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Montana Renewables completes startup, gets bridge loan from I Squared

Calumet Specialty Products Partners said this week that its Montana Renewables subsidiary completed the startup of its sustainable aviation fuel and pretreatment units.

Calumet Specialty Products Partners, L.P. said this week that its its Montana Renewables subsidiary completed the startup of its sustainable aviation fuel and pretreatment units.

Calumet and its SAF off-taker plan to hold a ribbon cutting ceremony on May 10, 2023 to recognize this important milestone.

“We are pleased to report that our leading Sustainable Aviation Fuel, Renewable Diesel, and Renewable Hydrogen platform is fully complete and operating,” said Bruce Fleming, CEO of Montana Renewables. “As we ramp up our pre-treater and draw down existing safety stock of clean feed, we reconfirm go-forward EBITDA guidance of $1.25 to $1.45 per gallon based on local sourcing of untreated feedstocks.”

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. “Our capital markets strategy remains unchanged,” said Fleming. “This transaction provides strategic optionality as we continue to build North America’s largest SAF business.”

Calumet’s CEO Todd Borgmann added “Following a year in which we’ve demonstrated the power of Calumet’s legacy Specialty business, we can now add the full earnings power of Montana Renewables. Over the past two years, our Montana Renewables team has quickly launched a leading renewables platform and created a first mover advantage in SAF. This major accomplishment is the most recent step in our transformational plan to unlock value for Calumet’s unitholders.”

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Calumet subsidiary Montana Renewables inks supply and offtake agreement with Macquarie

Montana Renewables is developing a renewable hydrogen facility that will supply hydrogen to a plant producing renewable fuels.

Calumet Specialty Products Partners has closed two transactions that together fund the working capital needs of Montana Renewables LLC (MRL), including a supply and offtake agreement with Macquarie Commodities and Global Markets, according to a news release.

The Macquarie supply and offtake agreement provides inventory monetization for renewable feedstocks and products, as well as intermediation services connected with the purchase of renewable feedstocks.

Simultaneously, a $90m asset backed loan revolving credit facility was executed with Wells Fargo Bank, NA, secured by accounts receivables and open blenders tax credit refunds.

“Now that Montana Renewables has commenced operations, these transactions ensure that our working capital needs are met going forward,” said Bruce Fleming, EVP Montana Renewables. “Third party inventory financing has been in the MRL plan since day one, and we are pleased to execute on the plan as we launch operations.”

Once fully operational, Montana Renewables, based in Great Falls, Montana, will use waste feedstocks to produce low-emission alternatives that directly replace fossil fuel products including Renewable Hydrogen, Renewable Diesel (RD) and Sustainable Aviation Fuel (SAF).

Montana Renewables is developing a renewable hydrogen facility that will supply hydrogen to the plant’s hydrocracker.

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 has 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 these transactions, the $300m convertible investment from Oaktree Capital Management L.P. in MRL has been retired.

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Mexico methanol project to use local wastewater

Transition Industries has agreed with local water authorities to use wastewater for a green and blue methanol facility in Sinaloa, Mexico.

Transition Industries LLC announced that it has signed a multi-year agreement with the Ahome Municipality’s Drinking Water and Sewage Board (JAPAMA) to use municipal wastewater for all water resource needs for its Pacifico Mexinol project, a 6,145 MT per day methanol production facility near Topolobampo, Sinaloa, Mexico.

When it initiates operations, Pacifico Mexinol, is expected to be the largest single ultra-low carbon methanol facility in the world – producing approximately 300,000 MT of green methanol from captured carbon and green hydrogen, and 1.8 million MT of blue methanol annually from natural gas with carbon capture, according to a news release. Furthermore, the water solution is expected to be the world’s largest application of industrial water reuse from municipal effluent.

Pacifico Mexinol’s purpose-driven water strategy, designed in partnership with JAPAMA, will allow the facility to completely avoid impacting the Bay of Ohuira. Instead of using seawater and other natural sources of water – which could compete with local agriculture, industrial, commercial and/or residential freshwater needs – Mexinol’s water solution uses municipal wastewater which will be treated and recycled back to the municipal wastewater facility. This closed loop water system will also prevent more than 12 million tons per annum of wastewater being disposed of into the Bay of Ohuira.

