Resource logo with tagline

US SAF producer targeting 1H24 monetization

Calumet Specialty Products subsidiary Montana Renewables – now the largest producer of sustainable aviation fuel in North America – has received interest for the business indicating valuations in excess of the entire company’s current enterprise value.

Calumet Specialty Products is expecting to close on a monetization of a minority equity stake by early 2024 in its Montana Renewables subsidiary, which is now the largest sustainable aviation fuel producer in North America.

The company has been exploring a monetization, including an IPO, of Montana Renewables with Lazard as an advisor since last year, and would use proceeds to deleverage the parent company. Executives said today they are speaking with bulge bracket banks regarding the timing of a potential IPO or minority stake sale.

“We continue to expect a potential monetization of Montana Renewables to complete the deleveraging of Calumet,” CEO Todd Borgman said in prepared remarks. “For some time we’ve discussed the possibility of a Montana Renewables IPO, private monetization, or even both. We continue to receive clear feedback: that Montana Renewables is a differentiated business, with transformational value potential to Calumet, well in excess of the entire company’s enterprise value.”

Calumet had engaged Lazard last year to conduct a process that culminated in a $250m investment in Montana Renewables from Warburg Pincus in August, 2022. The investment, in the form of a participating preferred equity security, valued Montana Renewables at a pre-commissioning enterprise value of $2.25bn.

The facility began making SAF shipments to Shell as an offtaker earlier this year.

In response to a question, Calumet executives pointed to the enterprise values of publicly traded energy transition companies, noting that Montana Renewables should align with that “at a minimum, if not get a premium for the competitive advantages that we’ve got, due to location, due to advanced pre-treater technology we’ve got, and due to the fact that we’re now North America’s largest SAF producer.”

Calumet’s equity trades at $15.80 per share and a $1.26bn market cap.

The company is evaluating an expansion of its SAF production at Montana Renewables and has purchased a second reactor and applied for a $600m loan from the DOE.

Unlock this article

The content you are trying to view is exclusive to our subscribers.
To unlock this article:

You might also like...

Buckeye Partners acquires EnCap-backed CCS developer

EnCap made a $350m initial capital commitment to Elysian in 2021.

Buckeye Partners has acquired Elysian Carbon Management from EnCap Flatrock Midstream.

Elysian provides integrated end-to-end carbon capture and storage (CCS) solutions to industrial, power and similar facilities seeking to transition to lower carbon products to advance emissions reductions goals.

EnCap made a $350m initial capital commitment to Elysian in 2021.

“This acquisition reflects Buckeye’s commitment to continue to provide essential infrastructure and logistics solutions to meet our customers’ evolving needs in the energy transition,” said Buckeye CEO Todd Russo. “Rapidly developing CCS-related technologies and solutions offer abundant synergies across Buckeye’s project development capabilities and existing pipeline network and are essential to enabling the energy transition’s success. We’re excited for the Elysian team to join the Buckeye platform and to integrate their expertise to better serve our customers’ growing lower-carbon needs.”

This acquisition is another meaningful step in Buckeye’s ongoing commitment to building a business that is responsive to the needs of the future while continuing to serve the energy needs of communities today. Through advancing strategies to further reduce carbon emissions, Buckeye is committed to becoming a net zero energy business by 2040, across scope 1 and 2 GHG emissions. These commitments and others can be found in Buckeye’s newly released 2022 Sustainability Report.

“Buckeye continues to demonstrate resiliency and emissions-reduction results across its increasingly diversified energy solutions portfolio,” said Elysian CEO Bret Logue. “We’re fully aligned with their decarbonization mission and look forward to adding immediate value to Buckeye’s customer base and their momentum in the energy transition by integrating CCS technologies across the energy value chain.”

Read More »

TotalEnergies and Air Liquide to produce low-carbon hydrogen at refinery near Paris

Air Liquide will invest over €130m in the construction and operation of a new unit producing hydrogen.

TotalEnergies and Air Liquide will produce renewable, low-carbon hydrogen at the Grandpuits zero crude platform, a refinery near Paris, according to a press release.

Under a long-term contract committing TotalEnergies to purchase the hydrogen produced for the needs of its platform, Air Liquide will invest over €130m in the construction and operation of a new unit producing hydrogen. This unit will partly use biogas from the biorefinery built by TotalEnergies and will be delivered with Air Liquide’s carbon capture technology Cryocap.

These innovations will prevent emissions amounting to 150,000 tons of CO a year compared to current processes. TotalEnergies’ biorefinery will use the unit’s hydrogen to produce sustainable aviation fuel.

