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HTEC gets CAD 10m in federal funds for hydrogen facility at pulp mill

HTEC's project will operate a renewable hydrogen production facility at a pulp mill in British Columbia.

HTEC and West Fraser Mills will receive CAD 10m from the Canadian government through a program seeking to facilitate adoption of innovative technologies.

Located in Nanaimo, B.C., HTEC’s project will operate a renewable hydrogen production facility at the Harmac Pacific Pulp Mill, producing clean hydrogen by electrolysis, according to a news release.

HTEC last year secured a CAD 217m investment from Chart Industries and I Squared Capital.

With a CAD 10m contribution through the Investments in Forest Industry Transformation program, the hydrogen will be used as clean fuel for transportation and heating, and will help the mill decarbonize its operations. HTEC’s project with Harmac Pacific is an example of how surplus energy from mills can be utilized to lower emissions and advance federal and provincial clean hydrogen goals, according to the release.

“HTEC’s growing network of hydrogen fuelling stations due to the industry demand for low-carbon transportation fuel in Canada has necessitated the development of local hydrogen production,” HTEC CEO Colin Armstrong said in a statement. “We are building multiple clean-hydrogen production facilities across the country, and this Nanaimo-based facility is a critical piece of the clean hydrogen value chain. We are grateful to the Government of Canada for its ongoing support in decarbonizing Canada’s transportation sector, allowing us to expand our retail fuelling network and opening up new market opportunities for heavy-duty transportation applications.”

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Copenhagen Infrastructure Partners acquires majority stake in Gulf Coast blue ammonia project

The project has commenced detailed engineering and will initially consist of two phases, each with a production capacity of 4,000 tons per day once operational in 2027.

Copenhagen Infrastructure Partners, through its Energy Transition Fund (CI ETF I), has acquired a majority stake in a blue ammonia project, which will be developed alongside U.S.-based Sustainable Fuels Group (SFG), according to a news release.

The financial terms of the transaction are not disclosed.

The project has entered into an agreement with International-Matex Tank Terminals (IMTT), a terminaling and logistics company, to provide ammonia storage and handling services. Located along the Gulf Coast, the project has commenced detailed engineering (FEED) and will initially consist of two phases, each with a production capacity of 4,000 tons per day (~3.0 million tons of annual production from both phases) once operational in 2027.

Blue ammonia is a low-carbon approach to ammonia production which combines traditional ammonia synthesis using natural gas with subsequent carbon capture and storage process. The project will use Topsoe’s industry leading SynCOR™ technology to produce blue ammonia with the lowest carbon intensity and is expected to reduce CO2e emissions by 90% (Well-To-Gate) compared to traditional ammonia production, thereby abating 5.0 million tons of CO2 per year.

The project will form part of the CI Energy Transition Fund, which closed in August 2022 at the hard cap of EUR 3.0bn, and like all current CIP Funds, is aligned with the UN Sustainable Development Goals (SDGs) principally through the expected avoidance of greenhouse gas emissions resulting from its investments.

The CI Energy Transition Fund focuses on clean hydrogen, and other next generation renewable technologies to facilitate the decarbonization of hard-to-abate sectors such as agriculture and transportation.

Søren Toftgaard, partner in Copenhagen Infrastructure Partners, said of the acquisition: “We are developing a global portfolio of clean hydrogen and hydrogen-related products, such as clean ammonia. Blue ammonia is considered an important part of a successful energy transition, which can potentially help fill the ammonia shortage in Europe as well as being a steppingstone to the successful implementation of green projects, and we are excited to bring this project to the Gulf Coast region. Further, the agreement provides important diversification to our CI ETF I portfolio and can provide a platform for future hydrogen-related investments in the U.S.”

“IMTT is thrilled to support CIP’s development of this alternative fuels project,” said Chris Partridge, executive vice president of IMTT. “Additional clean energy sources, such as blue ammonia, are vital to advancing the global energy transition. We look forward to leveraging our terminaling experience and expertise to assist CIP in delivering this low-carbon fuel to the market.”

