STX, BioValue unveil new financing structure for biomethane

In the Netherlands, STX Group has unveiled a new structure financing partnership with BioValue for the construction and development of the Groengas Cothen biomethane plant in the Netherlands.

The project

The new plant adds at least 80GWh of renewable natural gas capacity per year. This strategic move is aligned with STX Group’s mission to promote the energy transition and underscores the redefinition of market dynamics aimed at boosting project development in the renewable energy space.

The financing

What’s different? In this set-up, BioValue will secure capital without fixed offtake prices and retains ownership of the plant while benefiting from STX Group’s market access for biomethane and financial support. So, we’re seeing the downstream partner take on more of the price risk — and the corresponding upside, presumably — as well as giving access to capital.

The financing by STX Group ensures BioValue access to key capital but also provides flexibility, avoiding potential constraints from fixed offtake prices. Collaborating with Nationaal Groenfondsas the junior financier, STX Group goes beyond traditional offtake agreements: unlike traditional banking institutions, this financing model provides BioValue with exposure to the developing biomethane market, contributing to their strategic goals and long-term success.

It’s a model, to use an example, that has been utilized in the restaurant market for decades. Certain companies with “discount dining” clubs would negotiate supply-and-distribution deals with emerging restaurants. The restaurant would, in return for committing a certain number of tables throughout the year at deeply discounted prices, would be receive cash advances that were typically used to capitalize equipment and other launch-related expenses. It reduced risk for the entrepreneur and gave the financing/distribution partner an advantaged position. The STX package is not exactly the same, but there are strong similarities and it is interesting to see this proven model for financing growth appearing in the bioeconomy. 

The EU biomethane backstory

The European Commission established a goal aiming to achieve 35 bcm of sustainable biomethane production by 2030, as an integral part of REPowerEU. 

The latest EBA report revealed European biomethane production rose by 20% in 2022 over the previous year. However, the EU dependency on natural gas imports went from 83% to 97%. Amidst the global push for sustainability, momentum is building in the biomethane sector, marked by surging industrial demand and capacity despite project development challenges.

Elsewhere in RNG Finance: moves on US tax credits

On Friday, the U.S. Treasury Department and Internal Revenue Service issued a technical correction to the Notice of Proposed Rulemaking issued in November in regard to proposed changes to the Sec. 48 investment tax credit, intended to make clear that the cleaning and conditioning equipment critical to processing biogas into renewable natural gas (RNG) is eligible for the ITC.

Cleaning and conditioning equipment integral to processing biogas into RNG was recognized under the Sec. 48 ITC changes put forth in the Inflation Reduction Act in 2022. However, a proposed rule issued in November 2023 considered excluding such equipment from ITC eligibility, contrary to Congressional intent. 

“The technical correction issued today signals a better understanding of how the ITC can facilitate RNG deployment to maximize the benefits of methane capture and recycling,” said RNG Coalition Director of Federal Government Affairs Geoffrey Dietz. “This change comes on the heels of diligent engagement from RNG Coalition membership which will continue in the coming weeks and months as we move toward a final rule.”

The STX and BioValue backstories

STX Group is an environmental commodity trader and climate solutions provider HQ’s in Amsterdam with operations in 13 countries.  BioValue, meanwhile, is driving on its goals in biomethane — the current target is to reach production of 300,000 MWh of biomethane and  Bio-LNG per year, by early 2025.

Reaction from the stakeholders

“This agreement marks a significant milestone in the biomethane sector and showcases our ability to pioneer novel financing solutions,” says Sead Keric,

 Managing Partner of Renewable Gas at STX Group.  “By combining BioValue’s operational expertise with our climate finance capabilities, we empower biomethane producers to focus on what they do best while addressing development challenges. In light of the developing nature of the biomethane market and the illiquid, less transparent markets, there is a pressing need for alternative financing solutions. While we welcome the recent European Parliament’s recognition of biomethane contribution to the decarbonization of the transportation sector, establishing a fair and comprehensive legislative framework for accounting the role of renewable fuels would bring additional benefits to the market,” Keric commented.

“As a major biomethane actor running multiple plants in the Netherlands, we are determined to realize much-needed new capacity in line with Dutch biomethane targets and European Fit for 55 goals,” said Ids Schaap, Managing Director and Founder of BioValue. “Our commitment to reducing CO2 emissions and minimizing environmental impact aligns seamlessly with STX Group’s mission to drive sustainable practices in the renewable energy sector.”