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Exclusive: Green hydrogen developer raising capital for flagship project

A Québécois green hydrogen developer has retained a financial advisor and is raising equity capital for a pipeline of smaller scale projects in Canada and the United States.

Charbone, a publicly traded green hydrogen developer based near Montreal, has retained a financial advisor and is seeking equity capital for a pipeline of smaller scale projects in Canada and the US.

The company is working with advisory firm US Capital Global to raise $5m in equity capital to support the first phase of its flagship green hydrogen project, the Sorel-Tracy plant, located about 45 minutes from Montreal, CFO Benoit Veilleux said in an interview.

The Sorel-Tracy project, which could expand to up to 10 tonnes per day of production, requires about $2m of capital in order to advance through phase 1, which would amount to a capacity of approximately 200 kg per day. The balance of the raise would support development of additional projects, including one in Michigan that will seek to provide green hydrogen for the automobile industry, Veilleux said.

Veilleux expects that the projects will eventually be back-levered through a debt raise, and that Canada’s export agencies, including Investissement Québec, will be involved in providing financing.

In total, Charbone plans to scale and deliver 16 green hydrogen production facilities in the US and Canada by 2030, each set up as a separate legal entity with its own strategic and financial backers. The company is also working with New York-based Maxim Group on additional project financing and equity raise aspects of its project pipeline.

Potential Charbone sites. Source: Charbone corporate presentation

Charbone believes the smaller scale of their projects give it a near-term advantage in getting projects off the ground, according to Veilleux, as they are finding offtakers interested in the product now, versus waiting several more years for larger projects to come online.

“We’re focusing on this niche and we have a window, we think of 10 to 15 years where there’s big players or big projects that will start to come into play,” he said. “But at the end of the day, it’s a massive market that is increasing every day.”

Charbone is working with renewable energy construction firm EBC Inc. to lead project delivery, and has signed offtake contracts with Superior Plus, a North American gas marketer and distributor.

While Charbone has chosen its sites to be close to industrial demand, it chose to sign offtake agreements with a distributor to take advantage of Superior’s existing infrastructure and transportation capabilities.

The company plans to use PEM electrolyzers that can ramp up and down more quickly with intermittent power from renewables, and is in talks with several of the major PEM manufacturers.

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Hydrogen and CCUS factor heavily in U.S. DOE heavy-industry decarbonization selections

The projects are expected to reduce the equivalent of more than 14 million metric tons of carbon dioxide emissions each year.

Hydrogen and CCUS factor heavily into the projects that have been selected by the U.S. Department of Energy (DOE) as part of a $6 billion funding program for 33 projects across more than 20 states to decarbonize energy-intensive industries and reduce industrial greenhouse gas emissions.

The full list of winners selected for grant negotiations is here. Below are some of the highlights:

Steelmaker SSAB has been selected to negotiate for a grant of up to $500m for the Hydrogen-Fueled Zero Emissions Steel Making project, which would bring green hydrogen-based steel production to the United States to build the first commercial-scale facility in the world using fossil-free Direct Reduced Iron (DRI) technology with 100% hydrogen in Perry County, Mississippi. The project also plans to expand SSAB’s Montpelier, Iowa steelmaking facility to utilize the resulting hydrogen-reduced DRI. SSAB has signed a letter of intent for Hy Stor Energy to supply green hydrogen and renewable electricity to the DRI facility. 

Cleveland-Cliffs has been selected to receive up to $500m for the Hydrogen-Ready Direct Reduced Iron Plant and Electric Melting Furnace Installation project for iron and steel, including plans to install a hydrogen-ready flex-fuel Direct Reduced Iron (DRI) plant and two electric melting furnaces at Cleveland-Cliffs’ Middletown Works mill in Ohio. 

Orsted would receive up to $100m for its Star e-Methanol project, which plans to use captured carbon dioxide from a local industrial facility to produce e-methanol to reduce the carbon footprint for hard-to-electrify sectors like shipping. Orsted’s facility is estimated to produce up to 300,000 metric tons of e-methanol per year and would reduce the carbon footprint by 80% or more than traditional production methods. 

