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Exclusive: Plug Power enlists bank to evaluate financing options

The cash-burning company is working with a bulge-bracket American bank to evaluate debt financing options to help stave off a liquidity crisis.

Plug Power is working with Goldman Sachs to evaluate a capital raise in the form of debt financing to shore up its balance sheet, sources said.

The New York-based company recently said it was at risk of a liquidity crisis in the next 12 months if it is not able to raise additional capital, noting it was exploring various options for bringing in financing.

Its total cash and cash equivalents as of September 30 stood at $567m, representing a decline of $580m for the quarter, according to SEC filings. The company also has nearly $1bn of restricted cash balances stemming from sale-leaseback transactions, of which $50m becomes available per quarter.

In a shareholder letter and on its 3Q23 earnings call, executives outlined the financing options that are on the table for the company, including a debt raise, funding from the Department of Energy’s Loan Programs Office, and bringing in project equity partners for its facilities.

The company is “evaluating varied debt financing solutions to support [its] growth,” according to the shareholder letter. CFO Paul Middleton added on the call that they’ve had “some expressions of offers for ABL-like facilities” as well as restricted cash advance facilities. 

CEO Andy Marsh said the company would need to raise between $500m – $600m, according to a news report from Barron’s.

Representatives of Plug Power and Goldman Sachs declined to comment.

Plug is also working towards a conditional commitment from the DOE Loan Program Office to finance plants in its green hydrogen network. 

“The framework that we’re working on with them is a $1.5bn platform that would fund our green plants and would fund from construction phase onwards,” CFO Middleton said, adding that the funding could amount to as much as 80% of the projects. 

Middleton said he expected the DOE loan, if granted, would start funding in early 2Q24, and could even be used to back lever some of its existing plants in Texas and New York.

The company’s stock traded today with a $2.34bn market cap, while its outstanding debt consists of a $200m convertible note issued in 2020.

The notes traded around 130 cents of par before Plug’s going concern announcement, and subsequently dropped to trade in the high-70s, with quotes this week in the 80s.

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Largest NorthAm SAF producer on IPO path

Montana Renewables, now the largest producer of SAF in North America, is talking to bulge-bracket banks about a public listing that could occur within one year.

Montana Renewables, a subsidiary of Calumet Specialty Products Partners and now the largest producer of sustainable aviation fuel in North America, is on a path to list publicly through an IPO that could occur within one year.

The company as of last year was working with Lazard to review strategic options after receiving inbound interest from strategic players, a process that amounts to “an abundance of riches,” Bruce Fleming, CEO of Montana Renewables, said this morning.

The Montana Renewables facility is a SAF, renewable diesel, and renewable hydrogen platform producing an initial run-rate of 30 million gallons of SAF per year, ramping up to 60 million gallons into 2024 and a potential further expansion to 230 million gallons. The complex completed its startup in late April.

A key financial pivot point for Montana Renewables will be the outcome of its loan guarantee application with the Department of Energy, Fleming said. As of March, the subsidiary had been invited to submit a Part II application for a $600m loan guarantee through the Title XVII Innovative Clean Energy Loan Guarantee Program.

“That is a material strategic anchor,” Fleming said. “With a clean balance sheet, the IPO is enabled; the over-under from the bulge bracket banks that we’re talking to is centered on nine months.

The process could unfold more quickly, he said, noting that future speculation depends on market conditions in which to execute on an IPO.

“Knock on wood, if the world economy is going to be on a stable footing, then we’re going to have a pretty compelling pure-play energy transition offering,” he said. “It’s not a small thing to suddenly be the biggest SAF producer in North America that nobody ever heard of.”

Balance sheet

On April 19, MRL closed a $75 million bridge loan with I Squared Capital. The bridge loan bears a variable rate of interest at SOFR plus 6.0 to 7.3% per annum and we have the flexibility to prepay 50% of principal under the bridge loan from free cash flow by the end of 2024.

In August, 2022, Warburg Pincus agreed to invest $250m in MRL in the form of a participating preferred equity security, which values MRL at a pre-commissioning enterprise value of $2.25bn.

Stonebriar Commercial Finance invested an additional $350m through a pair of sale and leaseback contracts on top of its existing $50m commitment to MRL. The sale and leaseback transactions carry an approximate 12.3% cost of capital and offer certain strategic early termination options. Concurrent with those transactions, the $300m convertible investment from Oaktree Capital Management L.P. in MRL was retired.

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Gevo awarded USDA grant for carbon tracking

A grant of up to $30m will support tracking the carbon intensity of corn destined for SAF production.

Gevo, Inc. announced today it has finalized and executed a Notice of Grant and Agreement Award with the U.S. Department of Agriculture (USDA) for a Partnerships for Climate-Smart Commodities grant of up to $30m for Gevo’s Climate-Smart Farm-to-Flight Program, according to a news release.

