Valero invests in Enerkem, in $60M funding round

| June 2, 2011

Valero and Waste Management team up again, investing in the capacity scale-up of a celebrated waste-to-biofuel technology.

In Canada, Enerkem Inc has closed a $60 million financing round that includes Valero Energy Corp. who joins existing investors Waste Management, Rho Ventures, Braemar Energy Ventures and Cycle Capital, who have each invested in the new equity round.

Enerkem’s financing round, for which Credit Suisse acted as agent, will support the company’s large roll-out of current and future planned projects. It comes on the heels of $130 million in financial support from the U.S. Department of Agriculture (USDA) and Department of Energy (DOE) for a plant in Pontotoc, Mississippi, expected to break ground later this year. Construction is already underway on a similar 10 million gallon per year waste-to-biofuels facility in Edmonton, Canada, the company’s second commercial facility.

With its investments in 10 ethanol plants throughout the Midwest, Valero has long been a champion of renewable fuels in the United States. The investment in Enerkem demonstrates Valero’s commitment to the advanced biofuel sector. Valero and Enerkem have also agreed to jointly consider commercial opportunities.

The Enerkem and Waste Management view

“With Valero joining Waste Management as a strategic investor, Enerkem becomes one of the very few renewable products companies that is aligned with industry leaders from both upstream and downstream parts of the business,” said Vincent Chornet, president and chief executive officer of Enerkem. “This buy-in is yet another testament to the solid ongoing growth of our company, which is uniquely positioned to successfully meet the demand for clean transportation fuels and biochemicals.”

“By combining Waste Management’s industry leadership and expertise,” aid Tim Cesarek, managing director of Organic Growth Group at Waste Management, “in the collection and management of a wide range of segmented waste streams with Enerkem’s leading clean technology solutions, we are broadening our portfolio of conversion technologies in the waste-to-biofuels market, which is key to developing new, higher value-added end markets for materials.”

Enerkem’s financing round, for which Credit Suisse acted as agent, will support the company’s large roll-out of current and future planned projects. It comes on the heels of US$130 million in financial support from the U.S. Department of Agriculture (USDA) and Department of Energy (DOE) for a plant in Pontotoc, Mississippi, expected to break ground later this year. Construction is already underway on a similar 36 million litre (10 million gallon) per year waste-to-biofuels facility in Edmonton, Alberta, the company’s second commercial facility.

The Digest’s Take

Waste Management and Valero are getting more in synch all the time. First, co-investing in Terrabon, now Enerkem. It continues to show that the traction in advanced biofuels in North America, right now, is around low-cost feedstocks with long-term fixed-rate supply contracts. And, in this case, the added benefit that municipal solid waste is a societal problem, not a food-or-fuel commodity that stakeholders fight over.

Just yesterday, Valero announced that it OK’d the financing of the Diamond Green renewable diesel project off its balance sheet, and pulled out of the DOE loan guarantee program.

For sure, they are proving to be committed, serious investors who see opportunities at scale in biofuels. In that, they are in good company with Waste Management.

 



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