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Strategic RNG ventures ramping up

A pair of joint ventures to develop RNG projects in the US – between Clean Energy Fuels Corp. and bp and TotalEnergies, respectively — are expected to make first profits in the second half of this year, as projects come online and begin to generate environmental credits.

Over the next 12 to 24 months, investments made by Clean Energy Fuels and its global JV partners TotalEnergies and bp will start realizing earnings for the company, president and CEO Andrew Littlefair said in an earnings call today.

When these projects come online they have a period of nine to 12 months where the project is producing gas but not monetizing state and federal credits.

“This ramp-up period will have a negative drag on our financials in 2024, until we can monetize the RNG produced with environmental credits,” Littlefair said, adding that the company plans to store RNG until the credits can be claimed.

To date Clean Energy Fuels has invested $238m in the joint ventures established three years ago, Littlefair said. Another $35m is to be deployed into additional dairy RNG projects.

Clean Energy Fuels put $68m into its dairy RNG venture with bp late last year, Robert Vreeland, Clean Energy’s CFO, said in the call; $198m of cash infused into that JV is now all earmarked for dairy RNG development.

M&A can play a factor in Clean Energy Fuels’ RNG growth, Vreeland said. The company is open to acquiring projects to accelerate production volumes.

The RNG ventures will start producing revenues in the second half of this year, Vreeland said; 100% of net losses will occur in the first half of the year.

“You see the effects of the dairy-RNG joint ventures being in ramp-up mode,” Vreeland said. “We’ll start to see the effects of monetizing the RNG projects in the second half of the year.

A large project in Idaho with 37,000 cows will be complete in late 2024 or early 2025, Vreeland said. That project alone will be responsible for more than half of the earnings drag in 2024.

Six greenfield projects have completed construction and are in final commissioning, Littlefair said. Two projects are in or near construction and the company continues to evaluate new projects.

Clean Energy has the largest number of RNG fueling stations in the US, serving customers like Amazon. Some of the stations are customer owned and operated by Clean Energy, namely in Texas, Ohio and California.

Cummins new X15N engine will allow new fleets to adopt RNG, providing a catalyst for Clean Energy’s growth in commercial trucking and OEMs, he said.

Littlefare called the recent passage of a clean fuels standard in New Mexico a major win for RNG adoption, and noted positive signs that midwestern and northeastern states could pass their own standards soon.

Stonepeak committed $400m to Clean Energy Fuels in DecemberThe company recently made a $10m commitment to climate solutions start-up Rimere.

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Fluor and Carbfix collaborating on CCS solutions

The companies look to partner with clients looking for end-to-end CO2 reduction. An MOU enables the two companies to pursue CO2 removal projects like direct air capture and bioenergy CCS.

Fluor Corporation has signed an MOU with Carbfix, the CO2 mineral storage operator, to pursue CCS solutions, according to a news release.

Together the companies look to decarbonize hard-to-abate industries like steel, aluminum and cement.

“The companies will leverage their respective expertise to partner with clients looking for end-to-end CO2 reduction,” the release states. “The MOU also enables the two companies to pursue CO2 removal projects such as direct air capture and bioenergy carbon capture and storage.”

Fluor will provide its proprietary carbon capture technology and EPC. Carbfix’ technology dissolves CO2 in water and injects it into porous basaltic rock formations, where natural processes cause the CO2 to form stable carbonate minerals within two years.

Carbfix has applied its method of turning CO2 into stone underground for more than a decade in Iceland. The company currently captures and mineralizes one-third of the CO2 emissions from Iceland’s largest geothermal power plant, with the goal of increasing this rate to 95% by 2025.

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Exclusive: Verde Clean Fuels seeking project finance for gas refineries

Publicly listed Verde Clean Fuels plans to seek equity and debt investors for low-carbon gasoline refineries it expects to deploy across the US. We spoke to CEO Ernest Miller about the strategy.

