on financing and a final investment decision by each of the project entities in the consortium.

TC Energy will lead commercialization activities, including qualifying for federal 45Q tax credits. Return on project construction and operation costs would be recouped through 45Q, which provides $85 per ton of CO2 permanently stored underground.

In addition, the project participants submitted applications in May for a $350m grant through the U.S. Department of Energy’s Carbon Capture Demonstration Projects Program and a $150m loan through the state of North Dakota’s Clean Sustainable Energy Authority. The project currently has approval for a $100m CSEA loan.

Project Tundra is designed to capture up to four million metric tons of CO2 annually from the coal-based Young Station. The CO2 will be stored more than a mile underground. Minnkota currently has the largest fully permitted CO2 storage facility in the United States and is pursuing additional CO2 storage opportunities near the Young Station.

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Distressed SAF developer in investor takeover

An investor consortium formed to take over the UK-based SAF developer, which has a project in development in Natchez, Mississippi.

Distressed sustainable aviation fuel developer Velocys has agreed to be taken over by a consortium of investors in a cash deal worth £4.1m.

Based in the UK, and with projects there and in the US, Velocys said last month that, unless it was able to find meaningful sources of funding or strategic options, it was unlikely that the company would be able to continue as a going concern beyond the end of December 2023. This date has now been extended into early-January 2024 as a result of cost control and cash management initiatives, the company said in a December 5 market update.

A fund advised by Lightrock, a fund advised by Carbon Direct Capital along with GenZero and Kibo Investments formed the investor consortium, called Madison Bidco, to take over Velocys. As part of the deal, the investors will inject $40m of growth equity into the company, “which is expected to ensure that Velocys and its management have the capital resources needed to deliver against Velocys’ medium-term strategic plans,” the release notes.

Velocys in October announced a new technology facility in Plain City, Ohio, that will house the reactor core assembly and catalysis operations related to its production process for sustainable aviation fuel.

The company is currently developing two proposed SAF projects, including the Bayou Fuels project in Natchez, Mississippi, which aims to produce 36 million gallons per year of SAF from woody biomass feedstock.

The Altalto project in Immingham, UK would produce 20 million gallons per year of SAF from municipal and commercial solid waste feedstock.

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Canadian IPP evaluating H2 production, carbon capture in Alberta

A carbon hub will use existing infrastructure along with new hydrogen production.

Canadian independent power producer Heartland Generation will evaluate hydrogen production and carbon sequestration as part of its Battle River Carbon Hub (BRCH) project, according to a press release.

BRCH will use existing infrastructure at Heartland’s Battle River Generating Station (BRGS) in Alberta, along with new hydrogen production to generate electricity.

The BRCH project also includes an open-access carbon sequestration hub, proximate to the BRGS, that will capture and sequester carbon emissions from Heartland Generation, and other industrial sources in the region.

The company was selected by the Government of Alberta as part of the Carbon Sequestration Tenure Management process.

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Exclusive: Riverstone Credit spinout preparing $500m fundraise

Breakwall Capital, a new fund put together by former Riverstone Credit fund managers, is preparing to raise $500m to make project loans in decarbonization as well as the traditional energy sector. We spoke to founders Christopher Abbate and Daniel Flannery.

Breakwall Capital is preparing to launch a $500m fundraising effort for a new fund – called Breakwall Energy Credit I – that will focus on investments in decarbonization as well as the traditional energy sector.

The founders of the new fund, Christopher Abbate, Daniel Flannery, and Jamie Brodsky, have spent the last 10 years making oil and gas credit investments at Riverstone Credit, while pivoting in recent years to investments in sustainability and decarbonization.

In addition to bringing in fresh capital, Breakwall will manage funds raised from Dutch trading firm Vitol, for a fund called Valor Upstream Credit Partners; and the partners will help wind down the remaining roughly $1bn of investments held in two Riverstone funds.

Drawing on their experience at Riverstone, Breakwall will continue to make investments through sustainability-linked loans across the energy value chain, but will also invest in the upstream oil and gas sector through Valor and the new Breakwall fund.

