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Fitch lays out credit considerations for green hydrogen financing

Key operating metrics include the efficiency and rate of hydrogen production, plant availability, the ability to respond to intermittent power, and hydrogen purity levels.

Fitch Ratings has set out specific credit-risk considerations relevant to green hydrogen projects in a new report.

Fitch considers the credit risks of such projects to have the closest parallels to those of thermal power assets, and to generally be at least equal to – but potentially greater than – thermal power risks. Future technology and process developments will be evaluated and incorporated in ratings as the industry matures.

Whilst there are two key proven electrolyser technologies for producing hydrogen from renewable energy and water, the green hydrogen market is still nascent, meaning that precedents for project-financed transactions are very limited.

Green hydrogen projects have a greater range of balance of plant than solar, wind or thermal power projects. Complexity, and consequently integration risk, will therefore have a key influence on the completion risk assessment in any rating.

The availability of alternative replacement contractors to complete a project will be key for whether it can be rated above the incumbent contractor.The immaturity of the market will heighten the weight given to independent experts’ (IE) views in relation to such replaceability. We also generally expect high dependence on project parties, such as original equipment manufacturers, who will be key in O&M activities due to their expertise and equipment warranties.

The limited number of peer green hydrogen projects also means Fitch will be more reliant on the IE’s views of the reasonableness of a project’s budgeted or contracted operating costs. Any perceived lack of credibility, competence and experience of the project parties could be factored into the financial profile assessed in our ratings.

Key operating metrics include the efficiency, and rate, of hydrogen production, the plant availability, the ability to respond to intermittent power, and, where this is critical, the hydrogen purity levels.

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Clean Vision chooses West Virginia for $50m hydrogen facility

The Nevada-based company will leverage a $50m total investment in a manufacturing facility converting plastic feedstock into precursors for recycled content plastics and clean fuels, including hydrogen.

Clean Vision Corporation has signed a Memorandum of Agreement to collaborate on a manufacturing facility focused on recycling plastic feedstock into precursors for recycled content plastics and clean fuels, according to a news release from the governor.

The MoA is between the company’s Clean-Seas West Virginia subsidiary and the West Virginia Department of Economic Development. The total investment is $50m over three years.

Upon completion of construction and commencement of operations, the facility, located in Quincy in eastern Kanawha County, will process plastic for conversion to clean energy at a rate of 100 tons per day, starting in 2024, with plans to scale up to 500 tons per day over time.

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Biofuels developer seeking to raise $3.5bn for US refinery projects

A biofuels developer has engaged an international bank and is nearing FID on its first project, which produces bio-based ethylene for the plastics industry. It is seeking $3.5bn for four additional refineries.

New Energy Blue, the clean-energy developer of lowest-carbon biofuel and biochemicals from crop residues, today advances its Decarbonizing America agenda by forming New Energy Chemicals.

In phase one, the new biochemical subsidiary will produce American-sourced and American-made bio-based ethylene to enable Dow’s production of low carbon plastics used in everyday life; in phase two, it will expand operations at its Port Lavaca, Texas, facility to produce sustainable aviation fuel (SAF), according to a news release.

“New Energy Chemicals opens multiple pathways to our exponential growth in biobased fuels and chemicals,” says Albury Fleitas, President of New Energy Blue. “We’re particularly excited by our new end-to-end alternative to Brazilian ethanol for making SAF, which will begin in the American Midwest by refining agricultural waste.”

“Flexibility is baked into the process design and business operations of our biomass refineries,” adds CEO Thomas Corle. “We’re not locked into a single product, single market, or single feedstock. New Energy Chemicals gives us 360-degree downstream options for achieving liftoff of an American bioenergy revolution. We can pivot to mitigate market risk, seize growth opportunity, and hit lowest-carbon targets consistently.”

In late 2025, the New Energy Freedom biomass refinery in Mason City, Iowa, will begin converting local corn stalks into 16-20 million gallons a year of highly decarbonized (HD) cellulosic ethanol and 120,000 tons of clean HD lignin. Lignin has high value as a fossil substitute in markets like paving American roads and decarbonizing steel production.

