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Transatlantic hydrogen coalition seeks to emulate market forces

In forming a coalition of prospective buyers and sellers of hydrogen on both sides of the Atlantic, an industry group is looking to set up the superintending architecture of a market before a market even exists.

A coalition of industry players is forming with the aim of emulating some of the market forces that wouldn’t otherwise exist due to the absence of an actual global hydrogen market.

The group, called the Transatlantic Clean Hydrogen Trade Coalition (H2TC), has outlined the pursuit of five main goals that will support early hydrogen movers in the US Gulf Coast and Northwestern Europe, Nabil Bennouna, principal on the hydrogen team at RMI, one of the coalition’s proponents, said in an interview.

The coalition is still growing its membership, and its work has been endorsed by over 20 companies including Ambient Fuels, Apex Clean Energy, Buckeye, BAES Infrastructure, Intersect Power, Linde, LyondellBasell, NextEra Energy, OCI, Shell, STX, Trafigura and Zhero.

As its first goal, H2TC is seeking to foster regulatory cohesion between the US and Europe.

“The lowest hanging fruit we saw was regulatory alignment between the US and the EU, and the opportunity to incorporate real market data from the private sector in shaping those decisions, because there are a lot of efforts on both sides of the Atlantic, but specific trade objectives have been lacking,” Bennouna said.

The coalition has a stated goal of facilitating trade of more than three million metric tons per year of methanol and ammonia by 2030.

H2TC is also seeking to map out infrastructure requirements to ensure the right foundation is built for the industry.

“In the absence of some limited amount of coordination, there’s a real risk for harmful path dependencies to emerge. Building the wrong infrastructure could create bottlenecks by itself,” he said.

‘Temporary scaffolding’

A third goal is to match supply and demand, something that gets at the heart of the value of coalitions, according to Bennouna.

“Before you have a fully liquid commodities market for hydrogen, prospective market participants really need a medium to exchange these ideas to identify bottlenecks and at least signal their interest,” he said. “Where do you go to signal your interest as a market participant? There’s no digital exchange for any of this to happen at these very nascent stages.”

He added: “I think about it as emulating some of the benefits of market forces before the market exists, so it’s kind of a temporary scaffolding to help build a little bit of structure to accelerate the market activation.”

A fourth objective is building a dedicated workstream to model landed cost estimates with sound data.

“You want to be able to quantify regulatory risks and implications of different rules as they are implemented, and you can’t do that without a sound quantitative engine,” he said. 

Finally, the group is seeking to integrate its findings with capital markets – or telling their “de-risking story” to the project finance lenders that will ultimately finance projects.

“At some point you’re going to need to implement these big ideas, and you’re going to need to finance these big ideas, and the capital markets are going to need some help understanding risks,” he said.

In this sense, according to Bennouna, the coalition is “a way of spreading out first-mover risks across a diverse set of market participants.”

He noted that, before a mature market exists with developed infrastructure, no individual player is incentivized to take on first-mover risk: other competitors can step in and take advantage at later stages. 

“If you’re framing out the story and the pathway to de-risking for the direct project participants, then theoretically that de-risking story and data can also be utilized to help the capital markets navigate their internal risk management processes,” Bennouna said. “If you’re already doing a lot of that work through this platform, it’s a natural way to integrate and help those institutions get the best and most current story about risks for transatlantic trade projects.”

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Canadian H2 infra company receives CAD 217m equity investment

HTEC, the privately held British Columbia-based hydrogen infrastructure solutions provider, has received a CAD 217m investment from Chart Industries and I Squared Capital.

HTEC, the privately held British Columbia-based hydrogen infrastructure solutions provider, has received a CAD 217m investment from Chart Industries and I Squared Capital, according to a news release.

This investment expands Chart’s ownership of HTEC to 25 percent and provides ISQ a 35 percent holding; HTEC’s original shareholders and employees will retain a 40 percent ownership in the company.  The majority of directors of HTEC remain independent of Chart and ISQ, and the Company will remain headquartered in British Columbia

Winston & Strawn and Stikeman Elliott served as legal advisors to Chart, while I Squared Capital used Stikeman Elliott, Kirkland & Ellis and Greenhill & Co. as financial advisor. Fort Capital Partners acted as financial advisor to HTEC on the transaction, and Blake, Cassels & Graydon as legal counsel.

This investment provides HTEC with significant capital to fund new green hydrogen production projects and to expand its hydrogen fueling station portfolio serving both the light-duty and heavy-duty market, the release states.

HTEC has 17 hydrogen fueling stations operating or in development in Canada and the United States today. The company also delivers engineering and design services and specialty products and solutions to customers around the world.

Chart is a global manufacturer of liquefaction and cryogenic equipment serving multiple applications in the energy and industrial gas end markets, including hydrogen. ISQ is an independent global infrastructure investment manager.

 

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Ampaire tests SAF with hybrid electric aircraft

Combining the hybrid electric propulsion with SAF fuel more than doubles the efficiency and drives emissions to near zero, the company said.