“We’re not abandoning the conventional hydrocarbon economy,” Flannery said in an interview. “We’re embracing the energy transition economy and we’re doing it all with the same sort of mindset that everything we do is encouraging our borrowers to be more sustainable.”

In splitting from Riverstone Credit, where they made nearly $6bn of investments, the founders of Breakwall said they have maintained cordial relations, such that Breakwall will seek to tap some of the same LPs that invested in Riverstone. The partners have also lined up a revenue sharing arrangement with Riverstone so that interests are aligned on fund management.

The primary reason for the spinout, according to Abbate, “was really to give both sides more resources to work with: on their side, less headcount relative to AUM, and on our side, more equity capital to reward people with and incent people with and recruit people with, because Riverstone was not a firm that broadly distributed equity to the team.”

Investment thesis

A typical Breakwall loan deal will involve a small or mid-sized energy company that either can’t get a bank loan or can’t get enough of a bank loan to finance a capital-intensive project. Usually, a considerable amount of equity has already been invested to get the project to a certain maturity level, and it needs a bridge to completion.

“We designed our entire investment philosophy around being a transitional credit capital provider to these companies who only needed our cost of capital for a very specific period of time,” Flannery said.

Breakwall provides repayable short-duration bridge-like solutions to these growing energy companies that will eventually take out the loan with a lower cost of capital or an asset sale, or in the case of an upstream business, pay them off with cash flow.

“We’re solving a need that exists because there’s been a flock of capital away from the upstream universe,” he added.

Often, Breakwall loan deals, which come at pricing in the SOFR+ 850bps range, will be taken out by the leveraged loan or high yield market at lower pricing in the SOFR+ 350bps range, once a project comes online, Abbate said. 

Breakwall’s underwriting strategy, as such, evaluates a project’s chances of success and the obstacles to getting built. 

The partners point to a recent loan to publicly listed renewable natural gas producer Clean Energy – a four-year $150m sustainability-linked senior secured term loan – as one of their most successful, where most of the proceeds were used to build RNG facilities. Sustainability-linked loans tie loan economics to key performance indicators (KPIs) aimed at incentivizing cleaner practices.

In fact, in clean fuels, their investment thesis centers on the potential of RNG as a viable solution for sectors like long-haul trucking, where electrification may present challenges. 

“We are big believers in RNG,” Flannery said. “We believe that the combination of the demand and the credit regimes in certain jurisdictions make that a very compelling investment thesis.”

EPIC loan

In another loan deal, the Breakwall partners previously financed the construction of EPIC Midstream’s propane pipeline from Corpus Christi east to Sweeny, Texas.

Originally a $150m project, Riverstone provided $75m of debt, while EPIC committed the remaining capital, with COVID-induced cost overruns leading to a total of $95m of equity provided by the midstream company. 

The only contract the propane project had was a minimum volume commitment with EPIC’s Y-Grade pipeline, because the Y-Grade pipeline, which ran to the Robstown fractionator near Corpus Christi, needed an outlet to the Houston petrochemical market, as there wasn’t enough export demand out of Corpus Christi.

“So critical infrastructure: perfect example of what we do, because if your only credit is Y-Grade, you’re just a derivative to the Y-Grade cost of capital,” Abbate said.

Asked if Breakwall would look at financing the construction of a 500-mile hydrogen pipeline that EPIC is evaluating, Abbate answered affirmatively.

“If those guys called me and said, ‘Hey, we want to build this 500-mile pipeline,’ I’d look at it,” he said. “I have to see what the contracts look like, but that’s exactly what type of project we would like to look at.”

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Waste-to-energy company interviewing advisors for strategic capital raise

Vancouver-based Klean Industries plans to run a process to raise between $250m – $500m of capital to deploy into projects, some of which would use green hydrogen to upgrade recovered fuel and pyrolysis oils.

Waste-to-energy specialist Klean Industries is interviewing financial advisors and planning to run a process to find investors for a strategic capital raise.

The Vancouver-based company is seeking to raise between $250m – $500m in a minority stake sale that would value the company around $1bn, Klean CEO Jesse Klinkhamer said in an interview.

Klean had previously intended to list on the NASDAQ exchange but those plans were nixed due to the COVID-19 pandemic, he said. The company still plans to list publicly in 2024 or 2025.

