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Pending renewable fuels SPAC deal adds green hydrogen to business model

The companies in a pending renewable fuels SPAC takeover will add green hydrogen production to its syngas to gasoline plus other products process. Its first facility will be constructed in Maricopa, Arizona.

The companies in a pending renewable fuels SPAC takeover will add green hydrogen production to its syngas to gasoline plus other products process, according to a press release.

CENAQ Energy Corp., a special purpose acquisition company focused on energy and energy transition, and Bluescape Clean Fuels Intermediate Holdings, a renewable feedstock company, said that the Inflation Reduction Act of 2022 contains incentives for the production of green hydrogen that should allow the addition of green hydrogen at the post-combination company, Verde Clean Fuels, Inc.

By adding an external source of green hydrogen to Verde’s STG+® process, Verde expects to be able to utilize approximately two-thirds less feedstock while maintaining the same gasoline output with no change in total capital expenditures for its first facility to be constructed in Maricopa, Arizona, the release states.

The green hydrogen incentives are in the form of 10-year production tax credits that equate to as much as $3.00 per kilogram of green hydrogen produced. Verde’s initial facility is anticipated to use green hydrogen volumes that would result in the generation of approximately $20m per year of production tax credits. The generation of these production credits could provide Verde with new and attractive financing alternatives.

Bluescape is currently in discussions with several green hydrogen providers to either acquire electrolyzer assets or form a joint venture to provide green hydrogen to Verde’s initial facility as well as to planned future Verde renewable gasoline facilities.

The parties announced the signing of the merger in August, and have since twice extended the deadline for completing the combination. The deadline is now February 16, 2023.

The business combination values BCF at an implied $280m enterprise value and a pro forma equity value of approximately $500m.

Imperial Capital is serving as financial advisor to CENAQ. Vinson & Elkins L.L.P. is serving as legal counsel to CENAQ.

Kirkland& Ellis LLP is serving as legal counsel to BCF.

Baker Botts L.L.P. is acting as legal counsel to Imperial Capital.

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