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Raven SR: “We haven’t had a problem finding offtakers”

Waste-to-hydrogen firm Raven SR has offtakers knocking on its door.

An official from waste-to-hydrogen firm Raven SR has a counter for the hydrogen offtake naysayers out there.

“We haven’t had a problem finding offtakers,” JuliAnne Thomas, director of external affairs at the company, said yesterday.

“We’ve got people coming to us on a regular basis looking for hydrogen, whether it be a city bus transport, somebody like Hyzon, the Chevrons, the Shells of the world,” she said in remarks at the Reuters Energy Transition conference in Houston. “People are looking for this molecule.”

The firm has three projects in California, one of which, the Richmond project, is nearly permitted. It was undergoing a Series C capital raise last year with advisory support from BofA Securities and Barclays. In February it took a strategic investment from Stellar J Corporation.

Raven SR is looking for partners with skin in the game, Thomas said. “We want the offtaker, we want the waste company that wants to come in on a partnership,” she added. “We’re helping the landfills use up the methane that would otherwise be flared.”

‘Complicated puzzle’

On the same panel, David Galey of Orsted outlined some of the Danish multinational’s Power to X plans on the Gulf Coast.

The company is developing Project Star, which will use onshore wind and solar PV to produce 300,000 tonnes of e-methanol annually under a partnership with Maersk. It is also looking at ammonia on the Gulf Coast, for a different offtaker in the chemical feedplant business, Galey said.

“Methanol production is a very complex, integrated process where you’re not just relying on renewable electricity to create hydrogen, you also have the biogenic CO2 side of things,” he said.

“So the partnerships that you need in order to support methanol production […] each have their own challenges,” he said, noting considerations for large sources of biogenic CO2, cheap renewable power, and proximity to offtakers.

“It’s a complicated puzzle of how you try to find the best balance between those different constraints that you have,” he said.

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CAD $20m awarded to 18 Alberta hydrogen projects

The total value of the funded projects, including matching investments for project partners, is more than CAD $200m.

The Alberta Hydrogen Centre of Excellence is awarding CAD $20m to 18 projects to advance innovations in hydrogen through its first funding competition, according to a press release.

A full list of the projects can be seen here.

One of the projects is the proposed Bremner 100% Hydrogen Community in Strathcona County, Alberta. ATCO and Qualico are studying the logistics, technology requirements and other considerations involved in developing 100% pure hydrogen communities – an step toward eliminating carbon emissions produced by hot water use.

“Other successful projects in the competition will examine the safe and effective use of pipelines for hydrogen transmission,” the release states. “Another project will look at how to convert heavy-duty long-haul trucks to dual-fuel machines. In all, projects will examine everything from production, transmission, distribution, and storage, to end-uses of hydrogen.”

A total of 68 project proposals were received. The HCOE will fund up to 50 per cent of eligible costs for the successful projects, or up to 75 per cent of eligible costs for projects led by post-secondary institutions, or those with a significant Indigenous component.

The total value of the funded projects, including matching investments for project partners, is more than CAD $200m. Projects have 24 months to complete their proposed work.

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LSB CEO Mark Behrman: new ammonia markets could reshape – and revalue – the company

We spoke to CEO Mark Behrman about his vision of the company’s future.

Oklahoma City-based ammonia producer LSB Industries wants to be a player in new markets for ammonia as they develop, and is nearing a deal to provide blue ammonia to an existing customer in its ammonium nitrate and nitric acid segment, CEO Mark Behrman said in an interview.

Though Behrman expects LSB’s sales mix to shift – and the company’s valuation to rise – as ammonia markets evolve, it is pursuing deals to furnish blue ammonia at a premium to customers in its ammonium nitrate and nitric acid segment, currently its largest portion of net sales.

LSB is developing a blue ammonia facility on the Houston Ship Channel with INPEX and Air Liquide, offtake contracts for which could push its earnings mix away from more volatile fertilizer markets and help revalue the company. It also has a partnership with Lapis Energy for the installation of a carbon capture unit at its ammonia production facility in El Dorado, Arkansas.

