Ontario, Canada-based Dairy Distillery is raising money for a complex of plants producing ethanol from milk waste, which would in turn be used to make sustainable aviation fuel.
The firm is seeking to raise $5m to complement a commitment from the Canada Infrastructure Bank to fund a FEED study for the project, CEO Omid McDonald said. A follow-on capital raise for the full complex of 12 ethanol plants and a SAF plant would call for $780m of debt and equity.
McDonald was one of several business leaders to pitch investors on the idea at the North American SAF Conference & Expo last week. The company is backed by Canadian private equity firm Ag Capital, which is focused on agtech investments, as well as friends and family investors.
Dairy Distillery has already broken ground on its first ethanol plant in the U.S. Midwest. The $41m plant in Constantine, Michigan will make 2.2 million gallons of ethanol annually from milk permeate, a concentrated waste product containing sugars that can be fermented into ethanol.
The project received $2.5m in funding from the Michigan Strategic Fund. Lending partners include Pathward®, N.A. and CoBank, and the project also received a USDA loan, McDonald said.
The $5m capital raise, combined with the matching funds from CIB, would allow the firm to launch a FEED study for an integrated milk permeate ethanol and SAF plant. It would also fund the modularization of the plant’s design, help secure SAF offtake, and find equity investors and lenders for the larger project.
For the ultimate undertaking, the firm would build 12 milk permeate ethanol plants near existing dairy farms, which would feed into a 30 million gallon per year ethanol-to-jet plant. The estimated cost is $780m, according to McDonald. The aim is to commence construction by 2026.
The company would seek to raise capital for the plant complex via a project finance model, with an equity partner such as a private equity firm putting in around $200m, he said. The dairy producers might also be interested in providing capital for the nearby ethanol plants.
Dairy farms in the U.S. generate enough waste to produce around 350 million gallons of SAF per year, at a cost that would be less than the spot price of jet fuel, McDonald added. Dairy farmers would share in project proceeds in exchange for no-cost milk permeate.
In addition, because the milk permeate is a waste product, it results in SAF with a low CI score of between 23 – 30 grams of CO2 per megajoule.
