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Enerkem and Technip developing waste-to-biofuels projects

Enerkem is involved in the development and construction of new commercial-scale waste-to-methanol facilities in Canada and Europe.

Enerkem Inc. and Technip Energies have signed a memorandum of understanding to enter into a Collaboration Agreement aimed at accelerating the deployment of Enerkem’s technology platform for biofuels and circular chemical products from non-recyclable waste materials, according to a news release.

Enerkem specializes in the development and commercialization of its groundbreaking gasification technology transforming non-recyclable waste into biofuels, low-carbon fuels and circular chemicals, catering to hard-to-abate sectors such as sustainable aviation and marine fuels. Since 2016, Enerkem has been operating a commercial demonstration scale facility in Alberta, Canada. Additionally, the company is currently involved in the development and construction of new commercial-scale waste-to-methanol facilities in Canada and Europe.

Technip Energies, having successfully executed bio and low-carbon fuels projects worldwide, will contribute its expertise in engineering, technology integration and project delivery to support projects developed by Enerkem. This partnership will enhance Enerkem’s project delivery capacity and speed. Furthermore, the collaboration will focus on strategic efforts to optimize design elements and industrialize the approach through the replication of Enerkem’s designs for future projects.

To expedite the deployment of its technology, Enerkem intends to establish a Development Company (DevCo). The purpose of DevCo is to acquire sites and secure relevant permits for the replicable methanol biorefinery design, supporting the production of bio and low-carbon fuels, as well as circular chemicals.

Dominique Boies, CEO of Enerkem, stated: “We are excited to partner with Technip Energies to accelerate the deployment of Enerkem’s technology in Europe, North America, and the Middle East. Technip Energies’ extensive expertise will enable Enerkem’s clients to benefit from projects speed to market and cost efficiencies, supporting their decarbonization efforts and sustainability goals.”

Bhaskar Patel, SVP Sustainable Fuels, Chemicals and Circularity of Technip Energies, said: “We are pleased to join forces with Enerkem on the deployment of its technology platform to convert waste into sustainable and valuable end products such as biofuels. By leveraging our expertise in engineering, sustainable chemistry and biofuels projects, we will support project execution and Enerkem’s technology deployment.”

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OMERS exec joins CCS project developer

Former managing partner and head of ventures at OMERS Ventures Damien Steel has joined a Montreal-based CCS developer as CEO.

Deep Sky, a Montreal-based venture commercializing carbon removal and storage solutions at scale, today announced that Damien Steel will take the helm as CEO.

Most recently, Steel served as managing partner and global head of ventures at Toronto-based OMERS Ventures (OV), part of one of Canada’s largest pension plans. There, he was responsible for investments, fund operations, and strategic global oversight of the group. During his tenure, he tripled the size of the platform to $2.5bn in assets while generating strong growth. Previously, he held roles with BridgeScale Partners and EdgeStone Capital Partners. Before joining OV, Damien was a healthcare entrepreneur, founding and selling a digital dental laboratory startup. He also serves on the board of tech disruptors, including Hopper, TouchBistro, Hootsuite and DuckDuckGo. Alongside his new CEO role at Deep Sky, Damien will remain a senior advisor to OMERS Ventures.

Steel brings significant finance, climate, infrastructure, and corporate governance experience in the highly regulated Canadian pension business to the position. In 2022, he led the early stage investment into a Toronto-based climate tech startup and gained first-hand insight into how businesses globally are prioritizing climate risk. Steel also led OV’s largest and most successful investment in travel app, Hopper, also started by Deep Sky founders Fred Lalonde and Joost Ouwerkerk. Through his work with Hopper in recent years, Damien has become increasingly committed to tackling the climate crisis.

“For nearly two decades I’ve had the privilege of supporting world class founders in their efforts to build world class companies,” said Steel. “At Deep Sky, I hope to apply all that I’ve learned from these great visionaries to what I believe is the greatest challenge facing humanity today – climate change inaction.”

“Building an ambitious company to reverse climate change requires an equally ambitious, big thinker at the helm,” said Deep Sky Co-Founder Fred Lalonde. “Damien is a proven visionary, leader, fundraiser, and operator who can catapult Deep Sky’s growth to meet the urgent threat that climate change presents. In working together since 2012, he’s demonstrated an uncanny knack for spotting the next moonshot that withstands the test of time. I’m pleased that he’s recognized Deep Sky as his next big bet.”

