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PE firm acquires Innomotics from Siemens AG

A supplier of electric motor and large-drive systems, Innomotics is seeking to capitalize on the megatrends of electrification, energy efficiency, digitalization, and hydrogen commercialization.

KPS Capital Partners, LP has signed a definitive agreement to acquire Innomotics GmbH from Siemens AG for an enterprise value of €3.5 billion.

Completion of the transaction is expected in calendar Q4 2024 or Q1 2025 and is subject to customary closing conditions and approvals, according to a news release.

Innomotics is a leading global supplier of mission-critical electric motor and large drive systems that optimize customers’ processes, uptime, efficiency and profitability. The company manufactures a complete portfolio of low voltage motors, high voltage motors, medium voltage drives and other components, in addition to providing value-added customer services and solutions. The company serves large, highly technical end-markets with its engineering expertise and industry-leading track record of successful projects.

Paul Weiss, Rifkind, Wharton & Garrison LLP and Gleiss Lutz served as legal counsel and Bank of America and Lazard served as financial advisors to KPS. Committed debt financing to support the transaction has been provided by Barclays, Citibank, Goldman Sachs, Intesa Sanpaolo, Morgan Stanley, MUFG Bank, Standard Chartered Bank, UBS and UniCredit.

Innomotics’ products and services are capable of addressing its customers’ most demanding requirements while enabling significant energy savings, decarbonization and sustainability. Headquartered in Nuremberg, Germany, Innomotics generates approximately €3.3 billion in annual revenue, employs approximately 15,000 people and operates 16 factories across the EMEA, Americas and Asia-Pacific regions.

Michael Psaros, Co-Founder and Co-Managing Partner of KPS, said, “The company is well-positioned to capitalize on the global megatrends of electrification, energy efficiency, digitalization, urbanization and the commercialization of new energy resources such as hydrogen. We look forward to working with Innomotics’ senior management and stakeholders to aggressively accelerate the Company’s growth trajectory and value creation opportunities. We thank Siemens for entrusting KPS with its iconic heritage business created by Werner von Siemens. We are proud that the world’s largest industrial companies continue to view KPS as a peer manufacturer and trusted partner.”

Michael Reichle, Chief Executive Officer of Innomotics, said, “KPS, with its demonstrated track record of manufacturing excellence and its global platform, is the ideal owner for the new Innomotics. We will extend our extensive track record of successful technological innovation and providing our customers with world-class products, solutions and services.” Reichle continued, “We look forward to working closely together with KPS and our talented people as we continue to deliver significant value for our customers around the world and enhance Innomotics’ strong technological leadership. Innomotics will continue to benefit from strong growth potential driven by the sustainability-oriented demand for highly efficient electrification and energy consumption in industry and society.”

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Ares acquires RNG developer

Ares Management has made a strategic investment in Arlington, Virginia-based Burnham RNG.

Ares Management’s Infrastructure Opportunities strategy has made a strategic investment to acquire Burnham RNG, from Edge Natural Resources

Burnham is a full-service developer and owner of organic waste management and anaerobic digestion biogas assets across the US.

The investment from Ares, which has approximately $15.1bn in infrastructure equity and debt assets under management as of September 30, 2023, will support Burnham in the further development and construction of its broader pipeline of renewable natural gas assets.

The acquisition of Burnham follows Ares’ announcement of a strategic investment in Dynamic Renewables earlier this year and represents the group’s continued commitment to building scale in the waste-to-value space, supported by the development of strong projects diversified across feedstock type.

Founded in 2021, Burnham is a leading fully integrated origination, development, financing and asset management platform that provides waste recovery solutions focused on the wastewater and agricultural waste industries. The company is the developer and owner of the Pasco Resource Recovery Center (PRRC) located in Pasco, Washington.

PRRC is designed to treat an average of 4.4 million gallons of industrial wastewater sourced from six local food processors per day via anaerobic digestion and supplementary nitrogen reduction systems. After completion, the facility is expected to produce treated water for irrigation, as well as ~900 MMBtu/day of renewable natural gas. The asset has a 30-year wastewater treatment agreement with the City of Pasco and will sell produced RNG to Cascade Energy via a 20-year offtake agreement. In addition to PRRC, Burnham has a development pipeline comprised of several waste-to-biogas projects across the U.S.

Burnham is led by its Founder and Chief Executive Officer Chris Tynan, who has over two decades of experience in financing and developing infrastructure projects.

Akin Gump Strauss Hauer & Feld LLP served as legal counsel to Edge. Latham & Watkins LLP served as legal counsel to Ares.

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IRS releases proposed regulations for 45V

The IRS has proposed strict rules for its approach to clean hydrogen tax credit qualifications.

