The Link Between Project Finance and Bioenergy Policy

Biomass Magazine
By Luke Geiver
November 08, 2012

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Agrivida raises $15M in key Series C bioenergy feedstock financing

Biofuels Digest
Jim Lane
September 11, 2012   Read more

Crossing the Valley of Dearth

RenewableEnergyWorld.com
By Jim Lane, Biofuels Digest
April 11, 2012

For bio-based industry, beyond the Valley of Death lies the Valley of Dearth, a shortfall in capital necessary to finance global deployment at scale. A global OPIC can bring institutional investors to the rescue, say top capital strategists in New York.

Michael Eckhart, the Global Head of Environmental Finance & Sustainability for Citigroup, doesn't hang around much on the conference circuit. In fact, the busy financier himself can't remember the last time he spent three days as a conference delegate, just taking in information. So when he came to ABLC last week, I took a chair and started making notes, fast.

You see, in project financings of $1B and up, Citigroup did all of them last year. When it comes to large-scale project debt financing of the type that bioenergy is turning to for at-scale deployments, they are not the elephant in the room. They are the room in the room.

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Private equity companies weigh in on pellet business

Biomass Power & Thermal
By Lisa Gibson September 09, 2011

Wrapping up the first day of an educational North American Biomass Pellet Export Conference in New Orleans, two representatives from private equity companies shared their point of view on the pellet business. They both agreed that it’s challenging.

If tasked to describe the wood pellet business in one word, Carl Williams, principal of River Stone Holdings, said he would use challenging. The industry is fraught with challenges, he said. It’s nascent and fragmented. Economies of scale and scope are crucial, and it’s difficult to realize “cash on cash” returns. “I will tell you that it is possible to do that in this business, but it is extremely difficult,” he said. If you can show a bank pages of cash on cash returns, however, they’ll finance the project, according to Williams.

But without that, the key criteria for “culling the herd” of pellet manufacturers are: health and safety, sustainability, product quality, and reliability of delivery. “When you say a shipment of pellets will show up, it sure as hell better show up,” Williams said.

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BTEC webinar delves into biomass project financing

Biomass Power and Thermal
By Anna Austin June 29, 2011

The development or timeline cycle for a biomass project is typically three or more years, according to Greg Montgomery, managing partner at Abundant Power, a financial services company.

Financing for each project stage is different, comes at different times, and includes development capital, construction capital, permit capital and operations capital. “Biomass project financing is a technique that is used to finance capital-intensive projects that are either difficult to support on a developer’s corporate balance sheet, or are more attractive when financed separately,” Montgomery said.

Montgomery was one of three presenters during a free Biomass Thermal Energy Council webinar held June 29 and titled Biomass Thermal Finance: Options, Steps and Resources for Biomass Project Development.

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First of Kind, Financing Advanced Bioenergy Pt 3: Dealing with Deal Breakers

Biofuels Digest
February 27, 2011
By Biofuels Digest special correspondent Tim Sklar

Part 3-Dealing with Deal Breakers. How financial modeling can be used in quantifying risk and identifying “Deal Breakers”

In Part I of this three part series titled “On Identifying Risks”, discussions were included that focused upon the high-risk nature of advanced bio-refinery projects, why financing is hard to obtain what can be done to improve the odds.

In Part 2 titled “On Quantifying Risks” a summary of due diligence inquiries that project developers can expect to be subjected to is presented along with a list of typical concerns potential financial backers have with respect to perceived risks. In addition, a set of bio-refinery specific “what if” questions are included, because many of them will be asked.

It was hoped that the material included in Part 2 will ultimately be used as a useful guide in assembling information and in conducting analyses that will be needed when preparing loan requests, applications for loan guarantees, investment memoranda and prospectuses.

In Part 3 titled “Quantifying Risk Using Robust Financial Models”, insights are presented as to the how financial modeling can be used in quantifying risk and identifying “Deal Breakers”. In the sub-section titled “The Anatomy of a Model”, a detailed description is given of the computational framework used in the financial model. Another sub-section describes how to use this model.

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First of Kind: Financing Advanced Biorefineries, Part II

Biofuels Digest
February 24, 2011
By Biofuels Digest special correspondent Tim Sklar

Part 2-On Quantifying Risks
In Part I of this three part article titled “On Identifying Risks”, discussions were included that focused upon the high risk nature of advanced bio-refinery projects, why financing is hard to obtain what can be done to improve the odds.

In Part 2 titled “On Quantifying Risks” a summary of due diligence inquiries that project developers can expect to be subjected to is presented along with a a list of typical concerns potential financial backers have with respect to perceived risks. In addition, a set of bio-refinery specific “what if” questions are included, because many of them will be asked. It was hoped that the material included in Part 2 will ultimately be used as a useful guide in assembling information and in conducting analyses that will be needed when preparing loan requests, applications for loan guarantees, investment memoranda and prospectuses.