Deep Sky is working to build large-scale carbon removal and storage infrastructure in Canada. Acting as a project developer, the company is bringing together the most promising direct air and ocean capture technologies to deliver the largest supply of high quality carbon credits to the market. Powered by renewable energy, Deep Sky’s facilities are strategically located in Quebec, a region with an abundance of hydroelectric power, immense wind power potential and a vast territory with the rich geological makeup required for carbon capture.

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Bloom Energy partners for expansion in Spain and Portugal

The California-based company has teamed with Telam Partners, a leading senior advisory firm specialized in the financing and market entry of energy, infrastructure, and technology projects.

Bloom Energy has teamed with Telam Partners, a leading senior advisory firm specialized in the financing and market entry of energy, infrastructure, and technology projects, to expand Bloom’s footprint into Spain and Portugal, according to a press release.

The two companies will market and deploy the Bloom Electrolyzer, as well as Bloom’s Energy Servers, supporting customers with solutions that can efficiently meet their energy security needs and green hydrogen demand.

“Business and political leaders are looking for clean technologies and energy solutions,” said Tim Schweikert, senior managing director of International Business Development, Bloom Energy Inc. “Bloom is now engaged to address these priorities in Spain and Portugal. Telam is a partner of choice, supporting Bloom’s long-term commitment to the Iberian Peninsula and to respond promptly to green transition policies and environmental imperatives.”

“At Telam we are excited to be able to work with the solid oxide fuel cell leader on the very important and urgent challenge of transitioning towards renewable energy,” said Jaime Malet, CEO of Telam Partners. “We are convinced that Spain and Portugal, thanks to an abundance of wind and solar resources, are among the clearest candidates to lead the production of green hydrogen in Europe.”

In line with Spanish and Portuguese objectives to become global green hydrogen hubs, Telam and Bloom will market Bloom’s solid oxide electrolyzer. With impressive efficiency confirmed in testing at the U.S. Department of Energy’s Idaho National Labs, the Bloom Electrolyzer provides hydrogen with low cost of ownership. Further, the Bloom Electrolyzer is well suited for large-scale installations, as well as projects such as ammonia and renewable fuels synthesis, which can be integrated with the electrolyzer.

Telam and Bloom will also market Bloom’s highly efficient fuel cell Energy Server™ to decarbonize port activities when ships are at berth. Bloom’s fuel-flexible technology, which can operate on natural gas, biogas or hydrogen, produces electricity without combustion and reduces carbon emissions compared to the auxiliary diesel gensets usually used for shore power.

This represents Bloom Energy’s first deal for the Iberian Peninsula. It confirms Bloom’s commitment to the European market, after announcing the installation of its energy platform at Ferrari’s Italian plant and a strategic partnership for the Italian market with the engineering, procurement and construction company CEFLA in 2022.

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Tailwater Capital partners with renewable diesel and SAF developer

The company, Ash Creek Renewables, serves North American renewable diesel and sustainable aviation fuel producers through its feedstock marketing, distribution, pretreatment and logistics operations.

Tailwater Capital LLC, an energy and growth infrastructure private equity firm, has agreed to a partnership with Ash Creek Renewables, a platform dedicated to developing renewable fuel feedstock solutions to meet the demands of the growing renewable fuels market, according to a news release.

Terms of the partnership were not disclosed.

The company serves North American renewable diesel and sustainable aviation fuel producers through its feedstock marketing, distribution, pretreatment and logistics operations.

Dallas-based Tailwater Capital is an energy and growth infrastructure private equity firm with $4.4bn in commited capital.

Ash Creek is led by chief executive officer John Cusick, who has over 20 years of experience in the low carbon fuels sector. Previously, Cusick was an owner of The Jacobsen, the leading consultancy for the renewable fuels industry. Prior to The Jacobsen, Cusick held senior positions at Renewable Biofuels, Inc., Glencore and Morgan Stanley.

