Ecostrat and New Energy Risk Announce Partnership to Develop Feedstock Supply Insurance©

October 22, 2024

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(Ecostrat) Feedstock Supply Insurance will catalyze, de-risk and accelerate the financing of bio-based projects -- – New Energy Risk (NER), a wholly owned division of Paragon Insurance Group, and Ecostrat, a leader in assessing, developing, optimizing, and managing biomass supply chains, today announced a partnership to develop Feedstock Supply Insurance^© (FSI), an insurance offering that aims to mitigate risk in biomass feedstock supply chains. It will do this by effectively capping feedstock costs and securing long-term project debt repayment obligations.

A key barrier to the rapid scaling of the trillion-dollar global bioeconomy is the fragmented nature of biomass supply chains, which often comprise small- and medium-size suppliers such as forestry companies, sawmills, farmers and truckers. Bankable, long-term supply contracts are rare, and balance sheet project finance is therefore difficult. As a result, bio-project finance is slow, complicated and expensive.

Through the partnership between Ecostrat and NER, FSI aims to transform non-investment grade supply chains into bankable, investment-grade ones by transferring risk from project developers and capital providers to A-rated insurance markets. This will strengthen the creditworthiness of backstops for biomass feedstock risk and help to guarantee key warranty obligations, such as debt repayment. The expected outcomes of FSI include lower project debt costs, greater access to larger pools of capital and a more rapid scale-up of the global bioeconomy.

“As recognized leaders in our respective sectors, Ecostrat and NER are natural partners in creating this game-changing insurance product. Ecostrat’s state-of-the-science predictive analytics will identify failure modes and quantify impact, and NER will use these stochastic mathematics to provide underwriting capacity for feedstock insurance policies,” said Jordan Solomon, President and CEO of Ecostrat. “Together, we will deliver a new tool to the market that will effectively securitize biomass supply chains and unlock much needed capital for bio-manufacturing.”

“For over a decade, NER has supported the energy transition and circular economy by enhancing technology bankability. Many of our clients in the bioeconomy face the added challenge of bankable feedstock supply,” added George Schulz, Managing Director at New Energy Risk. “Ecostrat has developed the tools and expertise required to assess this risk and we are excited to collaborate on solving this challenge with a novel insurance product, removing a key bottleneck in the sector’s growth. By mitigating supply chain risks and facilitating long-term financing, FSI will strengthen the viability of biobased projects, supporting its crucial role in achieving national renewable energy goals.”

For more information, or to learn how FSI can apply for your project(s), please visit www.ecostrat.com/feedstock-supply-insurance/ and www.newenergyrisk.com/feedstock-supply-insurance/.

About New Energy Risk

New Energy Risk is a pioneer of large-scale, breakthrough technology performance insurance solutions. The company provides complex risk assessment and serves as a bridge between technology innovators, financiers, and insurers. Insurance policies are administered through New Energy Risk affiliate, Complex Risk and Insurance Associates, LLC, CA License #0I24307. New Energy Risk is a wholly owned subsidiary of Paragon Insurance Holdings. Learn more: www.newenergyrisk.com.

About Paragon

Paragon Insurance Holdings, LLC, formed in 2014, writes all commercial lines of insurance across more than 25 programs. Paragon’s industry-specific and general underwriting facilities offer insureds, retail agents, carriers, reinsurers and service providers unique product, service, capability, and results. Learn more: www.paragoninsgroup.com.

About Ecostrat

Ecostrat is the North American leader in assessing, developing, optimizing, and managing biomass supply chains. Its mission is to propel the global bioenergy transition by pioneering tools that de-risk project development and investment and by delivering cutting-edge due diligence on biomass supply chain risk. Since its inception in 2008, Ecostrat’s Advisory Group has prepared over 300 Biomass Supply Assessments and feedstock due diligence for leading project developers, capital markets, power utilities, investment funds, engineering companies, governments and First Nations across North America. Learn more: www.ecostrat.com.

For more information, please contact:

George Schulz

Managing Director of Program Development

New Energy Risk

gschulz@newenergyrisk.com

Alan Peranson

Director of Business Development

Ecostrat

alan@ecostrat.com

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Ecostrat, New Energy Risk to develop Feedstock Risk Insurance (Biofuels Digest)
Feedstock Supply Insurance: Unlocking the Global Bioeconomy (Biofuels Digest)

Excerpt from Biofuels Digest: Biomass supply chains are complex, consisting largely of small and medium-sized suppliers such as sawmills, forestry companies, farmers, and truckers. These suppliers are rarely investment-grade and often unable to provide the long-term, bankable supply contracts necessary for project financing. Without recourse to an investment-grade counterparty in the event of supply chain failure, traditional project financing becomes nearly impossible. This shifts the risk onto parties ill-equipped to handle it, including suppliers, financial partners, governments, and the projects themselves.

The consequences are severe. Projects face longer timelines to secure capital, higher debt costs, and misaligned capital structures that fail to match project risks. Compounding these challenges is the scarcity of long-term supply contracts. Contracts that match the duration of project debt are extremely rare, and even when they exist, the non-investment-grade nature of most suppliers renders these contracts ineffective for financing.

What is needed is a fiscal instrument that functions to synthetically create investment grade supply chain out of non investment grade components. While this may seem like magic, in fact insurance has been performing this function effectively in other sectors for years. The key is being able to assess actuarially the risk of long-term failure of biomass supply chains and probability of contingency supply. Once the probability of that risk is defined, the impact on a bio-project’s proforma can be calculated, the cost of insurance can be properly priced and effective policies can be deployed.

Enter Ecostrat and New Energy Risk (NER), who have recently announced an agreement to tackle this critical challenge by developing Feedstock Supply Insurance (FSI). NER, a leader in insurance for energy transition innovations, brings expertise in securing insurance capacity for FSI through advanced risk-pricing models, policy development, key partnerships in the insurance and reinsurance markets and necessary licensing. Ecostrat, a market leader in biomass feedstock supply analytics, provides deep market insights, including forecasting models, scoring, and risk quantification tools for feedstock supply chains.

Together, they are creating a groundbreaking insurance solution that aims to stabilize and de-risk biomass supply chains. This innovative product has the potential to catalyze the development of transportation biofuels in North America and beyond, by providing the financial security needed to accelerate investment in the bioeconomy.

With Feedstock Supply Insurance, the industry will finally be able to overcome one of its biggest hurdles, paving the way for a more sustainable and prosperous future.

For more information visit https://ecostrat.com/feedstock-supply-insurance/. READ MORE