Rentech, Inc. has given notice of exercise of its option to acquire additional equity in ClearFuels Technology Inc., a project development company with proprietary reformation technology for the gasification of biomass. Upon closing of the transaction, Rentech would own a substantial majority of the equity of ClearFuels, with existing ClearFuels investors retaining a minority interest.
The transaction will be accomplished through the merger of a subsidiary of Rentech into ClearFuels, with ClearFuels continuing as the surviving company in the merger. The option was exercised pursuant to the terms of an option agreement signed by the two companies in September 2010. The merger is expected to close within a month. The companies expect no interruption of the project and technology development activities of ClearFuels.
At present, Rentech owns 25% of ClearFuels. Under a Project Support Agreement signed in September 2010, Rentech assumed control of the two companies’ joint integrated bio-refinery project which is being funded in part by a $23.0-million grant from the US Department of Energy (DOE). The grant is partially funding construction of a demonstration-scale ClearFuels biomass gasifier at Rentech’s Energy Technology Center (RETC). Upon completion late this year, the gasifier will be integrated with Rentech’s Product Demonstration Unit (PDU) to produce certified renewable synthetic jet and diesel fuels from cellulosic biomass feedstocks.
With the successful demonstration of the ClearFuels gasifier at Rentech’s PDU, Rentech will be able to offer the market an integrated solution, based on the ClearFuels reformation technology, for the conversion of cellulosic biomass feedstocks such as bagasse and other virgin biomass into high-value energy products such as certified low-carbon renewable synthetic jet and diesel fuels. These drop-in fuels are expected to qualify for renewable identification numbers (RINs) as cellulosic fuels.
ClearFuels is developing potential biomass-to-energy projects in the Southeastern US, Hawaii and internationally that would use the integrated ClearFuels-Rentech design and be co-located at sugar mills and wood processing facilities. The ClearFuels-Rentech design can be deployed to help achieve compliance with the European Union’s Emissions Trading Scheme as well as other low carbon fuels standards and renewable mandates.
ClearFuels is in active negotiations with Hawaiian Electric Company, Inc. (HECO) for a long-term conditional off-take contract for renewable diesel for fueling of a power generator to be produced at its proposed Hawaii project that would utilize the ClearFuels biomass gasification process and Rentech’s synthetic fuels technology to produce synthetic diesel fuel from bagasse. Any agreement that results from these negotiations would be contingent upon approval by the Hawaii Public Utilities Commission. ClearFuels plans to continue its negotiations with HECO, and pursue the development of the Hawaii project, with the full support of Rentech.
Consideration for the shares of ClearFuels to be acquired by Rentech consists of the obligations taken on by Rentech in the Project Support Agreement to support the construction of the ClearFuels technology at Rentech’s PDU. In connection with the transactions contemplated by the option agreement and the Project Support Agreement, Rentech will also issue a warrant to purchase approximately two million shares of Rentech common stock and provide the minority shareholders in ClearFuels with a carried interest in the Hawaii project, if that project is successfully developed.