In line with the two companies’ shared ambition to get to net zero by 2050, the project includes sustainable and circular innovations:

  • The new hydrogen production unit, with the capacity to produce over 20,000 tons a year will produce hydrogen that is partly renewable, thanks to the recycling of residual biogas from the Grandpuits biorefinery, in place of the natural gas that is normally used.
  • This unit will be delivered with a carbon capture technology, allowing it to help reduce the platform’s carbon footprint, by capturing over 110,000 tons of CO2 a year for reuse in food and industrial applications.
  • Most of the unit’s renewable, low carbon hydrogen will be used by the biorefinery itself, to produce sustainable aviation fuel, but it could also be used to support sustainable mobility in the Ile-de-France region.

“By recycling the biogas produced by the biorefinery into renewable hydrogen, this innovative project makes full use of the conversion of the Grandpuits refinery into a zero crude platform harnessing the potential of biomass, especially in the production of sustainable aviation fuel,” said Bernard Pinatel, president, refining & chemicals, TotalEnergies. “Combined with the production of low carbon hydrogen and the capture of CO2, this project contributes to TotalEnergies’ ambition to decarbonize all of the hydrogen used by its European refineries by 2030.”

“This innovative project is characterized by the combination of several solutions in order to produce renewable and low-carbon hydrogen,and contribute to the decarbonization of TotalEnergies’ Grandpuits site. It also provides the opportunity to recycle CO2 as part of a circular economy approach while securing its supply for agri-food applications. This project illustrates Air Liquide’s expertise in working with its customers on customized solutions to help them reduce their carbon footprint and actively participate in the fight against global warming. It provides yet another example of the key role that hydrogen will play to succeed in the energy transition”,” added Pascal Vinet, senior vice president and member of the executive committee, Air Liquide, in charge of Europe industries activities.

Read More »

US DOE awards $118m for sustainable biofuels projects

The US Department of Energy has awarded $118m in funding for 17 projects to accelerate the production of sustainable biofuels for transportation and manufacturing needs.

The US Department of Energy (DOE) has awarded $118m in funding for 17 projects to accelerate the production of sustainable biofuels for America’s transportation and manufacturing needs, according to a news release.

The selected projects, located at universities and private companies, will drive the domestic production of biofuels and bioproducts by advancing biorefinery development, from pre-pilot to demonstration, to create sustainable fuels that reduce emissions associated with fossil fuels, the release states.

Projects selected as part of this funding opportunity will contribute to meeting DOE’s goal to achieve cost-competitive biofuels and at least a 70% reduction in greenhouse gas (GHG) emissions by 2030.

Made from widely available domestic feedstocks and advanced refining technologies, energy-dense biofuels provide a pathway for low-carbon fuels that can lower greenhouse gas emissions throughout the transportation sector and accelerate the bioeconomy. Financing for novel biorefinery process systems can be a barrier to commercializing advanced biofuels, and this funding will reduce technological uncertainties and enable industry deployment.

The selected projects include pre-pilot, pilot, and demonstration projects that will scale-up existing biomass to fuel technologies that will eventually create millions of gallons of low-carbon fuel annually. By investing in these technologies, the projects will create good-paying jobs in rural and underserved communities in nine states. Plans submitted by the selected projects show intent to collaborate with local school districts to educate and train the bioenergy workforce of tomorrow.  Additionally, the funded projects align with renewable fuels goals in the first-ever U.S. National Blueprint for Transportation Decarbonization, a multi-agency framework for reducing emissions, creating a robust transportation workforce, and securing America’s energy independence. The projects also support the U.S. Sustainable Aviation Fuel Grand Challenge goal of enabling the production of three billion gallons of sustainable aviation fuel annually by 2030 and 35 billion gallons annually by 2050.

The 17 selected projects fall into four areas:

  1. Pre-Pilot Scale-Up of Integrated Biorefineries,
  2. Pilot Scale-Up of Integrated Biorefineries,
  3. Demonstration Scale-Up of Integrated Biorefineries, and
  4. Gen-1 Corn Ethanol Emission Reduction.

The selected projects are located in nine states and Washington, DC, and focus on technologies including anaerobic digestion, conversion of cellulosic sugars to SAF, catalytic biorefining, among others.

The following projects were selected:

Read More »
exclusive

How hydrogen from nuclear power shows pitfalls of ‘additionality’

An interview with the Nuclear Energy Institute’s Director of Markets and Policy Benton Arnett.

Tax credits for low-carbon hydrogen production in the Inflation Reduction Act represent one of the climate law’s most ambitious timelines for implementation, with the provision taking effect late last year. That means low-carbon hydrogen producers can, in theory, already begin applying for tax credits of up to $3 per kilogram, depending on the emissions intensity of production.

However, IRS guidelines for clean hydrogen production have yet to be issued, and industry groups, environmentalists, and scientists are taking sides in a debate over whether the tax credits should require hydrogen made via electrolysis to be powered exclusively with new sources of zero-carbon electricity, a concept known as “additionality.”