“Unlike a lot of our competitors, who are really known as fertilizer companies, half our business is non-fertilizer,” he said. “So we’re really familiar with the non-fertilizer markets and the pricing and contractual nature of those markets.”

The company is in talks with its mining and nitric acid customers – Covestro, Dow, BASF – about helping them lower their carbon footprint via blue ammonia so these customers can meet 2030 decarbonization goals, said Behrman, who hopes to announce a sizeable contract within the next several months, “obviously at some premium to the price that they’re paying today.”

As for what the blue premium will be, for some markets the formulation might come down to the required capital investments and the developer’s desired return.

“I want long-term cost plus offtake contracts so I could de-risk the volatility in any cost,” he said. 

By way of example, Behrman said, “If we’re selling to JERA, and we have a long-term contract, and it’s a cost plus, so natural gas and power plus, it might be at a healthy premium to the overall ammonia market, or it might be a discount to the overall market,” he said, “but basically we’ve built an annuity because we’ve got a long-term contract at cost plus, and lock in our return as long as we operate the plant well.”

‘Meaningful player’

Behrman, a former investment banker, recognizes that it’s a brave new world for ammonia – particularly clean ammonia – with demand expected to come from myriad new places like shipping and power production. “We want to be a meaningful player as the new demand develops for ammonia,” he said. 

But he believes the market will evolve more slowly than expected, noting that initial estimates even for Japanese offtake and use of ammonia have already been pushed back.

“I think in the earlier years, so call it ‘28, ‘29, even ‘30, you’re probably only going to have two or three offtakers out of Japan until the other ones come online.” Korea, on the other hand, might be faster due to its national incentive scheme, he said.

Meanwhile, in the last few months, LSB has had a lot of conversations with potential European offtakers as Europe’s carbon tax scheme and the Carbon Border Adjustment Mechanism (CBAM) take hold.

“Europe, while still significantly focused on green, has come to the realization that it’s an energy transition and not an energy revolution,” he said. “So I think that we’re looking at trying to secure some European offtake as well.”

Behrman believes that, over time, 400 million metric tons of new demand for ammonia could materialize – the current global market is around 175 million metric tons – but “it would take a lot of switching from hydrocarbons to ammonia, or to partial ammonia as a feedstock, and it’s going to take the marine industry to really ramp up.”

The principal gating factors, he said, are the infrastructure required to support the transition and parties coming together on price.

Mix shift

The Houston Ship Channel project could be a centerpiece in LSB’s efforts to expand into new markets and potentially transform the way the business is valued.

“As we think about where we’re going and our vision of really being a leader in the production of low-carbon products, I think you’ll start to see more of our production trend away from fertilizer and to existing markets that we’re in by broadening some of those markets, plus really focusing on taking advantage of some of these new markets,” he said.

One reason is for the stability of the contracts compared to fertilizer markets, he added, which feeds into the second reason: predictability of earnings could lead to higher multiples on LSB’s equity, akin to valuation multiples for Air Liquide, Linde, and Air Products. For reference, LSB’s equity trades in the mid to high single digits on an enterprise value to LTM EBITDA basis, while equities for the aforementioned companies trade in the mid to high teens.

On LSB’s most recent earnings call, Behrman detailed some of the expected economics from the Houston Ship Channel project as well as the in-development blue ammonia facility in El Dorado, Arkansas. He expects to add roughly $150m of EBITDA each year from the Houston Ship Channel project and $15m – $20m of EBITDA annually from the carbon capture installation in Arkansas.

Behrman clarified in the interview that the $150m figure assumes 100% ownership of the facility, and that LSB’s ultimate ownership would come in the 45% – 49% range.

LSB is expecting to finish the pre-FEED study for the project in July or August of this year, at which point they would elect to proceed with a FEED study that would finish around September, 2025.

The company will use a project finance model to fund the project, and recently ran a process to select a banker, the terms of which are still being negotiated. Behrman declined to name the advisor.