Some of Freedom’s ethanol is destined for California and Oregon auto fuel markets; by meeting their strict low-carbon standards, it will reduce greenhouse gas emissions by over 100% per gallon of gasoline displaced. Millions of HD gallons will also head to Texas, where New Energy Chemicals will convert it into bio-based ethylene, transported via pipeline to Dow’s U.S. Gulf Coast operations for production of renewable plastics across fast-growing end markets.

Dow’s use of bio-based feedstocks from New Energy Blue is expected to be certified by ISCC Plus, an international sustainability certification program with a focus on traceability of raw materials within the supply chain. While Dow intends to mix agriculture-based ethylene into its existing manufacturing process, ISCC Plus’s chain of custody certification would allow Dow’s customers to account for bio-based materials in their supply chains.

Albury Fleitas reports that “strategic and institutional investors are actively involved in our Freedom and Chemicals projects and upcoming expansions. With engineering design completed and major permits secured, we’ve reached the final investment decision (FID) stage. By partnering with an international bank and securing USDA loan guarantees for both project sites, we anticipate ground-breaking this year.”

New Energy Blue has ambitious plans to expand its biomass refineries across America’s 140-million-acre corn belt and wheat basin, harvesting excess straws and stalks to produce billions of gallons of highly decarbonized ethanol. Shorter-term, a six-year strategy calls for attracting $3.5 billion from capital markets to build four new refineries at twice the size of Freedom and provide abundant feedstock to New Energy Chemicals. Taken together, the five refineries are designed to keep over 1,000,000 tons of CO2 out of the atmosphere annually.

Beyond meeting its growing commitments to Dow, New Energy Chemicals’ phase-two expansion can capitalize on both domestic and international demand for SAF since the Port Lavaca site has barge access to deep water shipping.

Substantial European demand by 2030 is expected from the ReFuelEU Aviation initiative, which aims to mandate a SAF blending requirement at EU airports. In addition to ramping up its biomass refinery build-out, New Energy Blue plans to license its platform globally to accelerate the production of low-carbon, plant-based feedstock for HD auto fuel, SAF, and other biochemicals.

According to the U.S. Sustainable Aviation Fuel Grand Challenge, the American SAF goal is 3 billion gallons a year by 2030, 35 billion gallons by 2050. “U.S. carbon-reducing incentives have ignited a $400 billion SAF market,” Fleitas notes. Lifecycle analysis of the company’s refinery project consistently exceeds the required 50% reduction in GHG emissions compared to ethanol made from corn grain or sugar cane. New Energy Chemicals is expected to pre-qualify for maximum decarbonizing credits, giving it an advantage in a competitive capital marketplace.

The HD ethanol-to-ethylene process employed by New Energy Chemicals is most likely compatible with conventional jet fuel methods of production, using a technology pathway similar to Brazilian ethanol-to-SAF conversion.

“Except there’s a significant gap in decarbonization scores,” says Kelly Davis, Vice President, “and that gives our future SAF a dramatic edge in getting the airlines closer to their net-zero goal for GHG emissions. It’s an extra advantage that comes from using American-sourced leftovers from the annual grain harvest.”

Because of process design flexibility, New Energy Blue biomass refineries can also convert wheat, barley, and rye straws. In arid regions where food crops can no longer grow, the company intends to restore American grasslands by planting and harvesting perennials like arundo donax and miscanthus.

“Decarbonizing America is a big ask for a big task,” Corle says. “Those 140 million acres of U.S. grain provide enough stalks and straws and grasses to feed 500 refineries and produce 20 billion gallons of exceptionally low-carbon ethanol annually. That’s how you decarbonize SAF and Dow’s renewable plastic materials, how you make a dent in replacing oil refining with biomass refining.

“It starts with a biomass refinery in Mason City, Iowa and New Energy Chemicals conversion operations in Port Lavaca, Texas. But we’re already forging partnerships with governments, customers, and developers across CanadaEuropeAsia, and Africa. Inviting them to work collaboratively towards sustainable decarbonization with global impact.”