“We are thrilled to partner with Tailwater as we embark on this exciting new chapter,” Cusick said. “Pairing Ash Creek’s deep industry knowledge, capabilities and multi-decade relationships in the renewable fuels industry with Tailwater’s experience in downstream-adjacent infrastructure creates an ideal partnership to execute our strategy.”

“Ash Creek will make an incredible addition to our portfolio and aligns well with our growth infrastructure expertise that has been developed through over a decade of investing in the downstream-adjacent infrastructure, renewable fuels, and logistics sectors,” said Edward Herring, co-founder and managing partner of Tailwater. “We are excited to partner with Ash Creek as they continue to develop meaningful solutions for renewable fuel producers.”

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exclusive

Of CfDs and RFNBOs: Untangling the global hydrogen policy web

US ammonia and hydrogen project developers are increasingly looking to Japan and South Korea as target markets under the belief that new rules for clean hydrogen and its derivatives in Europe are too onerous.

Much fuss has been made about the importance of pending guidance for the clean hydrogen industry from US regulators. Zoom out further and major demand centers like the European Union, Japan, and South Korea have similarly under-articulated or novel subsidy regimes, leaving US clean fuels project developers in a dizzying global tangle of red tape. 

But in the emerging global market for hydrogen and ammonia offtake, several themes are turning up. One is that US project developers are increasingly looking to South Korea and Japan as buyers, turning away from Europe following the implementation of rules that are viewed as too onerous for green hydrogen producers.

The other is that beneath the regulatory tangle lies a deep market, helping to answer one of the crucial outstanding questions that has been dogging the nascent ammonia and hydrogen industry: where is the offtake? 

Many projects are proceeding towards definitive offtake agreements and final investment decisions despite the risks embedded in potential changes in policy, according to multiple project finance lawyers. In most cases, reaching final agreements for offtake would not be prudent given the raft of un-issued guidance in these major markets, said the lawyers, who acknowledge a robust offtake market but may advise their clients against signing final contracts.

The European Union rules for green hydrogen and its derivatives became law in June, and included several provisions that are proving challenging for developers and their lawyers to structure around: prohibiting state-subsidized electricity in the production of green hydrogen, and the requirement that power for green hydrogen be purchased directly from a renewable energy supplier. 

Taken together, the policy developments have pushed many US project developers away from Europe and toward Japan and South Korea, where demand for low-carbon fuels is robust and regulations are viewed as less burdensome, if still undefined, experts say.

Developers are carefully choosing jurisdictions for their target offtake markets, “limiting their focus to North Asian rather than European buyers, with the expectation that certain standards and regulations will be less strict, at least in the near term,” said Allen & Overy Partners Hitomi Komachi and Henry Sohn, who are based in Japan and Korea, respectively.

Trade association Hydrogen Europe lambasted the new European rules last year while they were still in formation, saying they would cause a “mass exodus” of the continent’s green hydrogen industry to the US.

Make or break

US policymakers delivered a shock blow with last year’s approval of the Inflation Reduction Act – but its full benefits have yet to flow into the clean fuels sector due to outstanding guidance on additionality, regionality, and matching requirements. 

At the same time, the 45V tax credit for clean hydrogen has been called potentially the most complex tax credit the US market has ever seen, requiring a multi-layered analysis to ensure compliance. The US policy uncertainty is coated on top of an already-complex development landscape facing developers of first-of-kind hydrogen and ammonia projects using electrolyzer or carbon capture technologies. 

“Even though folks are moving forward with projects, the lack of guidance impacts parties’ willingness to sign definitive documents, because depending on the guidance, for some projects, it could break the economics,” said Marcia Hook, a partner at Kirkland & Ellis in Washington DC.

Now, US developers seeking access to international markets are contending with potential misalignment of local and international rules, with Europe’s recently enacted guidelines serving as a major example of poorly arrayed schemes. 

Some US developers have already decided it may be challenging to meet the EU’s more rigorous standards, according Hook, who added that, beyond the perceived regulatory flexibility, developers appear to be garnering more offtake interest from potential buyers in Asia.

Projects that depend on outstanding guidance in Asia are also moving ahead, a fact that, according to Alan Alexander, a Houston-based partner at Vinson & Elkins, “represents a little bit of the optimism and excitement around low-carbon hydrogen and ammonia,” particularly in Japan and Korea.