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New Fortress Energy planning five industrial-scale hydrogen plants

The company is building a pure-play clean hydrogen business, known as Zero, which it plans to capitalize separately in the near future.

New Fortress Energy is planning to build five industrial-scale hydrogen production hubs as part of its pursuit of a pure-play clean hydrogen infrastructure business.

The liquefied natural gas company has started construction on its first plant in Beaumont, Texas, where it is expected to produce 50 tons per day of green hydrogen, the company said on its 3Q22 earnings call today.

New Fortress Energy is taking learnings from the construction of the Beaumont plant to scale up its hydrogen business via additional projects that will produce a combined 90,000 tons per year, according to a presentation.

The company is building a pure-play clean hydrogen business, known as Zero, which it plans to capitalize separately in the near future.

Plug Power will provide electrolyzers while Entergy will provide renewable power to the Beaumont plant, which is set to begin operations in 2024.

The location of the project in southeast Texas is near refineries with an anticipated demand of 1,000 tons per day – over 20 times what the Beaumont plant will produce initially, said Patrick Hughes, managing director and chief commercial officer of NFE Zero.

“So plenty of demand and plenty of growth potential in the immediate region,” the executive said, who noted the company was focused on optimizing offtake for the first phase of the project.

In addition to nearby refineries, the Beaumont project could also supply for an Entergy power plant known as Orange County Advanced Power station. Existing pipeline networks could also ship green hydrogen around the region.

“The good thing about electrolyzers is that it’s fairly straightforward to scale,” Hughes said.

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Former Denbury executive targeting growth through CCS at industrial emitters

Tracy Evans, a former COO of Denbury Resources, has launched a business unit aimed at offering carbon capture and sequestration services for existing industrial emitters.

CapturePoint, a Texas-based carbon capture and enhanced oil recovery specialist, is seeking to grow by offering carbon capture services to existing industrial emitters.

The company, started with an initial focus on enhanced oil recovery operations using CO2, has launched a subsidiary called CapturePoint Solutions to capitalize on growing demand for carbon capture services at industrial plants, CEO Tracy Evans said in an interview.

Evans, a former chief operating officer of Denbury Resources, has years of experience operating CO2 capture units, pipelines, and oil wells. “The only difference between EOR utilization and sequestration is going to the saline aquifers,” he said of the pivot.

The company’s primary focus is on existing emissions, Evans said, emphasizing the immediate opportunity over proposed plants that might take many years to build. He added that the company would target “pure” sources of CO2 versus diluted sources.

Evans brought in a JV equity partner for the CCS business, but declined to name them. He said the company is sufficiently capitalized for now but might need to raise additional equity as it signs up new projects in the next 12 to 16 months.

Tax equity and CCS

CapturePoint recently completed a tax equity deal for a CCS facility that has been operational since 2013, thanks to changes to provisions governing the use of 45Q for carbon capture that allowed existing plants to qualify if they capture over 500,000 tons of CO2.

The deal, at CVR Partners’ Coffeyville fertilizer plant, opened up an initial payment of $18m and includes installment payments, payable quarterly until March 31, 2030, totaling up to approximately $22m.

An ethanol facility where CapturePoint operates will also qualify for 45Q benefits because 80% or more of the carbon capture unit is being rebuilt, Evans said. The company was able to finance the new construction at the ethanol facility from cash flow out of its oil & gas operations.

Going forward, new projects installed at existing emitters will follow a project finance model, with equity, debt, and 45Q investors, Evans said. The company will use a financial advisor when the time is right, the executive noted, but said there’s more work to be done on sizing and costs before an advisor is lined up.

“The capture costs are similar for each site,” he said. “The pipeline distances to a sequestration site is what drives significant variation in total capital costs.”

Evans believes that tax credit increases in the Inflation Reduction Act – from $35 per ton to $60 per ton for CO2 used in EOR, and $50 per ton to $85 for CO2 sequestration – should help the CCS market evolve and lead to additional deals.