Today the U.S. Department of the Treasury and Internal Revenue Service (IRS) released proposed regulations on the Clean Hydrogen Production Credit established by the Inflation Reduction Act (IRA).

A link to the document that will be published in the Federal Register next week is here.

The agencies have taken the so-called three pillars approach for incrementality, temporal matching, and deliverability. These requirements are crucial, the IRS says, for accounting for both existing and new electricity generation from biomass or fossil feedstock, as they inform the lifecycle greenhouse gas (GHG) emissions impact of these sources.

The notice of public rulemaking will be open for public comment for 60 days once it is published in the Federal Register.

The NPRM is supported by a technical paper from DOE that considers how to assess lifecycle greenhouse gas emissions associated with hydrogen production using electricity.

Incrementality:

  • The incrementality requirement is met if the Electricity Attribute Certificate (EAC) is related to an electricity generating facility with a Commercial Operation Date (COD) no more than 36 months before the related hydrogen production facility was placed in service. This requirement ensures that the energy production contributing to the EAC is relatively recent and relevant to the current energy market conditions​​.
  • Recognizing the difficulty in identifying specific electricity generators and the times and places for incrementality, the IRS is considering alternative approaches, including a proxy approach. This approach would consider five percent of the hourly generation from minimal-emitting electricity generators (like wind, solar, nuclear) to meet the incrementality requirement, still subject to temporal matching and deliverability requirements​​.

Temporal Matching:

  • The temporal matching requirement generally mandates that the EAC represents electricity generated in the same hour as the hydrogen production facility’s consumption of electricity. A transition rule allows, until January 1, 2028, for EACs representing electricity generated in the same calendar year as the hydrogen production to meet this requirement. This approach aims to address significant indirect emissions from electricity use​​.

Deliverability:

  • The deliverability requirement stipulates that the EAC must represent electricity generated by a source in the same region as the hydrogen production facility. This ensures a reasonable assurance of the electricity’s deliverability to the intended location​​.

In addition to these specific requirements, the document discusses how these concepts might be applied differently in the context of renewable natural gas (RNG) or biogas, taking into account the different emission sources, markets, tracking methods, and potential incentives​​.

The IRS and the Treasury Department are actively seeking feedback on these proposed regulations, particularly concerning the practical implementation and verification of these requirements.

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Cleveland-Cliffs CEO: ‘Hydrogen is the future’

The largest producer of flat-rolled steel in North America plans to lean heavily on hydrogen to reduce its carbon footprint.

Cleveland Cliffs CEO Lourenco Goncalves is staking his company’s ability to decarbonize on large-scale use of hydrogen as a reductant in its blast furnaces.

The steelmaker is building a $9m pipeline that will feed hydrogen from the edge of its Indiana Harbor 7 plant into the blast furnace, what Goncalves called the company’s “high water mark” for hydrogen since it is the biggest plant of its kind in the Western Hemisphere.

“It’s the biggest blast furnace, the one that we use the most in terms of hydrogen because of its size,” Goncalves said on the company’s earnings call. “And it’s also because it’s our flagship, for instance, our biggest, the biggest in the Western Hemisphere and we are going to use as a demonstration plant for how to use hydrogen” in steelmaking.

Cleveland Cliffs in May completed a hydrogen injection trial at its Middletown Works blast furnace on a smaller scale.

Goncalves said previously that the company committed to offtake 200 tons per day of the 1000-ton-per-day project being developed by bp and Constellation as part of the Midwest Hydrogen Hub located in Indiana, Illinois, and Michigan.

The hub was recently awarded up to $1bn in funding from the US Department of Energy hydrogen hubs program.

“Cliffs’ commitment to buy a large portion of the output from the Midwest hub helped get this location selected by the Department of Energy,” Goncalves said.

“Hydrogen is the future,” he said. “Effectively, all of the current carbon emissions in our footprint are a result of the use of fossil fuel-based reductants or energy sources, where there is no economically feasible alternative,” he added. “Hydrogen can and ultimately will change that.”

He added that the use of hydrogen is very minimally capital intensive if you already have blast furnaces, with only minor plant additions needed, such as the Indiana Harbor pipeline.

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Low-carbon crude refinery developer lining up project cap stack

The developer of a low-carbon crude refinery is in talks with banks and strategics to line up project financing for a $5.5bn project in Oklahoma.

Texas-based Southern Rock Energy Partners is holding discussions with banks and potential strategic investors with the aim of shaping a $5.5bn capital stack to build a low-carbon crude refinery in Cushing, Oklahoma.

The project, a first-of-its-kind 250,000 barrel-per-day crude refinery, would make it the first crude facility of that size built in the United States in several decades.

The company is evaluating a project finance route with a debt and equity structure for the project, and has held talks with several major investment banks as well as “industry-leading” strategics in midstream, industrial gas, and electricity generation, Southern Rock Managing Partner Steven Ward said in an interview.