This program is aimed at tracking and quantifying the carbon-intensity (CI) impact of climate-smart practices while creating market incentives for low CI corn to help accelerate production of sustainable aviation fuel (SAF) and low-CI ethanol.

With the leadership and support of the USDA, we believe this grant will play a pivotal role in expediting the adoption of climate-smart farming practices and immediate market expansion of field-tracked, low-CI corn destined for SAF production in the area surrounding Gevo’s previously announced Net-Zero 1 (NZ1) SAF plant, currently under development in Lake Preston, South Dakota. The project will also accelerate the market adoption for climate-smart corn in close collaboration with Southwest Iowa Renewable Energy (SIRE), a dry-mill corn-based ethanol facility located near Council Bluffs, Iowa. An important part of the project is our aim to enroll majority female-owned farms in southeast Iowa and southeast Nebraska and Native American tribal organizations in South Dakota, including the Standing Rock Sioux Tribe.

“Our Farm-to-Flight Program, under this USDA grant, aims to count all the carbon at the field level and reward farmers on a performance basis for delivering low-CI corn, as well as to accelerate the production of SAF to reduce dependency on fossil-based fuel,” says Dr. Paul Bloom, Chief Carbon Officer and Chief Innovation Officer for Gevo, and Head of Verity. “The program will also focus on deploying our Verity Tracking platform with farmers to help them measure, report and verify their CI reductions.”

Gevo believes that the Argonne National Laboratory GREET model is the best available standard of scientific-based measurement for life cycle inventory or LCI. Verity, a Gevo program, uses the high-quality field and process level data, and the versatility of GREET to calculate the commodity’s carbon performance with a high degree of confidence that is traceable, immutable, and fully auditable. “The Verity carbon accounting platform will give us the ability to assign carbon-intensity scores to feedstocks on a field-by-field basis – creating financial grade climate smart commodities that carry their performance through the supply chain to the final biofuel products,” Bloom says. “This grant will help us apply the best science and reward growers for making a real difference to lower GHGs of biofuels.”

“When Net-Zero 1 and other production facilities come online, the feedstocks in the program will be a key to the equation,” says Dr. Patrick Gruber, CEO of Gevo. “This Partnerships for Climate-Smart Commodities grant will help ensure we count all the carbon through the entire business system and reward farmers for the good work they are doing.”

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Technology in focus: Avnos’ hybrid direct air capture uses water instead of heat

By using water captured from the atmosphere to regenerate its CO2-capturing sorbents, Avnos hopes to cut the operating costs of direct air capture plants and lower barriers to deployment.

One of the challenges of direct air capture (DAC), the new technology that promises to extract carbon dioxide (CO2) directly from the air all around us, is that it needs a lot of energy, and thus costs a lot of money. Currently, different types of DAC technologies require between 6 and 10 gigajoules per ton of carbon dioxide captured, according to the International Energy Agency.

The key to making a new DAC technology successful therefore is cutting energy needs and costs. Avnos, a Los Angeles-based carbon removal company, is trying to accomplish this by developing what it calls hybrid direct air capture (HDAC), backed by $36m in Series A funding closed in February, and over $80m in strategic and investment partnerships, announced in July

Avnos’ process is described as “hybrid” DAC because it captures both CO2 and water, as humidity, from the atmosphere at the same time. 

“In a generic DAC process, heat is critical to separating the captured CO2 from its ‘sponge,’ or sorbent, and regenerating that sorbent so that a plant may operate cyclically,” Avnos co-founder and CEO Will Kain said in an interview. “By contrast, Avnos uses a reaction enabled by the water it sources from the atmosphere to regenerate its sorbents. The impact of this use of water in the place of heat lowers the operating costs of an Avnos plant and lowers the barriers to deployment.” 

Less heat means less energy, which means companies using Avnos’ technology will have to compete less than regular DAC to access carbon-free energy sources and will have more flexibility in terms of where to put their facilities. 

“Unlike peer DAC companies who build and operate their hardware, our product is designed to be licensed and operated by any company committed to decarbonization and allows them to upgrade, modularly, as the tech advances over the long term,” Kain told ReSource

Avnos has an active pilot plant in Bakersfield, California, funded by the Department Of Energy and SoCal Gas. The plant began operating in November 2023, and it can capture 30 tons of CO2 and produce 150 tons of water annually. 

The company is also in the process of building a second pilot plant with the U.S. Office of Naval Research to pilot CO2 capture and e-fuels production – Avnos does not currently produce e-fuels, but sustainable aviation fuels producers could use its technology to source water and CO2, and it partners with sustainable aviation investors like JetBlue Ventures and Safran. 

Additionally, it is going to use money from its recently announced round of funding to open a research and development facility outside New York City, and it says it’s involved in four of the developing DAC hubs that were selected for funding awards by the DOE: the California Direct Air Capture Hub, the Western Regional DAC Hub, the Pelican-Gulf Coast Carbon Removal, and a fourth undisclosed one.