Proceeds from a capital raise now would be used to “rapidly deploy” into the projects that Klean is advancing around the globe, Klinkhamer said.

For one of those projects – a flagship tire pyrolysis plant in Boardman, Oregon – Klean is raising non-recourse debt to finance construction, the executive said. Klinkhammer declined to name the advisor for the project financing but said news would be out soon and added that the company has aligned itself with infrastructure funds willing to provide non-recourse debt for the facility.

The Boardman project, which is expected to cost roughly $135m, is an expansion of an existing site where Klean will use its advanced thermal conversion technology to recover fuel oil, steel, and refined carbon black from recycled tires. The end products are comparable to virgin commodities with the exception of being more cost-effective with a lower carbon footprint.

“A lot of what we do is of paramount interest to a lot of the ESG-focused infrastructure investors that are focused on assets that tick all the boxes,” Klinkhamer said, noting the consistent output of the waste-to-energy plants that Klean is building along with predictable prices for energy sourced from renewable power.

Klean has also partnered with H2Core Systems, a maker of containerized green hydrogen production plants, and Enapter, an electrolyzer manufacturer. The company will install a 1 MW electrolyzer unit at the Boardman facility, with the green hydrogen used to upgrade recovered fuel oil and pyrolysis oil into e-fuels that meet California’s Low Carbon Fuels Standards.

“We were exploring how we could improve the quality of the tire pyrolysis oil so that it could enter the LCFS market in California,” he said, “because there are significant carbon credits and tax incentives associated with the improved product.”

The company received proposals from industrial gas companies to bring hydrogen to the Boardman facility that were not feasible, and Klean opted for producing electrolytic hydrogen on site in part due to the abundance of low-cost hydroelectric power and water from the nearby Columbia River.

Addressable market

Discussing Klean’s addressable market for waste-to-energy projects, Klinkhamer points to Japan as an example of a comparable “mature” market.

Japan, an island nation of 126 million people, has built roughly 5,000 resource recovery, waste-to-energy plants of various scopes and designations, he notes. For comparison, the United Kingdom – another island nation of 67 million people – has just 20 waste-to-energy plants.

“The opportunity for waste-to-energy in the UK alone is mind boggling,” he said. “There are a thousand opportunities of scope and scale. Nevermind you’ve got an aging, outdated electrical infrastructure, limited landfills, landfill taxes rising – a tsunami of issues, plus the ESG advent.”

A similar opportunity exists in North America, he noted, where there are around 100 waste-to-energy plants for 580 million people. The company is working on additional tire, plastic, and waste-to-energy projects in North America, and also has projects in Australia and Europe.

Hydrogen could be the key to advancing more projects: waste-to-energy plants have typically been hamstrung by a reliance on large utilities to convert energy generated from waste into electricity, which is in turn dependent on transmission. But the plants could instead produce hydrogen, which can be more easily and cost effectively distributed, Klinkhamer said.

“There is now an opportunity to build these same plants, but rather than rely on the electrical side of things where you’re dealing with a utility, to convert that energy into hydrogen and distribute it to the marketplace,” he added.

Hydrogen infrastructure

Klinkhamer says the company is also examining options for participating in a network of companies that could transform the logistics for bringing feedstock to the Boardman facility and taking away the resulting products.

The company has engaged in talks with long-haul truckers as well as refining companies and industrial gas providers about creating a network of hydrogen hubs – akin to a “Tesla network” – that would support transportation logistics.

“It made sense for us to look at opportunities for moving our feedstock via hydrogen-powered vehicles, and also have refueling stations and hydrogen production plants that we build in North America,” he said.

Klean would need seven to 12 different hubs to supply its transportation network, Klinkhamer estimates, while the $350m price tag for the infrastructure stems from the geographic reach of the hubs as well as the sheer volume of hydrogen required for fueling needs.

“With the Inflation Reduction Act, the U.S. has set itself up to be the lowest-cost producer of hydrogen in the world, which will really spur the development of hydrogen logistics for getting hydrogen out,” he said. “And to get to scale, it’s going to require some big investments.”

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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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