In support of the refinery, the city of Cushing and the Cushing Economic Development Foundation approved $75m in tax-exempt private activity bonds, Ward noted. He added that the company could also tap industrial revenue bonds as well as PACE equity financing.

Seed capital for project development has so far come from strategic partners, some of which are operational partners, Ward said. He declined to comment further on the capital raise, noting that engagement letters have yet to be signed.

Engineering firm KBR is conducting a feasibility study for the Cushing project, and the company is moving through land acquisition, air permit preparation, and EPC selection, Ward said.

While most crude refineries consume natural gas, off-gasses, and ambient air, Southern Rock’s proposed refinery would use oxygen along with blue hydrogen produced from the refining off-gasses and green hydrogen from electrolysis. The process would eliminate 95% of greenhouse gas emissions at the proposed refinery.

“Our furnaces and our process heating units are fed 100% hydrogen and oxygen,” Ward said, noting that this type of system does not currently exist in the market. The company is expanding on technology it licenses from Great Southern Flameless, he said.

The size of the refinery would make it the largest to be built in the US since Marathon Petroleum built a 200,000 barrels-per-day facility in 1976.

Certain other low-carbon crude projects have been in the market for several years. Meridian Energy has been seeking to build cleaner crude refineries in North Dakota. Raven Petroleum ran up against environmental concerns while seeking to build a clean refinery in Texas. And MMEX is aiming to build an “ultra clean” crude refinery in West Texas.

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Exclusive: Middle market flagship fund to target e-fuels, renewables

A new $1.5bn US-focused flagship fund focused on middle market companies is in discussions with new and existing LPs now and will consider e-fuels and other sustainable molecules in its deployment.

Energy Impact Partners, the New York-based investment firm, is in discussions with new and existing LPs to raise a $1.5bn flagship fund focused on the middle market, according to two sources familiar with the matter.

The raise is being done without a financial advisor, the sources said. Once complete, it will target platforms and assets in the $40m to $50m range.

While the fund will be broadly focused on renewables, e-fuels and other sustainable fuels companies will be considered, one of the sources said.

The investment manager has invested in clean fuels via equity positions in Electric Hydrogen, Terragia and Metafuels, among others.

EIP did not respond to requests for comment.

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Waste-to-energy specialist executes MoU with Nikola

The partnership will encourage the adoption of Nikola Class 8 zero-emission vehicles with Klean Industries’ partners and feedstock suppliers. Nikola will evaluate offtake opportunities from the company’s green hydrogen projects.

Klean Industries, a Vancouver-based waste-to-value technology provider, has executed an MOU with Nikola Corporation to encourage the adoption of Nikola Class 8 zero-emission vehicles with Klean’s partners and feedstock suppliers.

The two companies will also work on developing green hydrogen supply and dispensing infrastructure in the US and Canada, according to a statement seen by ReSource.

Nikola will evaluate offtake opportunities from green hydrogen projects being developed by Klean and its partners involving hydroelectric, wind and solar power in the Pacific Northwest and Canada. Using Klean’s green hydrogen, the companies will convert Klean’s logistics partners’ truck fleet to Nikola Class 8 zero-emission vehicles.

Both Klean and Nikola see a significant opportunity to collaborate on projects where Klean and its partners operate recycling, resource recovery, and waste-to-energy plants, the statement reads.

“We believe Nikola’s hydrogen-electric trucks are going to fundamentally change the ground transportation and logistics landscape. This exciting collaboration will create opportunities that will reinforce the importance of working together as we look to both deploy and develop a renewable hydrogen value chain,” said Jesse Klinkhamer, CEO of Klean Industries Inc., in a statement. “Developing clean energy projects with leading technology companies such as Nikola supports Klean’s strategic focus and enables our respective companies to create a symbiosis between waste, resources, and energy, while simultaneously helping in the creation of a circular low carbon economy. Green hydrogen has the potential to completely transform the energy landscape and drive a cleaner, more sustainable future.”

Klinkhamer said in an interview last year that Klean was in the process of hiring an advisor to raise between $250m – $500m in a strategic capital raise.

Carey Mendes, president, energy at Nikola said, “Klean’s vision of utilizing a green hydrogen fleet of trucks in their tire recycling ecosystem is a clear indication of the company’s commitment to creating a better, more sustainable future. Klean has already brought together like-minded partners to decarbonize their truck fleets which is a testament to their far-reaching commitment and deep knowledge of this sustainability space.”

Klean recently partnered with City Circle Group to build a fully integrated, continuous tire pyrolysis plant to recover carbon black and biofuel in Melbourne Australia. The company also signed a partnership agreement with H2 Core Systems to distribute and build green hydrogen projects around the globe.

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