Constellium has been selected to receive up to $75m for a zero carbon aluminum casting plant at its Ravenswood, West Virginia facility. The project would install low-emissions SmartMelt furnaces that can operate using a range of fuels, including clean hydrogen.

The National Cement Company of California would receive up to $500m for a carbon-neutral cement plant in Lebec, California. Instead of using fossil fuels, the project would use locally sourced biomass from agricultural byproducts such as pistachio shells, replace clinker with a less carbon intensive alternative (calcined clay) to produce limestone calcined clay cement (LC3), and capture and sequester the plant’s remaining approximately 950,000 metric tons of carbon dioxide each year.

Heidelberg Materials would receive up to $500m for an integrated carbon capture, transport, and storage system at their newly modernized plant located in Mitchell, Indiana. This project would capture at least 95% of the carbon dioxide from one of the largest cement plants in the nation and store it in a geologic formation beneath the plant property.

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Ampaire tests SAF with hybrid electric aircraft

Combining the hybrid electric propulsion with SAF fuel more than doubles the efficiency and drives emissions to near zero, the company said.

Ampaire Inc., a maker of hybrid electric aircraft systems, has completed its first ground test utilizing pure 100 percent ASTM D7566 Sustainable Aviation Fuel (SAF) produced by Dimensional Energy from electricity and carbon dioxide.

Los Angeles-based Ampaire conducted rigorous ground testing using its Eco Caravan hybrid electric aircraft to validate the performance and viability of Dimensional Energy’s pure e-fuel SAF, according to a news release. The results exceeded expectations, demonstrating an increase in efficiency compared to traditional aviation fuels.

Ampaire’s AMP-H570 AMP Drive™ hybrid electric propulsion units are capable of 50 to 70 percent reduction in fuel and emissions as compared to conventional Pratt & Whitney PT6 turboprop engines typically found in Cessna Caravan turboprops. Combining the hybrid electric propulsion with SAF fuel more than doubles the efficiency and drives emissions to near zero.

Kevin Noertker, CEO of Ampaire, emphasized the significance of this milestone, stating: “The successful ground test using pure SAF from Dimensional Energy marks a pivotal moment in our journey towards sustainable aviation. By showcasing the transformative efficiency gains achievable through hybrid electric propulsion, we are driving the future of eco-friendly air travel. For those already recognizing the potential of SAF, its integration into our hybrid electric aircraft enhances its appeal even further.”

SAF, derived from renewable resources, has emerged as a key solution to reducing aviation’s carbon footprint. Dimensional Energy has two ongoing projects which will add significant inventory to the world’s availability of e-fuels. By scaling hybrid electric technology and SAF for aviation, there is an additional opportunity to address the quality and cost concerns associated with SAF, paving the way for even broader use in the aviation industry.

“Technology providers have to collaborate beyond innovation and into execution. By combining Dimensional Energy e-fuels with Ampaire’s aircraft technology that can reduce the amount of fuels combusted during flight, we quicken the pace up the steep curve of the energy transition and reduce the need for extraction faster,” said Jason Salfi, CEO of Dimensional Energy. “We are thrilled to collaborate with Ampaire on this groundbreaking initiative. Our partnership underscores our commitment to advancing sustainable aviation fuel solutions that offer tangible benefits to the aviation industry and contribute to a greener future.”

Elemental Excelerator, a nonprofit investor focused on scaling climate technologies with deep community impact, has provided project development capital and multiple years of hands-on support to help scale Ampaire and Dimensional Energy’s technologies.

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ITM Power gets 100 MW electrolyzer capacity reservation

The UK based electrolyzer maker signed the capacity reservation with Shell Deutschland.

ITM Power has signed a capacity reservation with Shell Deutschland GmbH, under which Shell has secured future production capacity for the manufacturing of its electrolyser stacks, according to the company.