“There wasn’t much in it for the emitter at $35 and $50, to be honest,” he said, “whereas at $60 and $85 there’s something in it for the emitter.”

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Mobility solutions provider to raise up to EUR 200m

Quantron, the German and US-based mobility solutions provider, is set to launch a capital raise that could entail the sale of up to 20% equity.

Quantron, the German and US-based mobility solutions provider, is set to launch a capital raise that could entail the sale of up to 20% equity, according to three sources familiar with the matter.

The company is seeking between EUR 150m and EUR 200m in the process, the sources said, implying a valuation of up to EUR 1bn.

Quantron, which recently expanded into North America with the opening of an office in Detroit, will also consider debt as a part of the raise, one of the sources said.

At a ceremony at the Delegation of German Industry and Commerce (DGIC) in Washington D.C. on 12 October, Quantron signed a deal to supply TMP Logistics with 500 Class 8 trucks. The trucks will be operated by Quantron’s as-a-service (QaaS) vertical; they are scheduled for delivery in 2024.

Quantron AG CEO Michael Perschke told ReSource at that event that the company is in discussions with US investors about the capital raise, which has not formally launched but is tentatively scheduled to wrap up in 2Q23. Quantron is also in pre-closure discussions with several US law firms.

A fourth source said Quantron has worked with Danish consulting firm Ramboll Group on past deals.

Perschke said his company has relationships with PwC and EY, the latter especially on IPO readiness.

Quantron in September closed on a EUR 50m Series A with NASDAQ-listed Ballard Power Systems and German machinery manufacturer Neuman & Esser as investors.

Looking forward the company would like to work with a US strategic or private equity interest committed to hydrogen.

Utilities or corporates investing in hydrogen production but still building out the offtake structure would be of interest to Quantron, Perschke said. He noted that private equity interest like Ardian’s HY24 and Beam Capital are also active in the space.

Quantron is in the final stages of a deal with an oil company that Perschke declined to name, but said the company has 2,000 fueling stations across Europe that they are considering for conversion to hydrogen.

Perschke said his company plans to build out its presence in California and then could look for expansion in the northeast, Gulf Coast or Canada. The company aims to be an early mover in US hydrogen-fueled long-haul trucking along with peer Nikola Motor.

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AIMCo-backed midstream infrastructure firm in refi

The company, whose asset footprint includes Gulf Coast hydrogen production, today priced a debt refinancing transaction with an 8.875% coupon.

Howard Energy Partners today priced $550m of senior unsecured notes to refinance amounts outstanding on its revolving credit facility.

The company, which is majority owned by the Alberta Investment Management Corporation (AIMCo), will pay 8.875% on the notes, inside of price talk of between 8.75% – 9%, according to sources familiar with the matter.

RBC Capital Markets and TD Securities are joint active bookrunners on the deal, the sources said.

Howard in 2021 closed on the acquisition of the Javelina Facility in Corpus Christi, Texas — a treating and fractionation plant that extracts olefins, hydrogen, and natural gas liquids from the gas streams produced by local refineries.

Starting in Jan of 2023, a strategic technology partner began producing a low-carbon diesel substitute using Javelina’s hydrogen and CO2 as feedstocks, making it one of the first merchant “clean” hydrogen facilities on the US Gulf Coast, according to the company. HEP is also pursuing carbon capture and sequestration opportunities with its Javelina assets through a joint venture with TALOS Energy and the Port of Corpus Christi.

AIMCo acquired an initial 28% stake in HEP in 2017, and brought its ownership stake to 87% last year following the purchase of Astatine Investment Partners’ stake in the company.

Howard operates in two key segments in the US and Mexico: natural gas and liquids. The natural gas segment includes 1,175 miles of pipelines and approximately 4.3 Bcf/d of throughput capacity and 600 MMCf/d of cryogenic processing capacity.

The liquids segment includes terminalling and logistics services for refined products as well as refinery-focused off-gas handling, treating, processing, fractionation and hydrogen supply services.

Spokespersons for the company, RBC, and TD did not respond to emails seeking comment.

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