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Exclusive: Tenaska advancing 10 CCS projects

Independent power development company Tenaska is advancing a portfolio of more than 10 carbon capture and sequestration hubs across the US. We spoke with Bret Estep, who heads up the CCS strategy for the firm.

Tenaska, a Nebraska-based energy company, is advancing a portfolio of more than 10 carbon capture and sequestration projects in the US, Vice President Bret Estep said in an interview.

The portfolio includes three previously announced projects that are highly developed along with seven others that have not been publicly disclosed, Estep added. Tenaska is focused on the transport and storage aspects of the CCS value chain.

“Our base facility is 5 million metric tons per year of storage capacity, and then the necessary pipeline infrastructure to bring those emissions in,” he said.

The base facility design will cost approximately $500m to build, but varies depending on the land position, site geology, and required pipeline miles, Estep said.

“For us, as we plan, I generally use a big rule of thumb to say these are around $500m overnight cost projects,” he said. “Just the storage facility itself, you might be in the $250m to $400m range. And then in really difficult places where there are a lot of pipeline miles, and those are expensive pipeline miles, it might be another $200m or $300m of just pipe.”

Estep says that Tenaska, as a private company, has flexibility on the eventual financing structure for projects, but that project financing is an option. He said the company has held discussions with potential financial advisors but declined to comment further.

Tenaska’s three announced projects are the Longleaf CCS Hub in Mobile, Alabama; the Pineywoods CCS Hub in Houston; and the Tri-State CCS Hub in West Virginia, Ohio, and Pennsylvania.

According to Estep, additional projects are going forward in Corpus Christi, New Orleans/Baton Rouge, and Central Florida. Further inland, Tenaska has two projects in Dallas, another in Oklahoma and another in Indiana.

Finding emitters

The projects “are not all easy – there’s a lot of competition out there,” Estep said. “In some places like let’s say Houston, there are a lot of other folks around, but there’s also a lot of emissions around. So I think there’s room for many people to be successful here.”

In other places like Mobile, Alabama or the Tri-State project, which are harder to develop, Tenaska is the only CCS developer, he added. 

As an example, the West Virginia project will likely be more costly to develop, given the suboptimal geology of the region. Still, the project benefits from a $69m DOE grant to support geologic characterization and permitting for the site.

For its CCS business, Tenaska makes money through what Estep calls a “plain vanilla” version of transport and storage: the take-or-pay contract.

“The emitter installs the capture equipment, they’re the taxpayer of record – they have whatever commodity uplift or green premium they can get on their product,” he said. “And they simply need someone to transport and store that CO2 long term really to qualify for that 45Q” tax credit.

For the Longleaf CCS project in Mobile, Estep places potential customers into four quadrants. The first is existing emitters like steelmakers, power plants, gas processing and pharmaceutical companies. “There’s less project-on-project risk in that way.”

The second is blue molecules. “There’s a growing blue molecule effort in that part of the world,” he said. Quadrant three is combined cycle with capture (though Tenaska is not pursuing a combined cycle for Longleaf) and quadrant four is direct air capture.

Tenaska is a participant in the Southeast DAC Hub, led by Southern States Energy Board, which received a grant of over $10m from the DOE.

“We see many emitters across industries from gas processing to cement, steel, power gen, you name it,” Estep said. “They want to do their own capture, or they want to deal straight with a capture technology, an EPC, or a standalone capture-as-a-service provider. And then what they really want is someone to come to their fence line and take the CO2 and store it long term, durably, safely,” he added. “That’s what we do.”

‘Intercept problem’

Tenaska is still about a year away from beginning to order long lead time items like specialized metallurgy or pipe, but will begin putting in orders once it has more visibility on matching up its development timeline with that of its customers.

Early on, Estep and his teams were sprinting to acquire land positions and submit permits, including some Class VI permits from the EPA, which are under review. But “the script almost totally flips” at that point, because under Tenaska’s hub and spoke model, “we want to be optimized for customers,” he said.

The firm looks at permitting timelines and the earliest likelihood of construction and injection versus when the emitter will likely take FID and begin capturing, “which we call the intercept problem,” Estep said.

Tenaska is the 100% owner of the projects at this point, and Estep believes they have put together a unique portfolio, “in that it’s diversified by customer, it’s diversified by EPA region, it’s diversified by geology and state.”

Estep added: “These kind of assets where there’s geology and storage, they can go the power gen route, they can go the hard-to-decarbonize route, cement and steel, they can go the new power gen route that’s advanced, they can go direct air capture, they can go to the molecule.”

“It’s a really interesting set of infrastructure projects that we are very bullish on for that reason.”

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JAPEX to develop carbon capture and blue ammonia projects

JAPEX has partnered with Invest Alberta to explore CCS, BECCS, and blue ammonia projects in the province.