Verde Clean Fuels, a publicly listed developer of clean fuels technology and projects, is planning to seek project debt and equity investors to finance a series of low-carbon gasoline refineries it expects to deploy across the US.

Houston-based Verde, which employs syngas-to-gasoline refining technology, recently announced an agreement with Diamondback Energy to construct a facility in the Permian Basin that will utilize stranded natural gas to produce 3,000 barrels per day of gasoline.

The company is also pursuing a carbon-negative gasoline project on the premises of California Resources’ Net Zero Industrial Park in Bakersfield, California. The California project will produce approximately 500 barrels of RBOB renewable gasoline per day from agricultural waste, while capturing and sequestering around 125,000 tons of CO2 per year.

Verde is capitalized following a private investment in public equity (PIPE) injection of $54m as part of a reverse merger last year, allowing the company to take the Bakersfield and West Texas projects through the FEED phase, CEO Ernest Miller said in an interview.

Underpinning Verde’s business model is the view that gasoline will persist as a transportation fuel for many years to come, and that very few parties are working to decarbonize the gasoline supply chain.

“Between renewable diesel, renewable natural gas, and sustainable aviation fuel, there is very little awareness that renewable gasoline is even a thing,” Miller said. “The addressable market is enormous, and the impact that can be made by taking even a sliver of that market is enormous.”

Miller says that many market participants believe that electric vehicles will solve the emissions problem from road transport.

“The fact is that gasoline has a very, very long runway ahead of it,” he said. “Regardless of the assumptions you want to make about EV penetration, the volume of gasoline that we continue to use for the foreseeable future is huge.”

Verde Clean Fuels demo plant.

Verde’s projects are sized in the 500 – 3,000 barrels per day range, making them a unique player at the smaller end of the production range. The only other companies with similar methanol-to-gas technology are ExxonMobil and Danish-based Topsoe, which operate at a much larger scale, according to Miller.

Miller recognizes that low-carbon, or negative-carbon, gasoline operates within a complex ecosystem, with the California project potentially playing in that state’s LCFS and D3 RIN markets, in addition to the market for gasoline.

“What I would like to see us do is have an offtaker that plays in all three of those products – so if I can go to Shell Trading, or bp, or Vitol, and get one of them to say, ‘here’s a price,’ and they take all of that exposure and optionality,” Miller said, “that allows me to finance the project without having to manage a whole bunch of different commodity exposures and risk.”

Bakersfield 

The Bakersfield project, estimated to cost $235m to build, will utilize 450 tons per day of agricultural waste to produce gasoline, and sequester CO2 via California Resources’ carbon management company, Carbon TerraVault, a joint venture with Brookfield Renewable.

Because of the carbon sequestration, the project will qualify for incentives under 45Q, but since it is producing, in Miller’s words, “deeply carbon-negative gasoline,” most of the value for the project will come from California’s LCFS program.

In order to qualify for LCFS credits, the Bakersfield facility goes through the full GREET modeling process – including transport of feedstock, processing and refining, and transport away from the facility – returning a negative 125 grams equivalent per MJ carbon intensity score for the project, according to Miller.

As for investors, Verde “would like to see both California Resources and Brookfield Renewable in the project, either individually or through the Carbon TerraVault JV,” Miller said.

Verde is also in discussions with a handful of financial players, including infrastructure and pension funds that are looking for bond-like cash flow that a project finance model can provide. The company has also explored the municipal bond market in California, which would bring to bear a favorable capital structure for the project, Miller said.

Verde is not currently working with a project finance advisor, Miller said, noting that they have in-house project finance experience. In Texas, Verde is working with Vinson & Elkins as its law firm; and in California Verde is working with Orrick as counsel.

Gasoline runway

For the Diamondback facility in West Texas, which requires roughly $325m of capex, both Verde and Diamondback will take equity stakes in the project, and Verde will seek to bring in debt financing to fund the rest of the project costs in a non-recourse project finance deal, Miller said.

