Raising capital, Regulatory

Wyoming CCS research projects get DOE funding

Several carbon capture projects that will run tests at a Wyoming coal plant have received funding from the DOE.

April 29, 2024

Several carbon capture and storage research projects hosted at the Wyoming Integrated Test Center at Basin Electric’s Dry Fork Station near Gillette have earned funding through the U.S. Department of Energy’s Office of Clean Energy Demonstrations (OCED).

Membrane Technology and Research (MTR) Carbon Capture announced Mar. 28 that it received $4.6m to develop a Front-End Engineering Design (FEED) study for an integrated carbon capture and storage project at Dry Fork Station. Wyoming CarbonSAFE, led by the University of Wyoming School of Energy Resources (SER), is a partner for sequestering the captured carbon dioxide and is a co-recipient of the award.

The project includes a FEED study for a proposed capture plant featuring MTR Carbon Capture’s second-generation Polaris^TM membrane. The project aims to capture, compress, and store onsite 3 million metric tons of carbon dioxide per year, achieving at least a 90% carbon capture rate, according to a news release.

This FEED study funding is part of OCED’s Carbon Capture Demonstration Projects Program, which advances carbon management technologies. The goal of the program is to accelerate the demonstration and deployment of integrated carbon capture, transport, and storage technologies.

“Basin Electric congratulates MTR Carbon Capture on an important next step in further evaluating carbon capture at our Dry Fork Station,” said Todd Brickhouse, CEO and general manager of Basin Electric. “The investment required to bring carbon capture and storage technology from study to pilot to full-scale production is substantial, and successful deployment will require partnerships at many different levels. Dispatchable generation facilities such as Dry Fork Station are integral to Basin Electric providing reliable and affordable electricity to our membership, and the work MTR Carbon Capture is doing today is important to keeping electricity reliable across our nation.”

This project is the second DOE award for MTR Carbon Capture at Dry Fork Station. In 2023, the company began construction on a large-scale pilot plant at the Wyoming Integrated Test Center to capture carbon dioxide from flue gas produced at Dry Fork Station. When operational later this year, it will be the world’s largest membrane-based carbon capture pilot project.

Sorbent-based post-combustion capture system

In February, OCED announced the selection of TDA Research Inc. (TDA) to negotiate an award of up to $49m to test a carbon capture system at the Wyoming Integrated Test Center.

Led by TDA in collaboration with global energy technology company SLB as the technology development and deployment partner, the project is a large-scale pilot with the aim of testing a sorbent based post-combustion carbon capture system capable of capturing 158,000 metric tons of carbon dioxide each year — an amount equivalent to the annual carbon dioxide emissions of 35,000 gasoline-powered cars.

TDA began testing several carbon capture technologies based on novel sorbents and sorbent/membrane hybrids to remove carbon dioxide from flue gas in Fall 2019. Supported by DOE funding from the Office of Fossil Energy and Carbon Management, the testing was successfully completed in Fall 2023.

Algae-based carbon technology

In January, a $2.5m project was announced with Colorado State University, the University of Wyoming, and Living Ink Technologies to convert an industrial source of carbon dioxide into high-value materials through an algae-based carbon transfer process.

The Wyoming Integrated Test Center project, supported by the U.S. Department of Energy, began its initial phase in 2023. The research will run for three years, with about six months of testing at the facility.

University of Wyoming’s team will convert the liquid from algae pyrolysis into advanced energy materials such as carbon nanofiber supercapacitor electrodes, under the direction of University of Wyoming’s School of Energy Resources.

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Project finance, Project news

LSB Industries outlines blue ammonia project economics

US fertilizer producer LSB Industries gives a glimpse at the economics of two in-development blue ammonia projects.

LSB Industries estimates its Houston Ship Channel blue ammonia project will add approximately $150m of EBITDA annually, CEO Mark Behrman said today.

The facility, which would produce approximately 1.1 million metric tons of ammonia and capture and sequester 1.6 million metric tons of CO2 annually, is currently in the pre-FEED phase and planned for construction on the Vopak Exolum Houston Ship Shuttle Ammonia Terminal.