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Exclusive: CCUS developer advancing $600m Louisiana sequestration hub

Mercuria Energy-backed CapturePoint this week announced its first 45Q tax credit direct transfer deal for CO2 captured from an ethanol facility. We spoke to CEO Tracy Evans about the deal and what’s next for the CCUS developer, including potentially raising $600m in project finance for a Louisiana carbon capture hub.

CapturePoint LLC recently closed on its first 45Q tax credit direct transfer deal for CO2 captured from an ethanol facility in Kansas, a mechanism that will be a major component of the company’s earnings amid growth in CO2 capture and sequestration.

Meanwhile, the Allen, Texas-based CCUS developer could seek to raise approximately $600m as soon as next year for a sequestration hub in Louisiana, for which it has applied for two Class VI sequestration wells from the EPA, CEO Tracy Evans said in an interview.

Under the direct transfer deal deal, CapturePoint will transfer 45Q tax credits generated at the Arkalon ethanol facility in Liberal, Kansas to an unnamed buyer for 12 years. Since CapturePoint transports the CO2 to injection wells used for enhanced oil recovery, the company receives the 45Q benefit of $60 per ton for EOR activities.

At full capacity, the ethanol plant produces 250,000 metric tons of CO2 annually, but usually undergoes two turnaround processes per year, which reduces output. 

The Arkalon facility had a previously installed carbon capture unit that was re-built by CapturePoint, a project that was funded from the company’s existing cash flows from its EOR business as well as draws on its $100m borrowing line, Evans said. Under 45Q, existing carbon capture facilities of which 80% or more are rebuilt can qualify for the tax credits.

The direct transfer of the 45Q tax credits was done at a discount, though Evans declined to disclose the amount.

Additionally, CapturePoint is capturing and removing CO2 from CVR’s Coffeyville fertilizer plant, also in Kansas, for which it completed a tax equity deal last year that opened up a stream of revenues.

Class VI wells

Both the Coffeyville and Arkalon plant operations are owned by the CapturePoint oil company, acquired along with oil and gas operations in 2017.

But CapturePoint has launched a carbon management subsidiary, CapturePoint Solutions, which will focus on industrial emissions to Class VI sequestration wells.

The subsidiary could seek to raise around $600m as soon as next year to build out a planned hub, the Central Louisiana Regional Carbon Storage Hub (CENLA), Evans said. The capital expenditure for the project includes a pipeline, five to seven capture facilities, and the sequestration site.

“We would love to do project finance, but we’d like to potentially start spending money now” versus waiting for a permit to construct, he said. “That seems to be the gating item for a lot of the project finance guys.”

He expects the project will take around two years to construct, thus to keep it moving, the company could spend money now on things like right-of-way and equipment using its own cash flow, he added, along with equity commitments from existing investors.

“The CapturePoint Solutions model is essentially based on only 45Q revenues,” Evans said. “Whether we’re taking them or whether somebody is paying us the transportation and sequestration fee, it’s still coming from the 45Q credits.”

CapturePoint Solutions has applied for three Class VI wells, two in Louisiana associated with the CENLA hub, and another in Oklahoma. Evans expects to have drafts of the Class VI wells from the EPA by late this year at the earliest, but Louisiana’s recently established primacy over the Class VI process could speed things up.

Evans said the company has already signed up 1.5 million tons of CO2 emissions at the CENLA hub, where the proposed sites each have 7.5 million tons of sequestration capacity annually.

“We’re still in a process of signing up emitters,” he said. “There’s additional capacity in the area, so we could easily expand to a third site.”

CapturePoint Solutions has also signed an agreement with Azure for a greenfield SAF plant in Kansas, where CapturePoint Solutions will tie in and take away CO2 to its planned Oklahoma site.

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Exclusive: Alternative asset manager exploring decarbonization fund

An asset manager in sustainable energy and agriculture is laying the groundwork for a fund focused on decarbonization of heavy industry and clean fuels.

Power Sustainable, the alternative asset manager based in Montreal, is deliberating on how to launch a fund focused on industrial decarbonization and clean fuels, a source familiar with the matter told ReSource.