The reservation covers 100 MW of TRIDENT electrolyser stacks to be manufactured in calendar years 2025 to 2026 in relation to the Refhyne 2 project at the Shell Energy and Chemical Plant in Rhineland, Germany, which remains subject to a final investment decision.

Dennis Schulz, CEO ITM, said: “Today‘s announcement is yet another validation of our technology and credibility to deliver at scale, providing reassuring recognition by a world-leading industrial customer. The capacity reservation also reflects the upcoming challenge for customers to secure credible large-scale delivery capability within the PEM electrolyser sphere, against a quickly growing demand.”

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Exclusive: Zero-emission locomotive start-up in Series B capital raise

A locomotive start-up focused on the US market for zero-emission freight trains is undergoing a Series B capital raise, with sights on a much larger Series C raise next year.

OptiFuel Systems, a provider of zero-emission line haul locomotives and generation solutions, is conducting a $30m Series B capital raise.

The South Carolina-based firm is seeking to finalize the Series B by the end of this year, and plans to use proceeds to advance production of its zero-emission technologies for the rail industry, which represents a massive decarbonization opportunity, CEO Scott Myers said in an interview.

Meanwhile, the firm will seek to tap the market for around $150m for a Series C next year, Myers added. The company is not working with a financial adviser. 

While the Series B will focus on bringing to production some of OptiFuel’s smaller rail offerings, such as the switcher locomotives, the Series C will be mostly dedicated to progressing testing, manufacturing, and commercialization of its larger line haul locomotive.

The company is also considering making its own investments into digesters for RNG facilities, from which it would source the gas to run its RNG-fueled locomotives. As part of its offering, OptiFuel also provides refueling infrastructure, and envisions this aspect of its business to be just as profitable as selling trains.

“We anticipate that we would be the offtaker” of RNG, “and quite potentially, the producer,” Cynthia Heinz, an OptiFuel board member, said in the interview.

A systems integrator, OptiFuel offers modular locomotives for the freight industry that can run on zero-emission technology such as renewable natural gas, batteries, and hydrogen. The company recently announced that it will begin testing of its RNG line haul locomotive, which is a 1-million-mile test program that will take two years and require 10 RNG line haul locomotives.

Image: OptiFuel

The company’s target market is the 38,000 operating freight trains in the U.S., 25,000 of which are line haul locomotives run by operators like BASF, Union Pacific, and CSX. Fleet owners will be required to phase out diesel-powered trains starting next decade following passage of in-use locomotive requirements in California, which includes financial penalties for pollution and eventual restrictions on polluting locomotives. Other states are evaluating similar measures.

“The question is not will the railroads change over: they have to,” Myers said. “The question is, how fast?”

Following completion of testing, OptiFuel aims to begin full production of the line haul locomotive – which has a price tag of $5.5m per unit – in 2028, and is aiming to produce 2,000 per year as a starting point. The smaller switcher units are priced between $1.5m and $2.5m depending on horsepower.

OptiFuel has held discussions with Cummins, one of its equipment providers, to source at least 2,000 engines per year from Cummins to support its production goal. 

“That’s a $10bn-a-year market for us,” Myers added.

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exclusive

US salt cavern developer selling hydrogen storage project

A US-based developer of salt cavern projects for hydrogen storage has retained a financial advisor to sell its first project and is informally seeking an equity investor.

Phoenix Hydrogen, a salt cavern storage developer based in Berkeley, California, has hired a financial advisor to run a sale of its primary project in Arizona, according to two sources familiar with the matter.

Scotiabank is leading the process, which will launch next week, the sources said. The sale is for 100% of the company’s first project near Kingman, Arizona. The project is expected to reach FID in the next 18 months.

Phoenix CEO Shawn Drost said in an interview that the company is informally seeking a platform equity investment as well but is only willing to take on a minority partner. An equity sale would need to raise an amount in the “low-tens” of millions, he said. It’s a difficult proposition, as equity providers in the space tend to demand majority positions.

The company wants to bankroll projects from beginning to end as an owner operator, he said, but requires capital to do so.