Pacifico Mexinol will pay JAPAMA a tariff per cubic meter of wastewater as determined by state law, thus enabling JAPAMA to commercialize its wastewater and strengthen its financial position. The agreement also includes upgrades and improvements to JAPAMA’s water treatment facility.

Rommel Gallo, the CEO of Transition Industries, commented: “We are pleased to have developed a sustainable water solution in partnership with JAPAMA that is not only a model for how to address climate change head-on but also shows how industry and government can work together for sustainable solutions, benefiting both the community and business.”

Transition Industries’ mission is to actively participate in the transition to a low-carbon world by leveraging technology and innovation to produce methanol safely and efficiently while minimizing any negative environmental and social impacts.

“Years of community and municipal engagement has led to the development of a set of purpose-driven design solutions, like our wastewater strategy, aligned with our core values. We will not impact the Bay; our facility is Net Zero to avoid pollution; we use clean and renewable energy; and we promote economic development aligned with the interests of communities,” says Tom Roche, Head of ESG for Transition Industries.

Pacifico Mexinol is expected to reach FID in 2024 and commercial operations in late-2027 to early-2028. The project will generate a significant number of local jobs during construction and operations.

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Japanese MoU for ammonia-fueled bulk carriers

The Japanese firms will each play a role in the design, development and implementation of the ammonia-fueled ships.

A group of Japanese firms has signed an MoU to jointly develop the commercialization of ammonia-fueled ships.

Kawasaki Kisen Kaisha, Ltd. together with ITOCHU Corporation, Nihon Shipyard Co., Ltd., MAN Energy Solutions (MAN), Mitsui E&S Co., Ltd., and NS United Kaiun Kaisha, Ltd. have signed the MoU, according to a news release.

The MoU is based on the premise that 200,000 deadweight ton class bulk carriers to be built by Nihon Shipyard will be equipped with ammonia-fueled engines being developed by MAN as a pilot project prior to commercialization, and that the necessary operational data will be collected after the delivery of the ships for the commercialization of ammonia-fueled engines and ammonia-fueled ships in cooperation with other parties involved.

The signing of this MOU is an important milestone for the implementation of ammonia-fueled ships, a new challenge being taken on by the maritime industry, and also an important step in the ongoing implementation of the Integrated Project being facilitated by ITOCHU, the release states.

ITOCHU and its partners will proceed with the development of the ammonia-fueled engines and ships based on this MOU, aiming to begin social implementation once the engines and ships are ready in accordance with the integrated project for the development and social implementation of ammonia fueled ships selected by the New Energy and Industrial Technology Development Organization (NEDO) in October 2021.

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Carbon-negative materials firm in $40m equity raise

A Texas-based manufacturer of renewable plastics is developing its first plant in the Midwest, with a commercialization date set for 2026.

Citroniq Chemicals, a maker of renewable and carbon-negative plastics, is undergoing a $40m equity raise, according to two sources familiar with the matter.

The process has launched and is being led by Young America Capital, the sources said. The company’s projects account for about $1bn in CapEx.

Based in Houston, Citroniq uses bio-based feedstocks to produce plastics at scale. The company recently signed a Letter of Intent with Lummus Technology for the development of Citroniq’s green polypropylene projects in North America.

“With a projected investment of over $5bn and a combined polypropylene annual capacity of over 3.5 billion pounds, Citroniq is prepared to execute a rapid expansion plan of its E2O process, to meet the market’s growing need for sustainable, carbon negative polypropylene at a competitive price,” Mel Badheka, Principal and Co-Founder of Citroniq Chemicals, said in a press release announcing the LOI. “Located in the Midwest, Citroniq’s first plant is scheduled to start production in 2026 and provide identical, drop-in products that can be directly certified as biogenic through physical testing.”

In January Citroniq announced a separate LOI with Mitsui Plastics for a large-scale supply agreement for sustainable polypropylene.

Citronia and Young America Capital did not respond to requests for comment.

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US hydrogen developer auditioning bankers

A US-based clean fuels developer has large capital needs for unannounced green hydrogen projects in California and Illinois, as well as an ammonia facility in Texas.