The firm, which has AUM of CAD 3.8bn as of March 31 through several credit funds in energy infra and and an equity vehicle in sustainable food production, is exploring the launch of a decarbonization private equity vehicle to make investments in things like green steel, cement and plastics, the source said.

Hiring or partnering with experts in the space to make informed decisions about private equity investment opportunities would be key, the source said.

“We’re going to bring in a phenomenal team and really trust them to figure out where the best investment plays are,” the source said.

The company has a strong relationship with Éric Gauthier, the development manager and his team at TESCanada H2 in Quebec, which is developing a large-scale green hydrogen facility in that province.

That project, Project Mauricie, consists of the construction of an electrolyzer and renewable energy production assets. Upon its commissioning in 2028, the project will produce 70,000 mtpy of green hydrogen exclusively dedicated to Québec end users.

The firm is in growth mode, seeking to multiply the size of its existing mandates, the source said. The firm is open to consultation from external advisory services.

Power Sustainable declined to comment.

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Quantron kicks off Series B equity raise

The German and American mobility provider is seeking to raise EUR 200m in a Series B equity raise, as the company plans to become a one-stop-shop for hydrogen-powered commercial vehicles, according to a teaser.

Quantron, the Germany and US-based hydrogen trucking manufacturer, is seeking to raise EUR 200m in a Series B capital raise, and has further plans to raise money in a Series C in 2024 or 2025, followed by an anticipated IPO beyond 2025.

The company plans to use proceeds from the Series B accelerate the roll-out of existing production and make additional market entries included expanding its operations in the US, according to a sale teaser seen by The Hydrogen Source. Stifel is leading the capital raise, as previously reported.

By advancing a full-scale zero-emission ecosystem, Quantron is seeking to take part in the sourcing and distribution of green energy and hydrogen, as well as building fuel cell and battery electric vehicles and components and offering customer solutions like aftersales, the teaser notes.

Quantron, which has offices in Augsburg, Germany and Detroit, Michigan, has brought in about EUR 28m in revenues since inception and expects EUR 60m in revenue this year, fueled by a EUR 100m order book and pipeline. The company has put 150 vehicles on the road to date and has 130 employees.

Its Series A capital raise of EUR 45m, completed in September, 2022, implied a EUR 250m pre-money valuation. The ongoing EUR 200m capital raise will come in the form of the Series B financing as well as working capital facilities.

The company recently announced commitments with FirstElement Fuel and Goldstone Technologies Limited. Quantron debuted its Class 8 hydrogen fuel-cell truck in the US at the Advanced Clean Transportation Expo in Anaheim, California in April.

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Methanol-to-hydrogen firm planning capital raise

An early-stage provider of distributed methanol-to-hydrogen solutions is planning a capital raise as it scales up.

Kaizen Clean Energy, a Houston-based methanol-to-hydrogen fuel company, is planning to raise additional capital in support of upcoming projects.

The company, which uses methanol and water to produce hydrogen with modular units, recently completed a funding round led by Balcor Companies, in which Balcor took a minority interest in Kaizen.

Additional funding in the capital raise was provided by friends and family, Kaizen co-founder and chief commercial officer Eric Smith said in an interview.

But with its sights on larger project opportunities this year, the company is already targeting an additional capital raise to support continued growth, Smith said. He declined to comment further on the capital raise and potential advisors, but noted that the company’s CFO, Craig Klaasmeyer, is a former Credit Suisse banker.

Kaizen’s methanol model utilizes a generator license from Element 1 and adds in systems to produce power or hydrogen, targeting the diesel generator market, EV charging and microgrids as well as hydrogen fueling and industrial uses.

Compared to trucking in hydrogen, the model using methanol, an abundant chemical, cuts costs by around 50%, Smith said, noting that Kaizen’s containers are at cost parity with diesel.

In addition, the Kaizen container is cleaner than alternatives, producing no nitric or sulfur oxide, according to Smith. Its carbon intensity score is 45, compared to 90 for the California electric grid and 100 for diesel generators.

Smith also touts a streamlined permitting process for Kaizen’s containerized product. The company recently received a letter of exemption for the container from a California air district due to low or no emissions. The product similarly does not require a California state permit and similarly, when off grid, no city permits are required, he added.

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