In a February letter, a coalition of environmental groups and aspiring hydrogen producers expressed concern to the IRS that guidelines for 45V clean hydrogen production tax credit implementation would not be sufficiently rigorous, especially when it comes to grid-connected electrolyzers. Citing research from Princeton University, the group argued that grid-powered electrolyzers siphon off renewable generation capacity, requiring the grid to be backfilled by fossil power and thus producing twice the carbon emissions that natural gas-derived hydrogen emits currently.

(The group, which includes the National Resources Defense Council, Intersect Power, and EDF Renewables, among others, also argues in favor of hourly tracking, which they say would better guarantee energy used for electrolysis comes from clean sources, and deliverability, requiring renewable power to be sourced from within a reasonable geographic distance. In February, the European Commission issued a directive phasing in, over a number of years, rules for additionality, hourly tracking, and deliverability.)

Benton Arnett, director of markets and policy for the Washington, DC-based Nuclear Energy Institute, a nuclear industry trade association, does not believe the concept of additionality was part of Congress’s intent when the body crafted the Inflation Reduction Act. For one, he notes, the text of the 45V provision for clean hydrogen production includes specific prescriptions for the carbon intensity of hydrogen production as well as for the analysis of life-cycle emissions, but says nothing about additionality.

“When you get legislative text, you don’t usually have prescriptions on carbon intensities for the different levels of subsidies,” he said. “You don’t usually have specifications on what life-cycle analysis model to use – and yet all of that is included in the 45V text. Clearly [additionality] is not something that was intended by Congress.”

Reading further into the law, section 45V contains precise language allowing renewable electricity used for the production of hydrogen to also claim renewable energy tax credits, or “stacking” of tax credits. Further, the statute includes a subsection spelling out that producers of nuclear power used to make clean hydrogen can also avail themselves of the 45U tax credit for zero-emission nuclear energy production.

“It’s really hard for me to think of a scenario where the drafters of the IRA would have included a provision allowing existing nuclear assets to claim 45V production tax credits and also be thinking that additionality is something that would be applied,” Arnett said.

Text of the IRA

The NEI emphasized these provisions in a letter to Treasury and IRS officials last month, noting that, “given the ability to stack tax credits for existing sources with section 45V, the timing of when the section 45V credit was made available” – December 31, 2022 – “and congressional support for leveraging existing nuclear plants to produce hydrogen, it is clear Congress intended for existing facilities to be eligible to supply electricity for clean hydrogen production.”

Arnett adds that the debate around additionally ignores the fact that not all power generation assets are created equal. Nuclear facilities, in particular, given the regulatory and capital demands, do not fit within a model of additionality geared toward new renewable energy capacity. (Hydrogen developers have also proposed to use existing hydropower sources for projects in the Pacific Northwest and Northeast.)

This year, the NEI conducted a survey of its 19 member companies representing 80 nuclear facilities in the US. The survey found that 57% of the facilities are considering generation of carbon-free hydrogen. Meanwhile, the US Department of Energy’s hydrogen hubs grant program requires that one hub produce hydrogen from nuclear sources; and the DOE has teamed up with several utilities to demonstrate hydrogen production at nuclear power plants, including Constellation’s Nine Mile Point Power Station, Energy Harbor’s Davis-Besse Nuclear Power Station, Xcel Energy’s Prairie Island Nuclear Generating Plant, and Arizona Public Service’s Palo Verde Generating Station.

“We’re worried that if [additionality] goes into effect it’s going to remove a valuable asset for producing hydrogen from the system, and it’s really going to slow down penetration of hydrogen into the market,” Arnett said.

As for the research underlying arguments in favor of additionality, Arnett says that it appears to take the 45V provision in a vacuum, without considering some of the larger changes that are taking shape in US electricity markets. For one, the research, which argues that electrolyzers would absorb renewable capacity and require fossil-based generation to backfill to meet demand, assumes that natural gas generation will continue to be the marginal producer on the electrical grid.

“One of the shortcomings of that is that the IRA has hundreds of billions of dollars of incentives aimed at changing that very dynamic. The whole goal of the IRA is that marginal additions of power are carbon-free,” he said, noting incentives for clean electricity production tax credits, investment tax credits, supply chain buildouts, and loan program office support for all of these projects.

Read More »

Exclusive: Plug Power enlists bank to evaluate financing options

The cash-burning company is working with a bulge-bracket American bank to evaluate debt financing options to help stave off a liquidity crisis.

Plug Power is working with Goldman Sachs to evaluate a capital raise in the form of debt financing to shore up its balance sheet, sources said.

The New York-based company recently said it was at risk of a liquidity crisis in the next 12 months if it is not able to raise additional capital, noting it was exploring various options for bringing in financing.

Its total cash and cash equivalents as of September 30 stood at $567m, representing a decline of $580m for the quarter, according to SEC filings. The company also has nearly $1bn of restricted cash balances stemming from sale-leaseback transactions, of which $50m becomes available per quarter.

