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Waste-to-fuels developer attracts PE investment

Raven SR will use RockCreek's investment to further commercialize low-to-negative carbon intensity hydrogen and sustainable aviation fuel.

RockCreek, a global multi-asset firm investing in the energy transition, has closed an investment in Raven SR, Inc. (Raven SR), a company that produces renewable transportation fuels from a variety of feedstocks, including waste streams, using a proprietary non-combustion process, according to a news release.

Raven SR will use RockCreek’s investment to further commercialize low-to-negative carbon intensity hydrogen and sustainable aviation fuel (SAF). This investment comes on the heels of last month’s announcement that Raven SR’s Richmond, Calif. project is the first ever biomass-to-renewable hydrogen project permitted in the state of California.

Renewable hydrogen from this project will be commercially available in the Bay Area beginning in 2024 through agreements with Chevron New Energies and Hyzon Motors. The same core technology will also be adapted to commercialize the production of sustainable aviation fuel in 2025.

The Raven SR investment is part of RockCreek’s Smart Aviation Futures fund. Working with a major US airline, Smart Aviation Futures invests in high-growth companies that enable and benefit from decarbonizing the aviation industry. Airlines are looking to both sustainable aviation fuel and hydrogen as key energy transition tools. Smart Aviation Futures taps into tailwinds from billions of dollars in opportunities unlocked globally by policy measures like the U.S. Inflation Reduction Act, and will target investments in companies aligned with corporate and consumer preferences for reducing environmental footprints. Supportive public policy initiatives and high demand for SAF are encouraging investors to expand in the space, leading to project development in regions across the world.

“Raven SR is pioneering innovative ways to produce renewable transportation fuels that will play an instrumental role in decarbonizing the aviation and transportation industries,” said Justin Heyman, managing director of RockCreek. “Their products have an attractive environmental footprint and are cost competitive with traditional fuels. This offers industries smart options to both manage fuel costs and achieve abatement goals.”

“RockCreek’s investment in Raven SR signals the investing community’s confidence that our patented Steam/CO2 Reforming technology will have a significant impact on reducing carbon emissions through the production of carbon-neutral and carbon-negative fuels,” said Matt Murdock, CEO of Raven SR. “With the demand for sustainable aviation fuel and renewable hydrogen rapidly on the rise, RockCreek’s support will play a vital role in advancing the development and expansion of our global business model.”

The Raven SR technology is a non-combustion thermal, chemical reductive process that converts organic waste and landfill gas to hydrogen and Fischer-Tropsch synthetic fuels. Unlike other hydrogen production technologies, its Steam/CO2 Reformation does not require fresh water as a feedstock and uses less than half the energy of electrolysis. The process is more efficient than conventional hydrogen production and can deliver fuel with low to negative carbon intensity. Additionally, Raven SR’s goal is to generate as much of its own power onsite as possible to reduce reliance on and/or be independent of the grid. Its modular design provides a scalable means to locally produce renewable hydrogen and synthetic liquid fuels from local waste.

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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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Chevron acquires majority interest in ACES Delta

ACES Delta is developing the Advanced Clean Energy Storage project in Delta, Utah. Chevron last year backed out of its plans to acquire a stake in the joint venture.

Chevron U.S.A. Inc., through its Chevron New Energies division, announced it has closed a transaction with Haddington Ventures to acquire 100% of Magnum Development, LLC (Magnum Development) and thus a majority interest in ACES Delta, LLC (ACES Delta), which is a joint venture between Mitsubishi Power Americas, Inc. (Mitsubishi Power) and Magnum Development, according to a news release.

ACES Delta is developing the Advanced Clean Energy Storage project in Delta, Utah.

Chevron last year backed out of its plans to acquire a stake in the joint venture.

The Advanced Clean Energy Storage project plans to use electrolysis to convert renewable energy into hydrogen and will utilize solution-mined salt caverns for seasonal, dispatchable storage of the energy.