A US-based clean fuels developer has large capital needs for unannounced green hydrogen projects in California and Illinois, as well as an ammonia facility in Texas.

Avina Clean Hydrogen has yet to formally engage an investment banker to raise the equity and debt needed for a trio of projects under development in the US, CEO Vishal Shah said in an interview.

The company, which recently announced the formation of a strategic advisory board composed of executives from companies like Cummins, bp and Rolls Royce, will need $600m or more of debt and between $200m and $300m of equity, as previously reported by ReSource. Capital raising talks are focused on the operating company and project level.

Capital raises for Avina’s 700,000 mtpa green ammonia project in the Texas Gulf Coast and a larger operating company raise will launch next month, Shah said.

“The amounts that we are going to need to raise have gone up,” Shah said. “We are working with a number of banks but we’ve not engaged anyone formally.”

Buildout of the Texas project has been accelerated. The company recently announced an agreement with KBR for that project, which is scheduled to come online next year.

Project level capital has been raised for Texas and a green hydrogen project in Southern California, Shah said. An additional green hydrogen project in Illinois is in development as well.

Finding the renewable power

Renewable power needs for these facilities are big, but Shah said the company doesn’t see a shortage of power. Instead, developers are facing interconnection issues and subsequent cost increases.

Hydrogen developers in California are in many cases offering higher prices for renewable energy than other buyers, Shah said. The issue is that credit-worthy investment counterparties are often seen as more attractive offtakers regardless of the higher price offers from aspiring hydrogen producers.

“I would say California is different,” Shah said. “The offtake market is a challenge.”

There are renewables developers with a genuine interest in hydrogen looking at the sector as a long-term play, Shah said. But for some without a strategic interest in hydrogen, a community choice aggregator offering a 15-year offtake is more certain than a hydrogen developer offering a 10-year offtake; higher price can be seen as a trade-off.

“That’s the nature of the beast, right now.”

Regulatory uncertainty

Investors looking into the space are hesitating to deploy capital in some cases because of uncertainty around IRA clarifications, particularly with regards to the PTC qualifications, Vishal said.

“A lot of the customers, lenders, everybody’s waiting to make decisions,” Vishal said. Offtakers also have hesitations. “Nobody wants to sign long-term contracts in an environment where pricing is not clear.”

Shah said investors should look for offtake when investing in projects. Avina has two of three contracts signed for each of its projects.

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Ammonia-to-industrial heat provider raising early-stage capital

An early-stage technology provider targeting clients in hard-to-abate industries is engaging investors and financial advisors to raise a seed round, with sites on a Series A in 2025.

Captain Energy, a Houston-based provider of ammonia-to-industrial heat technology, is seeking strategic investors for an early-stage seed round with plans for an eventual Series A, co-founder and interim-CEO Kirk Coburn said in an interview.

The company is developing a single-step process that can create industrial heat from cracked ammonia up to 700 degrees Celsius with zero NOX emissions, with hydrogen as a byproduct, Coburn said. The process uses a ceramic-based tubular solid oxide fuel cell that Captain manufactures in Dundee, Scotland.

“The results from the testing are that we’re 85% efficient,” Coburn said.

He likened the company to Amogy, but serving steel, cement and chemicals instead of transportation. Getting the kind of high-quality heat those industries need in a clean way can only come from a few sources, he noted.
“Ammonia is one of the greatest ways to do it if you can crack it efficiently like we can,” he said.
Past lab

The company is “past the lab stage” and needs to develop a pilot product to showcase to customers, Coburn said. About $5m will get the company to a 100-kilogram-per-day product, up from 25 kilograms now.

“That’s not, probably, big enough for most customers, but we can stack them,” Coburn said. “At this point we need to demonstrate commercially the product… after showcasing it we want to make larger units.”

Captain is owned by three co-founders, including Coburn. They have an 18-month line of site on a “much larger” Series A, Coburn said.

Strategic investors that would be end users of the technology are of interest to the company, particularly in Asian and European markets.

“We’re not getting in the game of making ammonia,” Coburn said. “We have to buy green ammonia.”

The company’s model is at “grid-parity” in Europe now, Coburn said, pointing to Germany in particular.

“We think we’re almost at subsidy-free pricing,” he said.

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