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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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ZeroAvia forms hydrogen aviation fuel partnership with Masdar

The UAE-owned renewable energy company will work with the aviation firm to build aircraft refueling infrastructure.

ZeroAvia has signed a partnership agreement with the UAE’s Masdar to explore hydrogen production and supply, initially in North America and Europe, in order to establish hydrogen-powered commercial flights, according to a news release.

The partnership will also try to establish clean flight operations in the UAE.

Masdar is targeting 1 million tons of green hydrogen production per year by 2030. The state-owned company’s Green Hydrogen division is already involved in aviation projects targeting the production of green hydrogen.

ZeroAvia, based in the UK and US, is backed by American Airlines and recently acquired California-based fuel cell stack innovator HyPoint.

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Air Products building $500m New York liquid production plant

The investment would support a 35 metric ton per day facility to produce green liquid hydrogen at a greenfield site in Massena, New York.

Air Products plans to invest approximately $500m to build, own and operate a 35 metric ton per day facility to produce green liquid hydrogen at a greenfield site in Massena, New York, as well as liquid hydrogen distribution and dispensing operations, according to a news release.

Commercial operation is targeted in 2026 or 2027.

In support of this project, the New York Power Authority (NYPA) board approved in July 94 MW of low-cost St. Lawrence hydroelectric power to Air Products.

Further to this proposed facility announcement, Pennsylvania-based Air Products is also investigating the feasibility of establishing a hydrogen fueling station network in the United States’ northeast region, including the ability to serve Air Products’ truck fleet. Air Products has announced plans to convert its global fleet of approximately 2,000 trucks to hydrogen fuel cell zero-emission vehicles.

The liquid hydrogen product from the facility is expected to be sold to the mobility market in New York State as well as other potential northeast industrial markets.

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H2 Green Steel building manufacturing plant in Sweden

H2 Green Steel will build the world’s first facility for direct reduced iron running on 100% green hydrogen.

H2 Green Steel will build the world’s first facility for direct reduced iron (DRI) running on 100% green hydrogen, according to a press release.

The plant will use run with systems built by Midrex Technology, a subsidiary of Japan’s Kobe Steel, the release states. It will have a yearly production of 2.1m tonnes of hot DRI and hot briquetted iron (HBI) that will feed the production of initially 2.5m tonnes of green steel in Boden in northern Sweden.

The DRI plant will be provided by a consortium comprising Midrex and Paul Wurth, an SMS group company.

Kobe Steel has made an investment in H2 Green Steel, the release states. The Japanese company has begun discussions with H2 Green Steel for the possible purchase of green HBI in the future. H2 Green Steel may have some over-capacity of HBI in the transition for the company’s production to reach full capacity.

H2 Green Steel’s purpose is to decarbonize hard-to-abate industries, starting with steel. Its process will remove up to 95 percent of carbon emissions compared to traditional steelmaking with a blast furnace. The bulk of the emission reductions will happen with Midrex’s technology when iron ore is reduced to sponge iron. The companies will also work together for optimization services in the DRI-process.

“This unique project is a ‘lighthouse’ to our industry and sets the standard for green steel. There is simply nothing like it – 100 percent hydrogen from day one to produce over 2 million tonnes of DRI with up to 95 percent reduction in CO2,” Stephen C. Montague, President and CEO of Midrex Technologies, said in the release.

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Biomass technology company launching US projects

Comstock Inc, a biomass technology company, is gearing up to build a fleet of plants that will use yield-enhancing technology to convert woody biomass into clean fuels.

Comstock Inc, a biomass technology company, is gearing up to build a fleet of plants that will use yield-enhancing new technology to process woody biomass into an intermediate product that can be further refined into clean fuels.

The company, traditionally a miner focused on gold and silver mining in Nevada, has been transformed into a technology innovator seeking to build, own, and operate a portfolio of carbon neutral extraction and refining facilities in the US, CEO Corrado De Gasperis said in an interview.

“We’re finalizing all of our documentation on readiness and engineering, and then we’ll be working to select an EPC, and then we’ll be ready to bond and finance,” he said.

Comstock, which trades on the NYSE, is currently engaged in the process of securing access to feedstock, and has mapped out nine regions in the U.S. which, combined, produce between 85 – 100 million tons of woody biomass residuals per year.

In parallel, the company is seeking to incentivize growth of trees like hybrid poplar that can be used as feedstock in the future, De Gasperis said. “We’re going to be building the backend of the supply chain with a feedstock strategy, accessing existing residuals, and then building these facilities,” he added.

In Minnesota, for example, there are around 300 sawmills with no place to send their sawdust and excess woodchips following the closure of several wood-to-energy plants, said David Winsness, a president at Comstock.

“Those are the materials that shouldn’t be sitting there – we should be converting them into fuel,” Winsness said.

Building plants

The company has set an objective to generate “billions” in revenue by 2030 – something it would achieve largely through building and operating the woody biomass plants near where the feedstock is located. Comstock also sells related services and licenses selected technologies to strategic partners.

Using simple math, Comstock could achieve its revenue goal by building and operating 10 facilities that produce approximately 1 million tons of clean fuels per year.

A plant producing 1 million tons per year would require capex of between $600m – $750m to build, and would likely be constructed using a project finance funding model, De Gasperis said. The company has not yet selected a financial advisor.