Behrman gave a back-of-the envelope estimate assuming the cost of the facility would come in at $800m, resulting in the added $150m of annual EBITDA .

“If you could tell me what the cost is, we’re only in pre-FEED now, but if we used an $800m cost, and I’m not suggesting that that’s the cost, I think we really need to go through our engineering, and we look at the types of returns that we would want, I would guess that for a very stable and steady stream of income, it’s probably somewhere in the neighborhood of $150 million annually,” Behrman said.

Oklahoma-based LSB will use a project finance model to fund the project, the company previously said, giving estimates of between $500m – $750 for the cost.

LSB expects initial offtakers based out of Japan and Korea, but Behrman said today that, more recently, “we have had conversations with potential European offtakers and are encouraged as we now believe Europe to be a viable target market as well.”

The company is developing the facility in partnership with INPEX, Japan’s largest E&P company, and plans to build and operate an ammonia synthesis loop using low-carbon hydrogen produced by Air Liquide, who will also handle the carbon capture and sequestration as well as the nitrogen supply.

El Dorado

Meanwhile, LSB expects to add up to $20m of EBITDA per year from the installation of a carbon capture unit at its ammonia facility in El Dorado, Arkansas.

LSB has partnered with Lapis Energy on the project, which will capture and sequester 450,000 metric tons of CO2 per year from El Dorado’s ammonia production. Lapis will receive 45Q tax credits of $85 per ton of CO2 sequestered and pay a fee to LSB for each ton.

In turn, LSB will produce 375,000 tons of low-carbon ammonia that can be sold at a premium, executives said on an investor call today.

“All combined, this should equate to an estimated 15 to $20 million in annual incremental EBITDA for LSB,” CEO Mark Behrman said.

“The main gating factor is the approval of our Class VI permit application from the EPA that will enable Lapis to begin construction and then capturing and permanently sequestering,” he said. Indications from the EPA are that they are on track to issue the permit during 2025, he added.

At the same time, LSB elected to delay the expansion of production capacity at the El Dorado facility citing commodity market conditions, planned turnarounds and other initiatives the company has underway.

The El Dorado expansion project has been selected to receive funding under the USDA Fertilzer Production Expansion Program, a financing element under which LSB expects to have five years to complete the project once approved for the grant.

LSB previously paused a green ammonia project planned for Pryor, Oklahoma, citing lower gas prices, higher power prices, and uncertainties around tax credit incentives under 45V that created conditions favoring blue ammonia projects.

March 6, 2024

Personnel moves, Raising capital

Fortescue hires from Riverstone for investment arm

Fortescue is looking to bring in equity investors for its projects as part of the formation of a New York-based investment arm.

Fortescue Metals Group Ltd has formed Fortescue Capital, headquartered in New York City, and named Robert Tichio as CEO and managing partner.

Fortescue Capital is a new green energy investment accelerator platform, and an integral next step in Fortescue’s commitment to deliver green energy projects and decarbonization investments, according to a news release.

Fortescue Energy CEO, Mark Hutchinson, said “Fortescue is taking its global pipeline of green hydrogen and green ammonia projects to Final Investment Decision, and in doing so has communicated our intention and desire to bring additional equity investors onboard. Further, Fortescue has previously communicated its planned investment to decarbonize its Pilbara operations, and we see Fortescue Capital as an essential tool of engagement as we embark on both missions.”

Before joining Fortescue, Tichio spent over 17 years at Riverstone Holdings, a New York based private equity firm, that has seen total capital raised across a variety of private equity and related products exceed $42bn.

Tichio will be joined by a senior leadership team with a global background across sustainable infrastructure, climate technology, energy and private markets, which includes Nathan Craig, Rael McNally and Jennifer Zarrilli.

Each will serve as Managing Directors and be based in New York.