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“First of Kind” – the Financing of Advanced Bio-Refineries, Part I

Biofuels Digest
February 24, 2011
By Tim Sklar

Today, we inaugurate a three-part, in-depth series – “First of Kind” – the Financing of Advanced Bio-Refineries, from our trusty correspondent Tim Sklar, whose last series on torrefaction was so well received. In Part I, today, we look at “Identifying Risks”.

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Brazil Sugar, Ethanol to Need $36 Billion, Rabobank’s Duff Says

Bloomberg
By Stephen Morris - Nov 30, 2010 12:00 PM CT

Brazil’s sugar and ethanol industries will need $36 billion in investment by 2020, said Andy Duff, a food and agribusiness researcher at Rabobank.

The sugar industry in the world’s largest producer requires higher spending after prices for the sweetener gained this year, Duff said today at the International Sugar Organization conference in London. Raw sugar on Nov. 11 reached 33.39 cents a pound, the highest level since January 1981, in New York.

The largest Brazilian companies in the industry will have the most success in obtaining loans and credit to fund growth and engage in joint ventures with multinational partners, Duff said in an interview with Bloomberg News. Medium-sized and smaller companies are unlikely to play a role because of “rather limited” access to credit, he said.

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Lux Research Report Shows Venture Capitalists Changing Focus in Biofuels Investment

Biofuels Journal
Date Posted: June 25, 2010

Boston—Although 2009 saw venture capitalists (VCs) invest $877 million across 51 deals for bio-based fuel and materials production, that level of funding represents a 26% drop from 2008.

However, the drop may signal a regrouping rather than a retreat from the industry as many VCs rethink their investment strategies after the 2008 economic collapse.

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Bioenergy: Fuelling a start-up

EnergyDigital.com
Andrea Marino Tue Jun 1, 2010

Bioenergy companies are increasing, yet securing funding may be challenging for this highly unproven and untested technology

Due to the economic downslide of recent years, finding funding for renewable energy projects is harder than ever. The current trend in the sustainable energy sector involves companies virtually waiting for the right kind of financing to come through for their projects. Whether they end up being funded by the federal government, state grants or bank-financed loans, a lot of environmental-development projects are being put on the back burner until the economy bounces back. For small businesses to get the right financing from banks, the banks also want to see evidence that these bioenergy companies will be successful. But it is hard to prove something like that when the bioenergy revolution is fairly new and hasn’t gained much exposure. In addition, these small businesses don’t have the funds to advertise or really make themselves known. While banks are interested in advanced environmental technologies to some degree, they are also hesitant to invest in a startup venture involving bioenergy—these projects are viewed as being a high risk in the eyes of most banks.

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Creditworthiness Key to Biomass Project Success

Biomass Magazine March 2010
By John Eustermann

Most biomass projects require the developer to raise large amounts of finance well in advance of breaking ground, let alone commercial operation. Although the debt markets are expected to rebound and the implementation of multiple state and federal financial incentives and capital sources have some saying they already see things opening up, arranging finance for a renewable energy project is not easy, and the route adopted to raise finance has a major bearing on how the project will be developed. It is therefore important that, at an early stage, consideration is given to the available financing options.

The push for renewable energy and the green economy combined with the multiple grants, guarantees, bonds and other stimulus programs and facilities have resulted in many options for biomass facility developers to consider when layering up their financial model. Though the applications and requirements differ from option to option, they share one threshold requirement: creditworthiness.

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U.S. advanced biofuel sector finds lenders wary

Reuters
Thu Oct 29, 2009 5:54pm EDT

WASHINGTON, Oct 29 (Reuters) - U.S. lenders are leery of putting money into cellulosic ethanol and other new-generation biofuels due to the recession and an industry shakeout, Agriculture Department and biofuel leaders said on Thursday.

That is one reason near-term production of advanced biofuels is unlikely to meet targets set by a 2007 energy law, said William Roe of Coskata Inc, which has a demonstration-size biomass plant in Pennsylvania.

Several witnesses at a House Agriculture subcommittee hearing on the future of new-generation biofuels pointed to difficulties in securing credit.

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Second-generation producers plea for improved federal loan programs

Ethanol Producer Magazine November 2009
By Kris Bevill
Report posted Oct. 30, 2009, at 9:11 a.m. CST

The CEOs of several cellulosic ethanol production facilities testified before a U.S. House Committee on Agriculture subcommittee Oct. 29 to explain the challenges facing second-generation ethanol projects and to suggest Congressional improvements. Topics addressed included the ethanol blend wall, producer tax credits, and greenhouse gas emissions analysis, but the majority of comments focused on financing and the lack of adequate federal grant programs.

Mascoma CEO Bruce Jamerson offered the Representatives a first-hand account of how difficult it can be for second-generation projects to obtain funding, even with governmental support. “Earlier this year, Mascoma and its financial advisors contacted 174 commercial lenders seeking a bank partner to apply for a USDA loan guarantee,” he stated. “Only two lenders were willing to work with us. We selected one, but in the end were unable to move forward due to structural problems with the USDA loan guarantee requirements.”