The first project, designed to convert and store up to 100 metric tons per day of hydrogen, is under construction and is expected to enter commercial-scale operations in mid-2025 to support the Intermountain Power Project’s “IPP Renewed” initiative. Several other opportunities for the project to produce and supply hydrogen to customers in the utility, transportation and industrial sectors in the western region of the United States are in development.

“As we continue to pursue lower carbon energy solutions, we are excited to move forward with the Advanced Clean Energy Storage hydrogen project, through our acquisition of Magnum Development and partnership with Mitsubishi Power, to build on Chevron’s 75-year history in Utah,” said Austin Knight, vice president, Hydrogen, Chevron New Energies. “We seek to leverage the unique strengths of each partner to develop a large-scale, hydrogen platform that provides affordable, reliable, ever-cleaner energy and helps our customers achieve their lower carbon goals.”

As part of broader efforts to pursue lower carbon energy solutions, Chevron New Energies is working to enhance demand for lower carbon intensity hydrogen – and the technologies that support cost-effective supply – as a commercially viable alternative in the transportation, power, and industrial sectors where greenhouse gas emissions are hard to abate.

“Reaching this milestone in the development of our hydrogen project will not only have significant benefits to the western U.S. population, but it will also serve as a blueprint for future hydrogen opportunities,” said Michael Ducker, senior vice president of Hydrogen Infrastructure for Mitsubishi Power. “With Chevron New Energies’ involvement, we expect to expand hydrogen supply more quickly. Together, we are investing in the future of hydrogen, helping to create a viable, cost-competitive market for emerging lower carbon solutions.”

“People look to Utah as the place where we work together to find solutions addressing today’s biggest challenges,” said Utah Gov. Spencer Cox. “This announcement demonstrates that our state has fostered a landscape where clean energy innovation is possible.”

“I look forward to this partnership with Chevron in the ACES Delta mission. Chevron will add tremendous strategic value as we develop a hydrogen production and storage facility,” said Craig Broussard, president, CEO and board chairman of Magnum Development.

“Haddington Ventures is very excited to see Chevron coming on board as the new majority owner at ACES Delta,” said John Strom, managing director, Haddington Ventures. “Having been the primary financial sponsor behind this key energy hub since 2008, we believe this transaction will accelerate lower carbon intensity solutions that reduce emissions in the western United States. Haddington Ventures will remain committed to the success of ACES Delta through its role in management of the investment vehicle that is providing construction equity to the current project.”

Citigroup Global Markets, Inc. served as financial advisor to Chevron. Jefferies LLC served as financial advisor to Haddington.

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Chrysalix Venture Capital closes fifth fund

The 120m fund will deploy into technologies supporting carbon neutrality in energy, mining, transport, chemicals, steel and cement, and forestry.

Chrysalix Venture Capital, an industrial sustainability investor with offices in Holland and Canada, has closed its fifth fund at $120m to invest in early-stage companies across the globe, according to a news release.

The Carbon Neutrality Fund is dedicated to developing technologies enabling carbon neutrality in energy, mining, transport, chemicals, steel and cement, and forestry. It will focus on technologies that include resource efficiency solutions, alternative fuels, materials substitution and circularity, carbon as a resource, negative emission technologies, carbon analytics and markets and will primarily invest across Canada, the US and Europe.

Investors in the fund include Evonik, LyondellBasell and Siam Cement Group (SCG).

“With this first close, the Fund is on its way to raising its target size of [$120m] and is supported by Chrysalix’s expanded presence in Europe, as well as the Chrysalix  ecosystem which includes many of the leading global industrial companies, top universities from Europe, North America and Asia, partnerships with climate technology accelerators and providers of non dilutive and growth capital,” the release states.

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Exclusive: Northeastern offshore wind sale kicks off

A major European energy firm has retained a banker and launched a process to sell a large portfolio of offshore wind developments in the northeastern US.