Tichio reports to Mark Hutchinson, CEO of Fortescue Energy, and the Operating Board of Fortescue Capital, which will initially include Robert Tichio, Jean Baderschneider, Mark Hutchinson and Mark Barnaba. Fortescue Capital is being developed as a fiduciary for third-party capital, which will complement the Energy and Metals internal corporate finance teams that already exist and work collaboratively to serve the shareholders of Fortescue.

Funding models will differ on a project-by-project basis as projects are formally approved by the Fortescue Board. The Company expects to hold equity stakes between 25 per cent and 50 per cent in each project, with third-party investors.

These potential capital partners include sovereign wealth funds, pension funds, endowments, insurance companies and ultra-high net worth family offices.

November 17, 2023

Personnel moves

Energy Vault appoints CFO

Energy Vault has appointed Michael Beer as chief financial officer.

Energy Vault Holdings, Inc., a provider of sustainable grid-scale energy storage solutions, announced today the appointment of Michael Beer as Chief Financial Officer.

Beer will replace Jan Kees van Gaalen, who has served in the role since November 2022 and plans to retire. The appointment is effective April 15, 2024, the company said in a news release.

Energy Vault offers proprietary gravity-based storage, battery storage, and green hydrogen energy storage technologies.

Prior to Energy Vault, Beer served as Chief Financial Officer for FreeWire Technologies, Inc. (FreeWire), an industry leader in ultra-fast EV charging, battery storage and energy management solutions, since 2021. Prior to FreeWire, he served as Head of Financial Strategy & Investor Relations at Luminar Technologies, Inc (Nasdaq: LAZR), culminating in the company’s public listing.

Before Luminar, Beer spent seven years at Citigroup Inc., serving as a Senior Research Analyst in Hong Kong and Singapore, covering the transportation, logistics and infrastructure space across Asia. Previously, he covered the North American transportation sector at Bear Stearns and Wolfe Research in New York. Beer also currently serves on the Board of Directors at UK-based venture builder, Cambridge Future Tech Ltd. (CFT) and is a Partner at Vest Coast Capital.

April 4, 2024

exclusive

Project finance, Project news, Raising capital

California biomass-to-hydrogen firm in Series A

A woody biomass-to-hydrogen firm in California is conducting an in-house Series A for engineering and design on its first project, one that will need more than $800m of debt and equity in the future.

Mote Inc. is aiming to finish a Series A round, raising between $12m and $15m, by the end of the year, CEO Joshuah Stolaroff said in an interview.

The company does not have a relationship with a financial advisor and has been conducting the raise in-house, he said. Moving forward the company will need a financial advisor.

The Series A will provide some 18 months of technology development runway, plus engineering and design on the first project in Bakersfield, Kern County. That will require some $800m in debt and project equity to start in the next year.

A second project in Sacramento is in the pre-Feed stage. That development is the subject of a recently secured grant from the Sacramento Municipal Utility District.

“We need big partners to do it on any meaningful scale,” Stolaroff said of biomass-to-hydrogen. Investors tend to be technology VCs with little or no knowledge of project finance, and infra funds looking for no-risk projects. “We fall somewhere in between.”

Part of the Arches H2 hub in California, Mote has ambitions to expand to other areas of the US with good biomass supply and CO2 storage, like the southeast and Gulf Coast, Stolaroff said. The company would also like to expand internationally.

“We are a great deal right now,” he said of the Series A,” adding that a Series B or project equity round will follow shortly.

Majority equity is held by the company’s six employees, Stolaroff said. There are also seed investors that hold equity.

Abundant feedstock and a growing offtake market

Mote’s three primary feedstocks are agricultural and forestry reside and urban green waste. California produces some 45m tons of it per year and the number nationwide is about half-a-billion, Stolaroff said.

Mote is confident for demand from hydrogen customers, Stoaroff said. Transportation is expected to be a strong demand source by the time Mote is operational. The Arches hub also has connections with municipal users, filling stations and the ports of LA and Long Beach.

“We are all planning for growth,” he said.

