What happens in Vegas…the biofuels edition

August 5, 2012 |

Creative financing keeping numerous advanced biofuels companies on the march, despite political uncertainty. Fiberight, Zeachem in focus.

Which strategics are next? What rule changes can USDA make to accelerate commercialization?

Although the USDA is trying to inject some mystery into the announcement, tomorrow USDA Under Secretary for Rural Development Dallas Tonsager and Senate Majority Leader Harry Reid will announce a loan guarantee for Fulcrum Bioenergy, which will use the LG to construct a 10 million gallon first commercial plant designed to convert household waste into advanced biofuels- specifically ethanol, at a plant near Reno, Nevada. 500 jobs are expected to result from what is understood to be a $100 million debt, in all, with $80 million guaranteed and another $20 million unguaranteed.

The financing itself? Another bond-based debt deal arranged by Stern Brothers, in a structure designed in cooperation with Mintz Levin’s Mark Reidy and Kreig DeVault’s John Kirkwood, which the USDA has eagerly embraced. Myriant recently closed a smaller financing using the same structure.

It’s exciting news, but hardly rivals most of what goes on in Vegas for razzle-dazzle. Negotiating loan guarantee conditions rivals watching grass grow – no, it rivals watching grass for signs of Carbon-14 decay – for headline value.

Nevertheless, a number of firms have been making strong progress in their financing and engineering. Let’s do a quick round up.

Fiberight

The financing for 8 Mgy first small commercial facility in Blair, Iowa expected to close by year end. It will be USDA loan guarantee based.

Zeachem

We are expecting ZeaChem also to be finalized around January with its USDA loan guarantee – after landing a $232.5 million conditional guarantee, largest in USDA history. Where are they now? Mired at the Office of Management and Budget (OMB). You can’t imagine how conservative the US government has become on loan guarantees since Solyndra. It’s like getting account information from the Swiss.

Strategic investors: who’s next? Companies on the docket

Well, according to the numbers, the next companies on the docket ought to be LyondellBasell, Formosa Plastics or Akzo Nobel/ICI – but, what about Honeywell’s UOP?

UOP has more to gain from licensing pyro technologies, and aviation biofuels conversion technologies – than perhaps any other player. But you have you have 5-6 US and offshore projects stalled, and the developers don’t have the heft to get the money they need, at this stage. One of their problems? The debt and equity guys want to see skin in the game. UOP may find itself in a position similar to where Dupont and Novozymes have arrived – needed to wheel out the balance sheet and give the technologies the imprimateur of a Honeywell.

They may well conclude that at this stage, the sector may not be strong enough where companies can just be a technology provider, based on pilot data, and find some developer who can find the equity and debt all by their onesey.

In short, they may find that wishing hard, crossing fingers and shouting “come on, 7” at the crap table of bioenergy may not cut it in 2012. It may not be the year of the winner from nowhere – instead, it may be the hour for the whales.

So, onto Vegas today, as we wait for the big whales to hit the tables.

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