Ampaire Inc., a maker of hybrid electric aircraft systems, has completed its first ground test utilizing pure 100 percent ASTM D7566 Sustainable Aviation Fuel (SAF) produced by Dimensional Energy from electricity and carbon dioxide.

Los Angeles-based Ampaire conducted rigorous ground testing using its Eco Caravan hybrid electric aircraft to validate the performance and viability of Dimensional Energy’s pure e-fuel SAF, according to a news release. The results exceeded expectations, demonstrating an increase in efficiency compared to traditional aviation fuels.

Ampaire’s AMP-H570 AMP Drive™ hybrid electric propulsion units are capable of 50 to 70 percent reduction in fuel and emissions as compared to conventional Pratt & Whitney PT6 turboprop engines typically found in Cessna Caravan turboprops. Combining the hybrid electric propulsion with SAF fuel more than doubles the efficiency and drives emissions to near zero.

Kevin Noertker, CEO of Ampaire, emphasized the significance of this milestone, stating: “The successful ground test using pure SAF from Dimensional Energy marks a pivotal moment in our journey towards sustainable aviation. By showcasing the transformative efficiency gains achievable through hybrid electric propulsion, we are driving the future of eco-friendly air travel. For those already recognizing the potential of SAF, its integration into our hybrid electric aircraft enhances its appeal even further.”

SAF, derived from renewable resources, has emerged as a key solution to reducing aviation’s carbon footprint. Dimensional Energy has two ongoing projects which will add significant inventory to the world’s availability of e-fuels. By scaling hybrid electric technology and SAF for aviation, there is an additional opportunity to address the quality and cost concerns associated with SAF, paving the way for even broader use in the aviation industry.

“Technology providers have to collaborate beyond innovation and into execution. By combining Dimensional Energy e-fuels with Ampaire’s aircraft technology that can reduce the amount of fuels combusted during flight, we quicken the pace up the steep curve of the energy transition and reduce the need for extraction faster,” said Jason Salfi, CEO of Dimensional Energy. “We are thrilled to collaborate with Ampaire on this groundbreaking initiative. Our partnership underscores our commitment to advancing sustainable aviation fuel solutions that offer tangible benefits to the aviation industry and contribute to a greener future.”

Elemental Excelerator, a nonprofit investor focused on scaling climate technologies with deep community impact, has provided project development capital and multiple years of hands-on support to help scale Ampaire and Dimensional Energy’s technologies.

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California Resources merger doubles CO2 pore space

A merger with Aera Energy will roughly double the pore space for California Resources’ carbon management business, Carbon TerraVault, a JV with Brookfield Renewable.

California Resources will more than double the CO2 pore space for its carbon management business, Carbon Terravault, through its announced merger with Aera Energy, the second largest producer of oil and gas in California.

The combination will expand CRC’s leading carbon management business through the addition of surface acreage and rights, and significant new carbon dioxide (CO2) pore space to enable future carbon capture and sequestration (CCS) development, according to a news release.

Through this combination, CRC will receive interests in approximately 220,000 net mineral acres with nearly 80% of the acreage within field boundaries held in mineral fee and 100,000 fee surface acres. Pro forma, CRC will have more than 1.9 million net mineral acres.

CRC will also obtain 1 pending Environmental Protection Agency (EPA) ClassVI permit application for 27 million metric tons (MMT) of storage capacity in the Belridge Field. CRC also expects to submit an additional Class VI permit for approximately 27MMT of storage at the Coles Levee Field. The Company will have the potential to nearly double its injection rate capacity near CTV I, creating a premier “decarbonization hub” for CO2 storage.

Additionally, the combination of the Carbon TerraVault platform and Aera’s Low Carbon Solutions will enable further expansion to a variety of energy transition technologies in development including Direct Air Capture (DAC), geothermal, solar, and water treatment, and enable additional clean tech partnership opportunities with a goal to further decarbonize California, the company said.

Aera is owned by entities managed by IKAV (51%), an international asset management group, and Canada Pension Plan Investment Board (CPP Investments) (49%). Post closing, IKAV-managed entities and CPP Investments will collectively hold 22.9% of CRC’s common stock.

Citi and Jefferies are serving as financial advisors and Sullivan & Cromwell LLP is serving as legal advisor to CRC. Wells Fargo acted as lead financial advisor alongside Truist and Latham & Watkins LLP is serving as legal advisor to CPP Investments & IKAV.

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DG Fuels charting path to be SAF powerhouse

The company has retained advisors and is mapping out a plan to build as many as 50 production facilities in North America for a “gigantic” sustainable aviation fuel market.

DG Fuels is charting a plan to build a proprietary network of 30 to 50 sustainable aviation fuel (SAF) production facilities in North America, CEO Michael Darcy said in an interview.

The Washington, D.C.-based company will pursue a combination of debt and equity on a case-by-case basis to fund the projects, Darcy explained, with financings underway now for the firm’s initial project in Louisiana and a second facility in Maine. The Louisiana facility recently inked a USD 4bn offtake agreement with an undisclosed investment grade industrial buyer.