August 17, 2023

Personnel moves, Project finance, Raising capital

Exclusive: Riverstone Credit spinout preparing $500m fundraise

Breakwall Capital, a new fund put together by former Riverstone Credit fund managers, is preparing to raise $500m to make project loans in decarbonization as well as the traditional energy sector. We spoke to founders Christopher Abbate and Daniel Flannery.

Breakwall Capital is preparing to launch a $500m fundraising effort for a new fund – called Breakwall Energy Credit I – that will focus on investments in decarbonization as well as the traditional energy sector.

The founders of the new fund, Christopher Abbate, Daniel Flannery, and Jamie Brodsky, have spent the last 10 years making oil and gas credit investments at Riverstone Credit, while pivoting in recent years to investments in sustainability and decarbonization.

In addition to bringing in fresh capital, Breakwall will manage funds raised from Dutch trading firm Vitol, for a fund called Valor Upstream Credit Partners; and the partners will help wind down the remaining roughly $1bn of investments held in two Riverstone funds.

Drawing on their experience at Riverstone, Breakwall will continue to make investments through sustainability-linked loans across the energy value chain, but will also invest in the upstream oil and gas sector through Valor and the new Breakwall fund.

“We’re not abandoning the conventional hydrocarbon economy,” Flannery said in an interview. “We’re embracing the energy transition economy and we’re doing it all with the same sort of mindset that everything we do is encouraging our borrowers to be more sustainable.”

In splitting from Riverstone Credit, where they made nearly $6bn of investments, the founders of Breakwall said they have maintained cordial relations, such that Breakwall will seek to tap some of the same LPs that invested in Riverstone. The partners have also lined up a revenue sharing arrangement with Riverstone so that interests are aligned on fund management.

The primary reason for the spinout, according to Abbate, “was really to give both sides more resources to work with: on their side, less headcount relative to AUM, and on our side, more equity capital to reward people with and incent people with and recruit people with, because Riverstone was not a firm that broadly distributed equity to the team.”

Investment thesis

A typical Breakwall loan deal will involve a small or mid-sized energy company that either can’t get a bank loan or can’t get enough of a bank loan to finance a capital-intensive project. Usually, a considerable amount of equity has already been invested to get the project to a certain maturity level, and it needs a bridge to completion.

“We designed our entire investment philosophy around being a transitional credit capital provider to these companies who only needed our cost of capital for a very specific period of time,” Flannery said.

Breakwall provides repayable short-duration bridge-like solutions to these growing energy companies that will eventually take out the loan with a lower cost of capital or an asset sale, or in the case of an upstream business, pay them off with cash flow.

“We’re solving a need that exists because there’s been a flock of capital away from the upstream universe,” he added.

Often, Breakwall loan deals, which come at pricing in the SOFR+ 850bps range, will be taken out by the leveraged loan or high yield market at lower pricing in the SOFR+ 350bps range, once a project comes online, Abbate said.

Breakwall’s underwriting strategy, as such, evaluates a project’s chances of success and the obstacles to getting built.

The partners point to a recent loan to publicly listed renewable natural gas producer Clean Energy – a four-year $150m sustainability-linked senior secured term loan – as one of their most successful, where most of the proceeds were used to build RNG facilities. Sustainability-linked loans tie loan economics to key performance indicators (KPIs) aimed at incentivizing cleaner practices.

In fact, in clean fuels, their investment thesis centers on the potential of RNG as a viable solution for sectors like long-haul trucking, where electrification may present challenges.

“We are big believers in RNG,” Flannery said. “We believe that the combination of the demand and the credit regimes in certain jurisdictions make that a very compelling investment thesis.”

EPIC loan

In another loan deal, the Breakwall partners previously financed the construction of EPIC Midstream’s propane pipeline from Corpus Christi east to Sweeny, Texas.

Originally a $150m project, Riverstone provided $75m of debt, while EPIC committed the remaining capital, with COVID-induced cost overruns leading to a total of $95m of equity provided by the midstream company.