“Projects are going forward but with conditions that these schemes get worked out in a way that’s bankable for the project,” he added. “It’s not optimal, but you can build it in,” he said, referencing a Korean contract where conditions precedent require that a national clean hydrogen portfolio standard gets published and the offtaker is successful in one of the  Korean power auctions.

RED III tape

Unlike the US, the EU has focused on using regulation to create demand for hydrogen and derivative products through setting mandatory RFNBO quotas for the land transport, industry, shipping and aviation sectors, according to Frederick Lazell, a London-based lawyer at King & Spalding.

Lazell called the EU rules “the most fully-developed and broad market-creation interventions that policymakers have imposed anywhere in the world.” As a result, being able to sell RFNBO into Europe to meet these quotas is expected to fetch the highest prices – and therefore potentially the highest premiums to suppliers, he said.

The European guidelines enacted in June introduced several provisions that will make it challenging for US developers to structure projects that meet the EU’s classification for renewable fuels of non-biological origin (RFNBOs).

For one, the European Commission issued guidance that prohibits subsidies for renewable energy generation when it is transmitted via a power purchase agreement through the electrical grid to make RFNBO.

This provision potentially eliminates all green hydrogen-based projects in the US from qualifying as an RFNBO, a managing partner at a US-based investment firm said, given that green hydrogen projects will likely be tied to renewables that are earning tax credits.

“The EC’s decision to include this restriction on State aid makes the EU’s version of additionality more onerous than even the strictest requirements being considered in the US,” lawyers from King & Spalding wrote in a September note, adding that some people in the industry argue that the decision is inexplicable under the RED II framework that authorized the European Commission to define additionality. 

A second challenge of the EU regulations is the mandate that PPAs be contracted between the RFNBO producer and the renewable energy source. Such a requirement is impossible for electricity markets where state entities are mandated to purchase and supply power, a structure that is common in multiple jurisdictions. Moreover, the requirement would remove the possibility of using a utility or other intermediary to deliver power for green hydrogen production.

“These technical issues may be serious enough for some in the industry to consider challenges before the Court of Justice of the European Union,” the King & Spalding lawyers wrote. “However, it is not yet clear whether there is the appetite or ability to turn such suggestions into a formal claim.”

Go East

Although the subsidy regimes in Japan and South Korea are expected to be less stringent in comparison to the EU, the programs are still not completely defined, which leaves some uncertainty in dealmaking as projects move forward.

The traditional energy sector has always dealt with change-in-law risk, but the risk is heightened now since regulations can change more rapidly and, in some cases, impact ongoing negotiations, said Komachi and Sohn, of Allen & Overy, in a joint email response. 

“Certain regulations coming into force may be contingent or related to the funding plan of the project,” they said. As such, clean fuels offtake frameworks need to facilitate not only the tracking and counting of emissions, they added, but also leave sufficient flexibility as regulatory frameworks evolve.

Japan, through its Hydrogen Basic Strategy, set out targets to increase the supply of hydrogen and ammonia in the country while reducing costs, deploying Japanese electrolysis equipment, and increasing investment into its supply chain. Additionally, Japan is contemplating a contracts-for-difference-style regime to support the gap between the price of clean hydrogen or ammonia and corresponding fossil fuels for 15 years.

Still, standards for “clean hydrogen” have not been clarified, though most observers believe the country will follow a carbon emissions lifecycle analysis in line with IPHE criteria, which is proposed at 3.4 kilograms of carbon dioxide per kilogram of hydrogen. Similarly, rules around “stacking” subsidies in Japan with other jurisdictions such as the Inflation Reduction Act have not been defined.

Meanwhile, Korea is considering carbon emissions standards of up to 4 kilograms of CO2 per kilogram of hydrogen. It is pushing for greater use of hydrogen in part through its Amended Hydrogen Act, requiring electric utilities to buy electricity made from hydrogen in a bidding round starting in 2024. The requirement scales up from 1,300 GWh of general hydrogen in 2025 to 5,200 GWh for general hydrogen and 9,5000 GWh for clean hydrogen in 2028.