The company is working with Guggenheim and Stephens as financial advisors, Darcy said. About 60 people hold equity in the company; Darcy and the founding team hold a majority stake.

In the coming months DG Fuels will likely make announcements about more SAF plants in the US and British Columbia, Darcy said. Site negotiations are underway and each project is its own subsidiary of the parent company.

“There’s clearly a good return of what we refer to as the ‘project level,’ and then we have the parent company,” Darcy said. “We have strategic investment at the parent and now we’re looking at strategic investment at the project level.”

Huge demand, low supply

DG Fuels produces SAF from cellulosic biomass feedstock, a technology that does not need sequestration of CO2 because natural gas is not used.

“We like to say it’s the corn cob, not the corn,” Darcy said. The company can also use timber waste, waxes, and renewable power as an important source of energy.

The company gets about 4.5 barrels of SAF for every ton of biomass feedstock, which is roughly three to four times the industry average, Darcy said.

“Practical scale” for a facility is 12,000 to 15,000 barrels a day, Darcy said. That’s big enough to be commercialized without stressing the electrical grid with power demand.

Despite the company’s advantages, there is “plenty of room” for other producers to come into the SAF space, Darcy said.

“Right now, the market for SAF is gigantic and the supply is minimal,” Darcy said. “Companies like us are able to pick and choose high-quality offtakers.”

DG Fuels includes Delta Airlines, Air France and General Electric as committed offtakers.

Multi-tasking

DG Fuels is “always engaged in some level of capital raise for construction of facilities and detailed engineering,” Darcy said. “There’s always more engineering to be done.”

Some of the financing has already been completed, but Darcy declined to go into additional detail. After Louisiana, the company will quickly follow up with Maine.

HydrogenPro AS recently announced that it would join Black & Veatch and Energy Vault in financing the remaining capital requirements of DG Fuels’ project in Louisiana, which is expected to be completed in mid-2022.

Most of the engineering work in Louisiana is transferable to the company’s project in Maine. Darcy likened the facilities’ build-out to a class of ships: once the first is completed, the second and third can be built almost concurrently.

“There will be a point where we won’t be building one at a time,” Darcy said.

The opportunity for funders to participate is broad in the SAF space, Darcy said. There is a crossover of good economics and ESG, so strategics, industrials, private equity and other pure financial players can all be involved.

The broad base of capital eager to participate in companies that are innovative — but not too innovative as to scare investors — is indicative of the industry’s ability to secure offtakers and feedstock.

Storing power

It’s one thing to acknowledge the need for reduction of carbon, but hard work is required ahead, Darcy said.

“The low-hanging fruit has been done,” he said of the renewables industry. “Now it’s not really about the power, it’s about the storage of power.”

DG Fuels is an offtaker of non-peak renewable power to displace fossil fuel energy. But baseload renewable power is becoming available almost anywhere.

The Maine project will use stranded hydroelectric power, Louisiana will use solar, and projects in the Midwest will use wind, Darcy said. Additionally, geothermal power is “starting to become a very real opportunity,” he added.

Deploying broadly with renewable power gets past the issues of variability of renewable power at a reasonable cost, he said.

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Waste-to-hydrogen developer to close $100m capital raise this month

Raven SR’s C-round of financing is being run by two bulge-bracket banks, and the firm has received widespread interest from private equity and corporate strategics.

Raven SR, a US waste-to-hydrogen developer, is working on a $100m capital raise that’s expected to wrap up this month, according to four sources familiar with the matter.

Raven’s C-round of financing is being run by Barclays and Bank of America. The firm has received widespread interest from private equity and corporate strategics.

Raven CEO Matt Murdock said on the sidelines of the Hydrogen Americas event in Washington D.C. that he was hoping to have the raise done by Thanksgiving.

Headquartered in Wyoming with projects in California and Spain, the company uses a steam/CO2 reforming process that transforms municipal solid waste, organic waste and methane into clean fuels.

In August, 2021, Raven closed on a $20m strategic investment from Chevron U.S.A., ITOCHU Corporation, Hyzon Motors Inc. and Ascent Hydrogen Fund. Samsung Ventures made a strategic investment earlier this year, allowing the company to expand into the Asia-Pacific market.

The company has partnered with INNIO to use its Jenbacher engines to provide renewable power and heat to Raven SR’s first waste-to-hydrogen production facility at the Republic Services West Contra Costa Sanitary Landfill in Richmond, California.

Raven SR plans to bring the plant online in the first quarter of 2023, initially processing up to 99.9 tons of organic waste per day and producing up to 2,000 metric tons per year of hydrogen.

In Aragón, Spain, Raven SR is aiming to bring a second project online in 2023 that will produce 1,600 metric tons per year of renewable hydrogen from approximately 75 tons of organic solid waste per day.

Raven SR recently announced the election of Mark Gordon of Ascent Fund and Michael Hoban of Chevron New Energies to its Board of Directors.

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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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