Ocean Wind I & II, Orsted’s offshore wind developments in New Jersey amounting to 2.5 GW of capacity, are for sale via an auction, according to two sources familiar with the matter.

Jefferies is the exclusive financial advisor on the sale, which is codenamed Project Hummer, the sources said. The process launched this month.

Denmark-based Orsted had previously halted development of Ocean Wind I and II as impairments on the projects climbed above $5bn. And the sale process comes amid the firm’s broader pullback from the offshore wind sector.

In an earnings call this month, Orsted CEO Mads Nipper said the company had plans to sell up to DKK 115bn (USD 16.6bn) in assets by 2030 as it accelerates divestments to boost its balance sheet.

Orsted also said it would withdraw from offshore wind markets in Norway, Spain and Portugal and cut its target for 2030 installed renewable capacity from 50 GW to 35 – 38 GW.

The company has a preference for a new owner acquiring 100% of both Ocean Wind leases and all associated development assets, the sources said.

Targeted COD for the two developments is 2029 and 2031, while estimated capex for each is USD 7.1bn (98 turbines) and USD 7.7bn (82 turbines), respectively.

New Jersey has accelerated offshore wind solicitation schedules and has recently awarded two contracts for 2.4 GW at $112.50/MWh and 1.3 GW at $131.00/MWh compared to the $98.10/MWh for Ocean Wind I and $84.03/MWh for Ocean Wind II awarded back in 2019 and 2021.

Orsted and Jefferies did not respond to requests for comment.

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California renewables firm in talks for green fuel co-development

A utility-scale solar and storage developer based in California has started outreach and discussions to have green fuels projects co-developed at some of its larger sites in the western US.

RAI Energy, the California-based solar and storage developer, has started to engage with other companies about developing green fuels along with its utility-scale projects, CEO and owner Mohammed S. Alrai said in an interview.

RAI recently took a development loan from Leyline Renewable Capital. That transaction ends a process launched by Keybanc first reported by The Hydrogen Source.

Alrai remains the 100% equity owner, he said. The liquidity from Leyline will last about two years.

The company’s most impending projects are in Colorado and California, Alrai said. Discussions around green fuels envision a partner coming in as a co-developer and customer for RAI’s renewable power.

“We’re definitely open to entering into conversations with all stakeholders,” Alrai said, adding that the effort could require capital raising. “We will be coming to the market to potentially raise equity.”

RAI is moving toward long-term ownership and operation of projects, he said. The company could also sell projects to raise capital.

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Ambient Fuels evaluating hydrogen project acquisitions

The company is well capitalized following a $250m equity investment from Generate Capital and is now opportunistically reviewing an initial slate of project M&A offerings.

Following an equity investment from Generate Capital, Ambient Fuels has begun to evaluate potential acquisitions of hydrogen projects that are under development, CEO Jacob Susman said in an interview.

“We’ve seen our first project M&A opportunities come through in the last 10 days or so,” Susman said.

Three projects for sale involve land positions, he said. Those that appear most attractive have a clear line of site to offtake or a strong approach to renewable power supply. Two out of three are not on the Gulf Coast.

“In no instance are these brokered deals,” Susman said.

Following the $250m equity investment from Generate Capital, Ambient is capitalized for several years and has no immediate plans to seek debt or tax equity, Susman said. The transaction was done without the help of a financial advisor.

Moving forward Ambient is open to JV formation with a partner that can help access offtake and renewable power, Susman said. Those points will drive future capital investment in the company and were resources that Generate brought to the table besides money.

According to ReSource‘s project tracker, Ambient is involved in at least two of the hubs that were encouraged by the DOE to submit a final application: California’s Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES), and the Port of Corpus Christi Green Hydrogen Hub.

In 2021 Ambient completed a funding round led by SJF Ventures. Several other VC funds and angel investors also participated.

In January The Hydrogen Source reported that Ambient was in exclusivity with an equity provider.

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