Both countries are working to incentivize the entire supply chain for hydrogen and ammonia to ensure the separate pieces of infrastructure will be available on investable and bankable terms, with the aim of creating a demand center when the export centers are developed, Komachi and Sohn added.

They also point out that the emerging clean fuels offtake market will operate in the near term in a more spotty fashion in comparison with the more liquid markets for oil and gas.

“Hydrocarbon markets have gradually moved towards portfolio players, trading and optimization,” said Goran Galic, an Australia-based partner at Allen & Overy. “Smaller market size, technological and regulatory considerations mean that clean fuels, at least initially, require more of a point-to-point approach and so building long-term working relationships between the developers and offtakers is a key aspect of offtake strategy.”

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exclusive

Interview: Vinson & Elkins’ Alan Alexander on the emerging hydrogen project development landscape

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

Vinson & Elkins Partner Alan Alexander, whose clients include OCI and Lotus Infrastructure, has watched the hydrogen project development space evolve from a fledgling idea to one that is ready for actionable projects.

In the meantime, a number of novel legal and commercial issues facing hydrogen project developers have come to the forefront, as outlined in a paper from the law firm this week, which serves as a guide for thinking through major development questions that can snag projects.

In an interview, Alexander, a Houston-based project development and finance lawyer, says that, although some of the issues are unique – like the potential for a clean fuels pricing premium, ownership of environmental attributes, or carbon leaking from a sequestration site – addressing them is built on decades of practice.

“The way I like to put it is, yes, there are new issues being addressed using traditional tools, but there’s not yet a consensus around what constitutes ‘market terms’ for a number of them, so we are having to figure that out as we go,” he says.

Green hydrogen projects, for example, are “quite possibly” the most complex project type he has seen, given that they sit at the nexus between renewable electricity and downstream fuels applications, subjecting them to the commercial and permitting issues inherent in both verticals.

But even given the challenges, Alexander believes the market has reached commercial take-off for certain types of projects.

“When the hydrogen rush started, first it was renewables developers who knew a lot about how to develop renewables but nothing about how to market and sell hydrogen,” he says. “Then you got the people who were very enthusiastic about developing hydrogen projects but didn’t know exactly what to do with it. And now we’re beginning to see end-use cases develop and actionable projects that are very exciting, in some cases where renewables developers and hydrogen developers have teamed up to focus on their core competencies.”

A pricing premium?

In the article, Vinson & Elkins lawyers note that commodities pricing indices are not yet distinguishing between low-carbon and traditional fuels, even though a clean fuel has more value due to its low-carbon attributes. The observation echoes the conclusion of a group of offtakers who viewed the prospect of paying a premium for clean fuels as unrealistic, as they would need to pass on the higher costs to customers.

Eventually, Alexander says, the offtake market should price in a premium for clean products, but that might depend in the near term on incentives for clean fuels demand, such as carbon offsets and levies, like the EU’s Carbon Border Adjustment Mechanism.

“Ultimately what we need is for the market to say, ‘I will pay more for low-carbon products,’” he says. “The mindset of being willing to pay more for low-carbon products is going to need to begin to permeate into other sectors. 30 or 40 years ago the notion of paying a premium for an organic food didn’t exist. But today there are whole grocery store chains built around the idea. When the consumer is willing to pay a premium for low-carbon food, that will incentivize a farmer to pay a premium for low carbon fertilizer and ammonia, which will ultimately incentivize the payment of a premium for low-carbon hydrogen. The same needs to repeat itself across other sectors, such as fuels and anything made from steel.”

The law firm writes that US projects seeking to export to Europe or Asia need to take into account the greenhouse gas emissions and other requirements of the destination market when designing projects.

In the agreements that V&E is working on, for example, clients were first focused on structuring to make sure they met requirements for IRA tax credits and other domestic incentives, Alexander says. Meanwhile, as those clean fuels made their way to export markets, customers were coming back with a long list of requirements, “so what we’re seeing is this very interesting influx” of sustainability considerations into the hydrogen space, many of which are driven by requirements of the end-use market, such as the EU or Japan.

The more stringent requirements have existed for products like biofuels for some time, he adds, “but we’re beginning to see it in hydrogen and non-biogenic fuels.”

