Advanced BioFuels USA

(Waste Advantage Magazine) On Thursday, May 20, Companies for Net Zero (formerly Companies for Zero Waste) held a great, informative session on Financing RNG Projects. The event kicked off with a discussion on “Cutting Edge Funding and Contractual Structures for Successful RNG Project Financing” presented by Allison Larr, Vice President of Citi, Dave Livingstone, Managing Director of Citi, Mark Riedy, Partner and Chair – Energy Project, Finance Practice for Kilpatrick Townsend & Stockton, and Russell Macpherson, President and Founder of Becon Corporation. Allison Larr introduced the topic and said that the tax exempt market is available to finance most waste-to-value projects. She pointed out that the session would cover what tax exempt bonds are and why they may be worth considering. Oftentimes, tax exempt bond financing can be combined with other financing methods. They would talk about the ins and outs out tax exempts and how to get started.

Dave Livingstone asked the question: Why consider the tax exempt market? He said that it is exceptionally strong and offers access to a competitive alternative to traditional debt markets. The tax exempt market is primarily for U.S. state and local governments to finance their infrastructure. The private sector can access this market to a limited extent, including for many waste-to-value projects. Benefits include significantly lower interest rate than similarly related taxable corporate debt, market acceptance for LCFS and RINs revenue, market acceptance of non-traditional construction, feedstock and offtake arrangements, less stringent covenant package, longer maximum maturity, and market acceptance for credits down to the B-/B3 category and non-rated. He pointed out that although the market is set up by the federal government, there are still a few hurdles you have to cross – eligibility and mechanics.

Mark Reidy explained the commercial side and what is available as well as working tax exempt bonds into commercial loan transactions. He talked about the government Loan Program -Title XVII, Section 1703, which are uncapped federal finance bank/treasury department loans credit enhanced by DOE loan guarantees. Many new and unique renewable, clean fossil and nuclear technologies are able to be funded. Changes for Title XVII Loan Guarantees via Section 9010 of the Consolidated Appropriations Act of 2021 includes moving all borrower and DEP third party vendor fees to financial closing or later, $25 million is provided to reduce borrower fees in all three programs. $170 million is available to reduce credit subsidiary fees in the Renewable Energy Program only, attempts to cap the credit subsidy payment at 3%, reduced time to closing to potentially 6 months requiring DOE accountability, instead of the 12 – 24 months as previously needed. He also covered USDA – Section 9003 of Farm Bill – for first commercial projects, 60 – 80 percent senior debt with an 80% guarantee. There is more than 400 million available annually. For the Business and industry program – $25 million of senior debt with 80% guaranteed for up to 15 years. 90/10 for existing businesses. All federal loan guarantee, loan or grant programs require the borrower to obtain a National Environmental Policy Act prior to financing closing.

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The last speaker of the session, George Sullivan, Senior Principal and CEO, Net Zero Analysis, gave an overview of RNG and its sources including fossil fuels, landfills and waste, livestock, biomass, biofuels and rice agriculture. He said that the biggest push right now is technology – pyrolysis of plastic, tires, roofing, waste, etc.; Aerobic Digestion – wastewater treatment, composting facilities, cellulosic ethanol, etc.; and Anaerobic Digestion – landfill gas, cellulosic carbon black, etc. All RNG project types offer multiple end-product streams. Binding letters of intent will finance these projects. What they are currently all missing is the Carbon Offset Future Income from their operations and product streams. Use the following methodologies: how to maximize plant generation and offtake products, electric material handling and/or EVs and charging stations generate an additional carbon offset project.

He pointed out that carbon offset composition has 3 prongs: environmental (MT of CO2e not released to the environment or sequestered from the atmosphere), social (improved local state/province, national economy and environmental health), and governance (demonstrates proactive pursuit of new revenue opportunities, risk mitigation and future proofing to stakeholders). States fall into two categories when it comes to utilities – regulated and deregulated. Why is it easier to go carbon neutral in a deregulated state? – renewable electric energy availability, RNG availability, and client carbon footprint reductions. In regulated states, he said to ask if the client wants to include the following – onsite renewable energy generation, offer a carbon footprint estimate of the facility within that state, offset the facility carbon footprint with carbon offsets. For deregulated states, the RNG Product Purchase Agreements (RNGPPA) are the big ones they are starting to see especially in the pipeline for natural gas. READ MORE