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Canadian renewables major eyeing hydrogen production at pumped hydro facility

Canadian power generation giant TransAlta could co-locate hydrogen production with select wind and hydroelectric facilities.

TransAlta, the Canadian power generator and wholesale marketing company, is contemplating a buildout of hydrogen production capabilities at its 320 MW Tent Mountain pumped hydro storage project in Alberta, Executive Vice President of Alberta Business Blain van Melle said in an interview.

“Our view on hydrogen is that it’s a technology that’s an option, somewhat further out in the future, particularly when it comes to power generation,” van Melle said. “If we can offer our customers maybe a power and hydrogen solution, and they’re using the hydrogen in another process, that would be something we would look at.”

In early 2022 TransAlta made a CAD 2m equity investment in Ekona Power, a methane pyrolysis company based in Vancouver. The company also committed USD $25m over four years to EIP’s Deep Decarbonization Frontier Fund 1.

That latter investment is a way to continue to learn about hydrogen and have exposure to emerging technologies, van Melle said.

The recent 50% stake acquisition in the Tent Mountain project includes the intellectual property associated with a 100 MW offsite green hydrogen electrolyzer and a 100 MW offsite wind development project.

Having hydrogen production co-located with wind and pumped hydro storage could make sense for the company in a few years, van Melle said. FID on Tent Mountain could be reached sometime in 2025 and will require the company to secure a PPA offtake and determine capital cost. Development work will take three to four years and earliest construction could begin in 2026.

The company has not had discussions with potential offtakers, van Melle said, adding that development on the pumped hydro facility needs to mature before a hydrogen component advances.

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Gas-fired peaker sale touts hydrogen blend potential

An equity process for 25% ownership of a California peaker plant includes plans to blend up to 30% hydrogen as part of the sales pitch, according to a teaser.

An opportunity to acquire 25% of the Sentinel Energy Center in California includes decarbonization initiatives like blending 30% hydrogen and installation of on-site battery storage, according to two sources familiar with the matter.

Project Oasis is being run by CIBC, the sources said. Voltage Finance, an entity managed by Guggenheim Partners Investment Management, is exploring the sale of its 25% indirect equity interest in the 850 MW generating facility in Riverside County.

The facility has more than 75% of its capacity contracted through 2027, according to a teaser seen by ReSource. The potential to execute a long-term green hydrogen offtake contract on several of Sentinel’s turbines is being evaluated.

“Sentinel is pursuing the implementation of hydrogen blending capabilities and has advanced the engineering and design through an agreement with a global OEM with beta testing expected in Q1 2025,” the document states.

Sentinel is also co-located with 15 MW of battery storage.

Guggenheim and CIBC did not respond to requests for comment.

Diamond Generating holds a 50% stake in Sentinel. The remaining 25% interest is owned by California-based fund manager Climate Adaptive Infrastructure (CAI), which bought its stake from Partners Group last year.

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Siemens Energy planning new US electrolyzer capacity

The company is targeting expansion in the U.S. given the favorable policy environment following passage of the Inflation Reduction Act (IRA).

Siemens Energy North America is laying the groundwork for new electrolyzer manufacturing capacity in the United States, President Richard Voorberg said during a panel discussion recently.

Siemens Energy, a global energy technology company, makes an 18 MW PEM electrolyzer, one of the largest in the world, and is targeting expansion in the U.S. given the favorable policy environment following passage of the Inflation Reduction Act (IRA), Voorberg said.

The company is building its first gigawatt factory in Berlin, Germany via a joint venture with France’s Air Liquide. The Berlin factory is expected to produce 1 GW of PEM electrolyzers per year starting in mid-2023.

“As soon as we get that first one up and running… I’ve got a plan already to put a 1,000 MW line in the US,” Voorberg said, speaking during an event at the Delegation of German Industry and Commerce in Washington D.C. last month.

Siemens’ existing manufacturing capacity in the US could expand to accommodate that new line, or the company could look to build an entirely new facility, Voorberg said. He added that the recently passed IRA helps makes the business case to do so.

Following the IRA, customers went from asking for fractions of a megawatt to seeking 2 GW in a single order, Voorberg said. His 18 MW line is now insufficient.

“We’ve got to scale up,” he said. “Scale is everything.”

Voorberg said his company sees hydrogen being used in electricity production around 2035, but mobility can use it now.

The planned move by Siemens underscores the extent to which the IRA legislation has trained the hydrogen industry’s focus on the U.S. Norway-based electrolyzer producer Nel is speeding efforts to expand electrolyzer capacity in the U.S. And Cummins announced last month that it would add electrolyzer production space at its existing facility in Fridley, Minnesota.

Siemens Energy is independent of Siemens AG, having spun off in 2020. The company has about 10,000 employees in the US and roughly 2,000 in Canada.

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