Sharing risk

Hydrogen projects are encountering other novel commercial and legal issues for which a “market” has not yet been developed, the law firm says, especially given the entry of a raft of new players and the recent passage of the Inflation Reduction Act.

In the case of a blue hydrogen or ammonia project where carbon is captured and sequestered but eventually leaks from a geological formation, for example, no one knows what the risk truly is, and the market is waiting for an insurance product to provide protection, Alexander says. But until it does, project parties can implement a risk-sharing mechanism in the form of a cap on liabilities – a traditional project development tool.

“If you’re a sequestration party you say, ‘Yeah, I get it, there is a risk of recapture and you’re relying on me to make sure that it doesn’t happen. But if something catastrophic does happen and the government were to reclaim your tax credits, it would bankrupt me if I were to fully indemnify you. So I simply can’t take the full amount of that risk.’”

What ends up getting negotiated is a cap on the liability, Alexander says, or the limit up to which the sequestration party is willing to absorb the liability through an indemnity.

The market is also evolving to take into account project-on-project risk for hydrogen, where an electrolyzer facility depends on the availability of, for example, clean electricity from a newly built wind farm.

“For most of my career, having a project up and reaching commercial operations by a certain date is addressed through no-fault termination rights,” he says. “But given the number of players in the hydrogen space and the amount of dollars involved, you’re beginning to see delay liquidated damages – which are typically an EPC concept – creep into supply and offtake agreements.”

If a developer is building an electrolyzer facility, and the renewables partner doesn’t have the wind farm up and running on time, it’s not in the hydrogen developer’s interest to terminate through a no-fault clause, given that they would then have a stranded asset and need to start over with another renewable power provider. Instead, Alexander says, the renewables partner can offset the losses by paying liquidated damages.

Commercial watch list

In terms of interesting commercial models for hydrogen, Alexander says he is watching the onsite modular hydrogen development space as well as power-to-fuels (natural gas, diesel, SAF), ammonia and methanol, given the challenges of transporting hydrogen.

“If you’re going to produce hydrogen, you need to produce it close to the place where it’s going to be consumed, because transporting it is hard. Or you need to turn it into something else that we already know how to transport – natural gas, renewable diesel, naphtha, ammonia.”

Alexander believes power-to-fuels projects and developers that are focused on smaller, on-site modular low-carbon hydrogen production are some of the most interesting to watch right now. Emitters are starting to realize they can lower their overall carbon footprint, he says, with a relatively small amount of low-carbon fuels and inputs.

“The argument there is to not completely replace an industrial gas supplier but to displace a little bit of it.”

At the same time, the mobility market may take off with help from US government incentives for hydrogen production and the growing realization that EVs might not provide a silver-bullet solution for decarbonizing transport, Alexander adds. However, hydrogen project developers targeting the mobility market are still competing with the cost of diesel, the current “bogey” for the hydrogen heavy mobility space, Alexander says.

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Exclusive: Renewable fuels firm hires advisor for topco raise

A renewable fuels firm with operations in California has hired a bulge bracket bank to raise project and platform capital for new developments in the Gulf Coast.

Oberon Fuels, a California-based renewable fuels developer, has hired Morgan Stanley for a topco and project capital raise to launch soon, CEO Rebecca Bordreaux said in an interview.

The company, backed by Suburban Propane, plans to reach COD on its next facility in the Gulf Coast in 2026, Boudreaux said. Late last year the company hired its first CFO Ann Anthony and COO Derek Winkel.

Oberon produces rDME at its Maverick Innovation Center in Brawley, California and recently established a partnership with DCC Fuels focused on Europe.

The location of the Gulf Coast facility is not public, Bordreaux said, though the company aims to reach FID on it this year. When operational it would produce 45,000 mtpy of methanol, or a comparative amount of rDME. Capex on the facility is in the range of $200m.

The company is shifting toward production of methanol as a shipping fuel, she said. New opportunities also include using DME as a renewable hydrogen carrier, as the fuel is easily transportable and compatible with many existing logistical networks.

Oberon is also preparing to issue $100m of municipal bonds from the state of Texas, Bordreaux said.

More than $50m has been raised by the company to date, with Suburban Propane being the largest investor and customer in California, Bordreaux said. The company has a third project in the pre-FEED phase.

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