Japan Petroleum Exploration Co., Ltd. (JAPEX) signed a memorandum of understanding (MOU) with Invest Alberta Corporation (IAC), an investment attraction agency established by the government of Alberta, Canada, to partner together to support JAPEX’s development of projects in the province, according to a news release.

The MOU signifies the intent of both parties to work jointly on potential projects of JAPEX in Alberta, leveraging JAPEX’s extensive experience in petroleum exploration, production and CCS (Carbon dioxide Capture and Storage) / CCUS (Carbon dioxide Capture, Utilization, and Storage), while Invest Alberta will support JAPEX with its in-depth knowledge of the local market and investment landscape.

JAPEX is a global hydrocarbon E&P and transportation company.

On this partnership, JAPEX is seeking to develop the projects in several areas:

  • CCS/CCUS
  • BECCS (Bioenergy with Carbon dioxide Capture and Storage) (*)
  • Blue Hydrogen/Ammonia Business

“We are very excited to start working together with Invest Alberta,” said Tomomi Yamada, executive management officer, president of overseas business division II, JAPEX. “JAPEX had a very long-standing history of business in Alberta in the areas of oil sands (as an operator) and natural gas. We are now aiming to come back to Alberta and contribute to its decarbonization, using our expertise and experiences gained through the participation in CCS demonstration project in Japan by investing in the project company and extensive E&P businesses in Japan as well as overseas.”

Established by the Province of Alberta, Invest Alberta provides high-end tailored support to companies, investors, and major new projects. As one of North America’s leading investment attraction organizations with teams strategically placed around the world, including in Tokyo, Invest Alberta breaks down barriers so businesses can start up, scale up, and succeed without limits.

“Invest Alberta is honoured to partner with JAPEX to help the company seize the opportunities that Alberta offers to investors,” said Rick Christiaanse, Invest Alberta CEO. “As Canada’s energy capital, Alberta has a skilled workforce and renowned researchers capable of advancing major projects forward in a welcoming business environment. JAPEX is a strong and valuable partner for Alberta, bringing extensive experience in the energy sector and a shared dedication to achieving net-zero through environmentally sustainable projects.”

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Clean Seas investing $50m in Arizona plastic-to-hydrogen project

The subsidiary of the Clean Vision Corporation is working to secure “stages of necessary capital” for the project in Phoenix.

Clean-Seas, Inc. has signed an MOU with the Rob and Melani Walton Sustainability Solutions Service to establish a plastic waste to hydrogen facility in Phoenix, Arizona, according to a press release.

Clean-Seas Arizona, a subsidiary of the Clean Vision Corporation, intends to invest at least $50m in the project. The company will “work towards securing the various stages of necessary capital to finance the innovative facility in phases,’ the release states.

Clean-Seas Arizona will source waste plastic feedstock from the Phoenix metro area for a global network of clean hydrogen hubs and recycle it into AquaH, Clean-Seas’ brand of hydrogen.

RMWSSS, an institute at Arizona State University, will provide scholarly, technical, and sustainability advisory services.

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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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Exclusive: OCI Global exploring ammonia and methanol asset sales

Global ammonia and methanol producer OCI Global is working with an investment bank to explore a sale of ammonia and methanol assets as part of the re-opening of its strategic business review.

OCI Global is evaluating a sale of several ammonia and methanol assets as part of the re-opening of its strategic business review.

The global producer and distributor of methanol and ammonia is working with Morgan Stanley to explore a sale of its ammonia production facility in Beaumont, Texas, as well as the co-located blue ammonia project under development, according to sources familiar with the matter.

The evaluation also includes OCI’s methanol business, one of the sources said.

Representatives of OCI and Morgan Stanley did not respond to requests for comment.

As part of the earlier strategic review announced last year, OCI in December announced the divestiture of its 50% stake in Fertiglobe to ADNOC, and the sale of its Iowa Fertilizer Company to Koch Industries, bringing in $6.2bn in total net proceeds.

However, OCI has received additional inbound inquiries from potential acquirers for the remaining business, leading it to re-open the review, CEO Ahmed El-Hoshy said last month on OCI’s 4Q23 earnings call.

“As such, OCI is exploring further value creative strategic actions across the portfolio, including the previously announced equity participation in its Texas blue clean ammonia project,” he said, adding: “All options are on the table.”

The comments echoed the remarks of Nassef Sawiris, a 40% shareholder of OCI, who recently told the Financial Times that OCI could sell off most of its assets and become a shell for acquisitions.

In the earnings presentation, El-Hoshy took time to lay out the remaining pieces of the business: in particular, OCI’s 350 ktpa ammonia facility in Beaumont; OCI Methanol Group, encompassing 2 million tons of production capacity in the US and a shuttered Dutch methanol plant; and its European ammonia/nitrogen assets.

Texas blue

The Texas blue ammonia project is a 1.1 million-tons-per-year facility that OCI touts as the only greenfield blue ammonia project to reach FID to date. The company has invested $500m in the project as of February 24, out of a total $1bn expected investment, according to a presentation.