The Permian project seeks to provide a pathway to monetize stranded gas in the basin by taking advantage of and alleviating its lack of takeaway capacity, which causes gas prices at the Waha Hub in West Texas to trade at a significant discount to the Henry Hub price.

“Diamondback would take the position that any gas that’s getting consumed in the Permian Basin is gas that’s not getting flared in the Permian Basin,” Miller said, thus making the project a emissions-mitigating option. “There will never be enough natural gas takeaway capacity out of the Permian Basin,” he added, noting that driller profiles are only going to get gassier as time goes on.

Diamondback, for example, produces more in the Permian than it can take out via pipeline, therefore “finding a use, a different exposure, for that gas by turning it into gasoline, is of value for them,” Miller said.

“It’s the same dynamic in the Marcellus and Bakken and Uinta – all the pipeline-constrained basins,” he added, alluding to possible future expansion to those basins.

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exclusive

Renewable hydrogen developer in exclusivity with strategic investor

A renewable hydrogen developer based in the western US is reaching the final stages of a capital raise with an investor in exclusivity.

NovoHydrogen, the Colorado-based renewable hydrogen developer, is in exclusivity with clean energy investment platform Modern Energy, according to two sources familiar with the matter.

ReSource reported in February that GreenFront Energy Partners was advising the company on a Series A.

NovoHydrogen CEO Matt McMonagle said previously that the company has about 30 projects in development in the US, ranging from a few megawatts to hundreds of megawatts. Its most active markets are the West coast, Northeast, Appalachia, Texas and the Rocky Mountains, though the company is not geographically constrained.

The company aims to begin construction on its first projects by the end of this year, the executive had said.

NovoHydrogen declined to comment. GreenFront and Modern Energy did not respond to requests for comment.

Modern Energy, a certified B-Corporation, recently put $90m into net metered solar developer Industrial Sun along with partner EIG. In 2020 EIG committed USD 100m to Modern Energy through a debt facility to fund the development of clean energy assets.

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Exclusive: New sustainability hedge fund to raise up to $2bn

A new hedge fund founded by a clean fuels industry veteran is gathering partners to raise up to $2bn initially for deployment into ammonia and other climate-transition technologies.

New Waters Capital, an emerging hedge fund based in New York City, is gathering its primary partners for its first fundraise of between $1bn and $2bn, founder Bill Brown said in an interview.

Brown formerly spent 15 years at North Carolina-based 8 Rivers Capital, which recently announced an ammonia project in Texas. Brown, a co-founder, sold his shares to South Korea’s SK, Inc. in that company’s majority takeover of 8 Rivers last year.

Brown recently created New Waters as a multi-strategy fund manager to invest in publicly traded companies in sustainability, AI, and clean fuels.

“The molecule-based economy is really important, and there’s some companies that have been in the molecule-based economy that are not really sure what they’re doing,” Brown said.

This creates an environment ripe for disruption, he said.

The firm is in the process of selecting its prime brokers, which will help determine the size of New Waters’ fundraises, Brown said. The first raise will be conducted in the next six months, and likely not be larger than $2bn to start.

New Waters’ law firm is Seward & Kissel.
The Wild West of molecules

Of all hydrogen produced in the US, about 65% is used for fertilizer production, Brown said. In Japan, where hydrogen is being co-fired with coal, replacing all coal-fired generation with ammonia would require 10 times the current ammonia production of the US.

“The market for molecules is so big, and yet the largest producer in the US of ammonia is CF Industries.” That company has one plant in Louisiana that represents roughly one third of total US ammonia production. “So CF is tiny compared to the opportunities out there.”

Brown said he is looking for the companies that are going to be the Valero and Phillips 66 of ammonia refining. He believes 8 Rivers is on track for something like that.

“We look at companies like that,” he said. “I think that entire market is up for grabs right now; it’s a whole new market.”

 Companies that can seize that market are the companies that are going to be part of the energy system of the future.

“In many respects right now, we’re in the Wild West, if you will, of the molecules of the future,” Brown said.

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