The Story of Red Rock Biofuels and the Bond Market Breakthroughs
by Jim Lane (Biofuels Digest) In the world of drop-in military biofuels, two major updates appeared this week.
In Oregon, Red Rock Biofuels got good news on Monday when the governor approved $245 million in bonds that will allow the company’s planned aviation biofuel plant thanks to overwhelming support by state level legislators and business groups. The facility set for Lake County intends to use 175,000 tons of forestry waste as feedstock via a Fischer-Tropsch process and then later hydro-processing to produce up to 16 million gallons of aviation biofuel annually – approximately 7.2 MMgal jet fuel, 7.2 MMgal diesel fuel, and 3.6 MMgal naphtha.
Sources tell The Digest that the bond sale is now in diligence and targeting a closing in early April — so nothing is fully baked yet.
RRB has eight-year offtake agreements for 100% of the jet fuel with Southwest Airlines and FedEx. Diesel and naphtha output will be sold through the either future offtake agreements with major refiners or on the spot market.
Meanwhile from Washington DC came news by mid-week that a proposed $55 million award for another drop-in military fuels project, one of four originally envisioned under a program of the Defense Production Act (DPA) Title III office — has been cancelled without further explanation. The timing on the cancellation is mystifying, since the original application due date was back in mid-May 2017 (then extended to early June). Whether the cancellation reflects project proposal quality or a change of heart at DoD on priorities remains to be seen. Selected awardees were required to share at least 50% of the total project cost.
The $245 million bond amount reported is somewhat mystifying. That’s because the project always featured to this point what Red Rock described as “balanced project funding and robust equity returns” with a $200+ million project cost that would be covered by a $70M DPA Title III grant and “130M+ private funds”.
Recently, Fulcrum BioEnergy raised $150 million in bond financing for its Sierra BioFuels project, which will convert up to 175,000 tons of municipal solid waste per year into more than 10 million gallons of low-carbon synthetic crude oil, beginning in early 2020.
On November 29, 2017, Prairie Catalytic, a subsidiary of Greenyug, closed on the sale of project bonds to finance its first commercial production facility to develop a 50,000 metric tons per year urethane grade ethyl acetate production facility that is located adjacent to the Archer-Daniels-Midland Company ethanol production facility in the City of Columbus, Platte County, Nebraska.
The Project Finance Group at Faegre Baker Daniels served as counsel for Stern Brothers and Heartland Bank and was headed up by John Kirkwood, a partner in FBD’s Indianapolis offices. Kilpatrick Townsend represented the bond buyers. (Note to readers: Stern Brothers and Faegre Baker Daniels are also leads on the Red Rock Biofuels project). READ MORE
Bond authorization opens door to Lake County biofuel project (Herald and News)