“Commercial discussions for long-term product offtake and equity investments in the project are at advanced stages with multiple parties,” El-Hoshy said. “This reflects the very strong commercial interest and increasing appetite from the strategics to pay a price premium to secure long-term low-carbon ammonia.”

El-Hoshy’s comments highlight the fact that, unlike most projects in development, OCI took FID on the Texas blue facility without an offtake agreement in place. The executive did, however, highlight the first-mover cost advantages from breaking ground on the project early and avoiding construction cost inflation.

Additionally, the project was designed to accommodate a second 1.1 mtpa blue ammonia production line, which would be easier to build given existing utilities and infrastructure, El-Hoshy said, allowing for an opportunity to capitalize on additional clean ammonia demand at low development costs.

“Line 2 probably has the biggest advantage, we think, in North America in terms of building a plant where a lot of the existing outside the battery limits items and utilities are already in place,” he said, emphasizing that by moving early on the first phase, they avoided some of the inflationary EPC pressures of recent years. 

At the facility OCI will buy clean hydrogen and nitrogen over the fence from Linde, and Linde, in turn, will capture and sequester CO2 via an agreement with ExxonMobil.

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exclusive

Exclusive: National RNG developer in equity sale process

A large US developer and operator of renewable natural gas projects has tapped an advisor and is in the early stages of a sale process.

DTE Vantage, a developer of renewable energy projects with a national footprint in the US, is in the first round of a process to sell its RNG business, according to two sources familiar with the matter.

Lazard is running the process, the sources said. First round bids were recently received.

The company’s RNG portfolio includes 13 projects, four of which are landfill-to-gas while the remainder are on dairy farms, with more under construction, according to company materials. One of the largest RNG producers in the Midwest, the company also has projects in North Carolina, California, New York, and Wisconsin.

Of note, the Riverview Energy landfill gas asset in Riverview, Michigan produces 8.6 mmcfd of pipeline natural gas and includes 6.6 MW of solar. Pinnacle Gas in Moraine, Ohio, produces 4.5 mmcfd, while Seabreeze Energy in Angleton, Texas produces 5.8 mmcfd.

DTE Vantage is a non-utility subsidiary of DTE Energy. Founded in the 1990s, it has about 600 employees and operates 64 projects in 16 US states, with one asset in Canada. The company serves industrial, agricultural, and institutional clients across three core groups: Renewable Energy, Custom Energy Solutions, and Emerging Ventures.

DTE declined to comment. Lazard did not respond to a request for comment.

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exclusive

Pharma and fuels tech provider could be ready for public listing

International biotechnology firm Insilico Medicine is applying the algorithms that produce novel drugs to synthesizing more sustainable petrochemical fuels and materials.

Insilico Medicine, a global biotechnology firm serving the pharmaceutical and carbon-based energy industries, could be ready for a public listing in the next phase of its corporate evolution.

Insilico, founded in Baltimore and now based in Hong Kong, has raised about $400m in private capital to date and is in the position of a company that would be exploring a public listing in the US and Hong Kong, CEO Alex Zhavoronkov said in an interview. He declined to say if he has hired a financial advisor to run such a process but said a similar company in his position would have.

The generative AI platform that the company uses to produce novel drugs can be applied to produce more sustainable carbon-based fuels, Zhavoronkov said. The objective is to maximize btu and minimize CO2, making the fuels burn longer and cleaner.

Saudi Arabia’s state oil company Aramco is a user of the technology and participated in Insilico’s $95m Series D (oversubscribed and split between two sub-rounds) last year through its investment arm Prosperity7.

Petrochemistry is going to be needed well into the future, Zhavoronkov said. In addition to renewable energy and other ESG efforts, the efficiency of petrochemicals should be a top priority.

“If you burn certain petrochemicals in certain combinations, you can achieve a reasonably clean burn and an energy efficient burn,” he said. For specific tasks like space travel or Formula 1 racing, combined fuels produce the necessary torque, and generative chemistry can achieve those objectives in a more sustainable way. “I think that we can make the world significantly cleaner just by modifying petrochemical products.”

The technology can also be used to make organic matter in petrochemical products degrade more quickly, which is useful in the case of plastics, Zhavoronkov said.

The company’s AI is primarily based in Montreal and in the drug discovery business in China, but fuel research takes place in Abu Dhabi. Zhavoronkov said he has hired a lot of “AI refugees” from Russia and Ukraine to work at the latter location. The company has 40 employees in the UAE and will likely scale to 70.

Insilico is capitalized for the next two years or so, he said. That doesn’t account for revenue, which closed at just under $30m in 2022. The petrochemical and materials business is under the AI research arm of the business, which is covered by funds raised to date.

“Our board would probably not allow me to reinvent myself as an energy play,” Zhavoronkov said. But the board does not object to applying resources to petrochemical products.

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