The only contract the propane project had was a minimum volume commitment with EPIC’s Y-Grade pipeline, because the Y-Grade pipeline, which ran to the Robstown fractionator near Corpus Christi, needed an outlet to the Houston petrochemical market, as there wasn’t enough export demand out of Corpus Christi.

“So critical infrastructure: perfect example of what we do, because if your only credit is Y-Grade, you’re just a derivative to the Y-Grade cost of capital,” Abbate said.

Asked if Breakwall would look at financing the construction of a 500-mile hydrogen pipeline that EPIC is evaluating, Abbate answered affirmatively.

“If those guys called me and said, ‘Hey, we want to build this 500-mile pipeline,’ I’d look at it,” he said. “I have to see what the contracts look like, but that’s exactly what type of project we would like to look at.”

February 12, 2024

exclusive

Innovation, Raising capital

NOx mitigation firm looking to scale

A publicly listed company with a hydrogen burner project backed by one of the largest US utilities could accelerate growth with a capital infusion in pursuit of first-adopter clients. It offers technology that aims to mitigate an underappreciated aspect of the embryonic clean hydrogen ecosystem: blending hydrogen with natural gas can greatly increase NOx emissions when combusted.

ClearSign Technologies, the publicly listed burner solutions provider, is at an inflection point in the development of its products to serve players in the emerging hydrogen landscape, CEO Jim Deller said in an interview.

“We’re new,” Deller said of the company’s emergence on the hydrogen scene. The company is aggressively seeking a place in the hydrogen mainstream as it pursues first-adopter clients. “We need to get our install base up.”

ClearSign recently received a collaboration commitment and pledged funding for its 100% Hydrogen Ultra Low NOx burner project from Southern California Gas Co. This comes on top of the SBIR program Phase 2 Award for $1.6m from the DOE. The company has one year’s cash on hand, according to Deller.

Hydrogen blending increases the output of NOx emissions, which are heavily regulated, Deller explained. A 20% hydrogen blend with fuel gas, for example, causes a 40% increase in NOx emissions.

The goal of the project with SoCalGas is to develop NOx hydrogen burner technology, which the company believes will enable the adoption of hydrogen fuel for industrial heating.

“Your NOx permit is not going to change,” he said. “In order to use even a small amount of hydrogen in your fuel gas, you need a technology that’s going to allow you to maintain NOx emissions for an efficient price.”

Deller said he sees ClearSign as an enabler of the hydrogen transition, pointing to SoCalGas’ need to keep their clients compliant with their operating permits.

“They’re going to have to modify their technology to enable the combustion of hydrogen without exceeding their NOx permits, and that’s where we come in.”

A ‘pivotal point’

ClearSign is open to discussing partnerships and financial options to scale deployment of its technology, Deller said, pointing to potential markets in Texas and the Pacific Northwest.

“We’re certainly open to any company that has a compatible technology,” Deller said.

ClearSign is not engaged for M&A now, but it does have discussions with prospective financial advisors, company spokesperson Matthew Selinger said. “Like any small company, if we had more money we could potentially accelerate faster.”

The company is not considering a spin off now, Deller said, focusing instead on getting traction commercially. ClearSign has not historically taken on debt. Those types of business opportunities are not off the table, but technical synergy and strategic partnerships are first pursued for value creation.

“We’re at a pivotal point, I believe, in the development of our technology,” Deller said. “I’m open to talk about any ideas.”

A technology in development

The burner technology is also applicable to systems that use only hydrogen, Deller said. The Phase 2 DOE grant funding is meant to develop a full range of commercial burners that will operate through a range of fuel gasses up to and including 100% hydrogen.

ClearSign does not have additional partnerships pending announcement, Deller said. But what’s applicable in Southern California is relevant to discussions happening in proposed hydrogen hubs around the country.

The company is headquartered in Tulsa, Oklahoma, along with process burner manufacturing partner Zeeco. It uses third-party manufacturing and will continue to do so, Deller said.

ClearSign also has offices in Seattle and Beijing. The company’s US and Chinese businesses to not have a materials shipping relationship, Deller said. The model followed has manufacturing separated between countries.

September 26, 2023