In a shareholder letter and on its 3Q23 earnings call, executives outlined the financing options that are on the table for the company, including a debt raise, funding from the Department of Energy’s Loan Programs Office, and bringing in project equity partners for its facilities.

The company is “evaluating varied debt financing solutions to support [its] growth,” according to the shareholder letter. CFO Paul Middleton added on the call that they’ve had “some expressions of offers for ABL-like facilities” as well as restricted cash advance facilities. 

CEO Andy Marsh said the company would need to raise between $500m – $600m, according to a news report from Barron’s.

Representatives of Plug Power and Goldman Sachs declined to comment.

Plug is also working towards a conditional commitment from the DOE Loan Program Office to finance plants in its green hydrogen network. 

“The framework that we’re working on with them is a $1.5bn platform that would fund our green plants and would fund from construction phase onwards,” CFO Middleton said, adding that the funding could amount to as much as 80% of the projects. 

Middleton said he expected the DOE loan, if granted, would start funding in early 2Q24, and could even be used to back lever some of its existing plants in Texas and New York.

The company’s stock traded today with a $2.34bn market cap, while its outstanding debt consists of a $200m convertible note issued in 2020.

The notes traded around 130 cents of par before Plug’s going concern announcement, and subsequently dropped to trade in the high-70s, with quotes this week in the 80s.

Read More »

AGDC seeks $150m in development capital for Alaska LNG project

The Alaska corporation is raising capital to reach FID on a $44bn LNG project that includes the construction of a natural gas pipeline and carbon capture infrastructure.

The Alaska Gasline Development Corporation (AGDC) is actively working to raise $150m in development capital for the Alaska LNG project, with Goldman Sachs providing advisory services.

This capital will cover third-party Front End Engineering Design (FEED) costs, project management, legal and commercial expenses, and overhead for 8 Star Alaska, the entity overseeing the project. Investors will receive a majority interest in both 8 Star Alaska and Alaska LNG as part of the fundraising efforts, according to a presentation​​.

AGDC, a public corporation of the state of Alaska, is hoping to finalize a deal for development capital in the next 12 months, but has not set a definitive timeline for the fundraise, AGDC’s Tim Fitzpatrick said.

The total cost of the project is estimated at $44bn, according to Fitzpatrick, and consists of three principal infrastructural components:

  1. Arctic Carbon Capture (ACC) Plant: Located in Prudhoe Bay on Alaska’s North Slope, this plant is designed to remove carbon dioxide and hydrogen sulfide before natural gas enters the pipeline.
  2. Natural Gas Pipeline: This 807-mile pipeline, with a 42-inch diameter, connects the ACC plant to the LNG facility and is capable of transporting 3.7 billion ft³/d of natural gas. It includes multiple offtake points for in-state residential, commercial, and industrial use.
  3. Alaska LNG Facility: Situated at tidewater in Nikiski, Alaska, this facility features three liquefaction trains, two loading berths, two 240,000 m³ LNG tanks, and a jetty. It is designed to produce 20 million tons per year of LNG​​.

Strategies to raise the necessary funds include collaborating with established LNG developers, strategic and financial investors, and possibly forming a consortium, according to the presentation. All project equity will flow through 8 Star Alaska, keeping the legal and commercial structure of the project consistent​​.

As of last year, the corporation was negotiating sales agreements for a significant portion of the Alaska LNG project’s capacity. Discussions include contracts covering 8 million tonnes per annum (MTPA) at fixed prices and market-linked charges, and equity offtake talks for up to 12 MTPA. Additionally, three traditional Asian utility customers have shown interest in a minimum of 3 MTPA, potentially increasing to 5 MTPA.

These negotiations involve traditional Asian utility buyers, LNG traders, and oil and gas companies, all credit-worthy and large-scale market participants, the company said. Some buyers are contemplating equity offtake, investing at the Final Investment Decision (FID) in exchange for LNG supplied at cost​​.

A key component of the project’s advancement is securing gas supply agreement terms, identified as a prerequisite by multiple investors. AGDC has held meetings with executives from two major producers to emphasize the need for Gas Supply Precedent Agreements to attract further investment. These discussions, highlighting the project’s importance to Alaska, were joined by key figures including the DOR Commissioner Crum, the DNR Commissioner Boyle, and representatives from Goldman Sachs​​.

The Japan Energy Summit, sponsored by AGDC, focused on the need for new LNG capacity in Asia. Japan’s Ministry of Economy Trade & Industry (METI) expressed strong support for new LNG investments and offtake, emphasizing the replacement of coal with gas in developing Asian markets​​.

Read More »

Welcome Back

Get Started

Sign up for a free 15-day trial and get the latest clean fuels news in your inbox.