Phoenix, a six-person team, has a relationship with GHD Group for EPC, he said. The company is seeking relationships with production-side developers to sign site and storage leases.

Scotiabank did not respond to requests for comment.

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exclusive

DG Fuels charting path to be SAF powerhouse

The company has retained advisors and is mapping out a plan to build as many as 50 production facilities in North America for a “gigantic” sustainable aviation fuel market.

DG Fuels is charting a plan to build a proprietary network of 30 to 50 sustainable aviation fuel (SAF) production facilities in North America, CEO Michael Darcy said in an interview.

The Washington, D.C.-based company will pursue a combination of debt and equity on a case-by-case basis to fund the projects, Darcy explained, with financings underway now for the firm’s initial project in Louisiana and a second facility in Maine. The Louisiana facility recently inked a USD 4bn offtake agreement with an undisclosed investment grade industrial buyer.

The company is working with Guggenheim and Stephens as financial advisors, Darcy said. About 60 people hold equity in the company; Darcy and the founding team hold a majority stake.

In the coming months DG Fuels will likely make announcements about more SAF plants in the US and British Columbia, Darcy said. Site negotiations are underway and each project is its own subsidiary of the parent company.

“There’s clearly a good return of what we refer to as the ‘project level,’ and then we have the parent company,” Darcy said. “We have strategic investment at the parent and now we’re looking at strategic investment at the project level.”

Huge demand, low supply

DG Fuels produces SAF from cellulosic biomass feedstock, a technology that does not need sequestration of CO2 because natural gas is not used.

“We like to say it’s the corn cob, not the corn,” Darcy said. The company can also use timber waste, waxes, and renewable power as an important source of energy.

The company gets about 4.5 barrels of SAF for every ton of biomass feedstock, which is roughly three to four times the industry average, Darcy said.

“Practical scale” for a facility is 12,000 to 15,000 barrels a day, Darcy said. That’s big enough to be commercialized without stressing the electrical grid with power demand.

Despite the company’s advantages, there is “plenty of room” for other producers to come into the SAF space, Darcy said.

“Right now, the market for SAF is gigantic and the supply is minimal,” Darcy said. “Companies like us are able to pick and choose high-quality offtakers.”

DG Fuels includes Delta Airlines, Air France and General Electric as committed offtakers.

Multi-tasking

DG Fuels is “always engaged in some level of capital raise for construction of facilities and detailed engineering,” Darcy said. “There’s always more engineering to be done.”

Some of the financing has already been completed, but Darcy declined to go into additional detail. After Louisiana, the company will quickly follow up with Maine.

HydrogenPro AS recently announced that it would join Black & Veatch and Energy Vault in financing the remaining capital requirements of DG Fuels’ project in Louisiana, which is expected to be completed in mid-2022.

Most of the engineering work in Louisiana is transferable to the company’s project in Maine. Darcy likened the facilities’ build-out to a class of ships: once the first is completed, the second and third can be built almost concurrently.

“There will be a point where we won’t be building one at a time,” Darcy said.

The opportunity for funders to participate is broad in the SAF space, Darcy said. There is a crossover of good economics and ESG, so strategics, industrials, private equity and other pure financial players can all be involved.

The broad base of capital eager to participate in companies that are innovative — but not too innovative as to scare investors — is indicative of the industry’s ability to secure offtakers and feedstock.

Storing power

It’s one thing to acknowledge the need for reduction of carbon, but hard work is required ahead, Darcy said.

“The low-hanging fruit has been done,” he said of the renewables industry. “Now it’s not really about the power, it’s about the storage of power.”

DG Fuels is an offtaker of non-peak renewable power to displace fossil fuel energy. But baseload renewable power is becoming available almost anywhere.

The Maine project will use stranded hydroelectric power, Louisiana will use solar, and projects in the Midwest will use wind, Darcy said. Additionally, geothermal power is “starting to become a very real opportunity,” he added.

Deploying broadly with renewable power gets past the issues of variability of renewable power at a reasonable cost, he said.

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