De Gasperis believes large refiners will want to co-build the facilities along with Comstock – which could also entail a strategic equity investment from the selected refiner and lead to a faster construction process.

“Speed and throughput is the goal,” he said, noting that the company has been engaged with roughly 12 of the large clean fuels refiners on a potential partnership. “The faster we’re producing these carbon-neutral gallons, the faster we’re decarbonizing, and the faster we’re making money.”

The company has private equity funds and infrastructure funds on their radar as potential investors but has not engaged with them yet.

The other half

Comstock’s technological breakthrough comes in its ability to produce a biointermediary – called bioleum – from a part of the woody biomass that is not cellulose, and which can be used to produce drop-in fuels. (Importantly, under new EPA rules implemented in June 2022, biointermediaries such as bioleum can be sold on to refiners, whereas previous rules required co-location with the refineries.)

“Cellulose only counts for 50% of a tree,” said Winsness. “For every gallon of fuel generated from cellulose, we’re getting another gallon from the byproduct. It’s a huge change for the industry to be able to get that much more throughput from the same amount of biomass.”

The Department of Energy recently issued a funding opportunity for projects that can produce more than 60 gallons of ethanol from 1 ton of wood feedstock, De Gasperis said.

“We saw that and we said, ‘We’re already there. We can do much more,’” he added.

Comstock can currently produce about 70 gallons of ethanol from 1 ton of wood, using cellulose. Meanwhile, with the non-cellulose half of the wood in 1 ton of feedstock, the technology can produce an additional 30 – 40 gallons of renewable diesel or aviation fuel.

The company has partnered on a process to convert ethanol to drop-in fuel, with the ultimate goal of producing 100 gallons of drop-in fuels from 1 ton of wood feedstock, according to De Gasperis. “All of our development is to stabilize the breakthrough we had on the bioleum – the heavy cellulose components of the wood is where our technology breaks through and shatters this.”

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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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Siemens Energy NA executive priming for scale in hydrogen

The North American wing of the global technology company is in the earliest stages of engaging EPC providers and economic development officials for its next US electrolyzer manufacturing site, Richard Voorberg, president of Siemens Energy North America, said in an interview.

To say the demand for electrolyzer capacity has grown exponentially in 2022 comes across as an understatement, as customers in industry and energy have increased their orders multiple times over.

Siemens Energy North America’s electrolyzer – which is 18 MW and among the largest in the market – was too large for many customers just a year ago, Richard Voorberg, president of Siemens Energy North America, said in an interview. But following passage of the IRA, the question became how many the customer could get – and how fast.

“How quickly can I get 100 of your electrolyzers?” Voorberg said he hears now, whereas before that same customer might have asked for half an electrolyzer.

The decision to make an electrolyzer as large as 18 MW was part of the company’s strategy to have bigger capacity as the market for hydrogen expanded, Voorberg said.

HIF Global recently said it has tapped Siemens Energy to engineer and design their proprietary “Silyzer 300” electrolyzers to produce approximately 300,000 tons per year of green hydrogen at an eFuels facility in Texas.

Siemens Energy NA is now in the earliest stages of developing a new electrolyzer manufacturing plant in the United States, as previously reported by ReSource.

The US plant will be similar to the plant Siemens Energy is building in Berlin, and won’t be built until after Berlin is completed, Voorberg said.

The company is actively engaging with state economic development committees to scout locations, incentives and labor supplies. It is also in the early stages of engaging engineers, EPC providers and other development partners, Voorberg said.

“We also need to decide in the next few months what we want to do in-house, with our own shops, versus what we want to outsource,” Voorberg said.

North Carolina, Houston, Alabama and upstate New York are all in Siemens Energy’s existing footprint and are as such strong contenders for the new facility, Voorberg said, though nothing is set in stone as far as location. The company would finance the facility within its normal capex expenses within a year.

In electrolyzer manufacturing there is some “test hydrogen” that is produced, so there will be a need to find some small offtaker for that, Voorberg said. The company could also use it to supply its own fork-trucks in the future.

Open to acquisitions

Diving into an acquisition of another electrolyzer manufacturer probably would not make sense for Siemens Energy, Voorberg said. But the company is open to M&A.

He cited the acquisition of Airfoil Components in Florida as the type of deal that the company could move on again. In that case, the target company had expertise in casting that was easier to acquire than build from scratch.

“Does that make more sense that we buy it, that we outsource it, or should we be doing something like that ourselves?” Voorberg said are questions he often asks.

“When it comes to less complicated things, like a commodity market, that’s not something we play well in or need to play well in,” Voorberg said. “When it comes to a specialty design-type product, that’s where we at Siemens Energy shine.”

Right now, the Siemens Energy parent company has a bid out to acquire the third of Siemens Gamesa, the Spanish-listed wind engineering company, that it does not own, Voorberg noted.

Start-up opportunity

Siemens Energy, through its in-house venture capital group and partnerships with US universities, is interested in helping technology startups scale, Voorberg said.

“We can play in between them and the customers and do the introductions and potentially even partner in with some of our technology,” he said.

The company keeps close relationships with incubators at Georgia Tech and the University of Central Florida, among others, Voorberg said.

Equity investments will be made through the VC group, Voorberg said, noting that effort as one that is strategic in growing the energy transition, rather than financial.

Additional non-equity partnerships, similar to the fellowship with the Bill Gates-founded Breakthrough Energy, are on the table as well.

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