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“Benjamins for Biofuels”: Part I: Who’s getting money now, and how

Biofuels Digest
September 22, 2009 Jim Lane

Today, Biofuels Digest debuts the first article in a series on where the industry is obtaining financing this year — one year after the seizure of Freddie Mac and Fannie Mae, and the collapse of Lehman Brothers, triggered the global financial meltdown.

In part I of the series, we will look at creative financing sources being used today.

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In Pursuit of Loot

Biomass Magazine September 2009
By Anna Austin and Lisa Gibson

Biomass projects encounter many of the same challenges as other businesses, including obtaining adequate capital. Biomass Magazine talks with industry experts about the current financial situation, and funding opportunities for biomass projects.

Money is the determining factor in achieving project success no matter what industry is involved. Although a lack of liquidity in the equity and debt markets is currently keeping a lid on project development activity, there are some encouraging signs on the horizon for biomass projects, according to Rob Kurtz, BBI International Engineering and Consulting Group project manager. “Positive signs include the recent USDA issuance of feasibility study grant guidelines for both combined heat and power at biofuels plants and anaerobic digestion systems, and a slight thawing in venture capital/risk investment as evidenced by the Tendril and Gevo investments recently announced, and several other announcements by companies developing combined-heat-and-power systems,” Kurtz says. The Tendril Networks and Gevo investments totaling $70 million were among the top five reported venture-capital deals nationwide for clean energy and environmental technology companies in the second quarter, according to Ernst & Young LLP. Gevo, an Englewood, Colo.-based alternative fuels producer received $40 million and Tendril, a Boulder, Colo.-based smart grid software company received $30 million.

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Securing Outside Financing for Biomass Power Projects

Biomass Magazine September 2009
By Trotter Hunt

The key to raising money for biomass power projects is developing a good solid business plan that lets investors and lenders know that the projects’ fundamentals are secure enough to ensure that financial returns are met.

Incentives included in the recently passed stimulus bill combined with pending renewable portfolio standards (RPS) at the federal level, have created a mass of new project developers hoping to bring biomass power projects to market. All of these developers face the same challenge: securing outside financing. To do this, developers must convince investors and lenders that the projects’ fundamentals are secure enough to ensure that financial returns are met. Having a good plan and knowing the requirements are key in today’s challenging economic environment.

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Ethanol: Where is the Industry Heading?

DomesticFuel.com
Posted by Joanna Schroeder – June 1st, 2009

What is the ethanol industry’s financial future? This question will be asked and answered by three of the most influential ethanol organizations including Growth Energy, ACE and RFA, during the 5th Annual Biofuels Financial Conference. The conference, sponsored by Christianson & Associates, PLLP, will focus on the financial challenges and opportunities for the biofuels industry. The conference is being held in Minneapolis, Minn. on June 24 – 25, 2009.

“This is a challenging time for the ethanol industry and we must all learn how to manage during periods of volatility,” said John Christianson, Partner, Christianson & Associates, PLLP. “This conference will educate participants about the current financial challenges and opportunities facing our industry, as well as teach them how to more effectively manage their businesses during financially challenging times.”

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In Search of the Perfect Biofuel -- and Financing to Bring It to Market

Reuters
Fri May 22, 2009 1:00pm EDT
By Marc Gunther - Marc Gunther

Funny thing about the biofuels business. Roughly 200 companies are pursuing the perfect biofuel -- as cheap as fossil fuels, adaptable to today’s infrastructure, low-carbon, sustainable and no threat to the food supply or to tropical forests. But even cutting-edge startups that say they have the puzzle just about solved can’t raise the money they need to get into commercial production.

“Everyone wants to be the first to finance the second plant,” says Arnold Klann, the CEO of biofuels firm Blue Fire Ethanol. “No one one wants to be first to finance the first one.”

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Biomass Project Financing Solutions in Today’s Difficult Capital Markets

Biomass Magazine June 2009
By Sue Wyka

Government grants and loan guarantees could be used to help fund biomass projects until the economy improves.

The biomass industry presents exciting new opportunities in renewable energy. As an emerging industry, there remains a lot of uncertainty around feedstock costs, supply and aggregation, technology and off-take contracts. Project finance is difficult in the best of times, but it is especially challenging in today’s capital markets. The bright side is the amount of money flowing from the federal government into renewable energy in the form of grants and loan guarantees. The American Recovery and Reinvestment Act, or the stimulus package, has allocated billions to renewable energy, and biomass is one of the key focus areas. By leveraging these grant, loan guarantee and tax incentive programs, as described in the table on page 55, it is possible to get a well-planned and organized biomass project funded today. These government programs will bridge the gap in funding biomass projects until the industry matures and traditional capital becomes available.

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