Rentech, Inc. has received a term sheet for a loan guarantee from the US Department of Energy (DOE) under the Section 1705 Title XVII Loan Guarantee Program, for an advanced-stage renewable power project in Port St. Joe, Florida, that would employ a Rentech-SilvaGas biomass gasifier to produce renewable power.
The Port St. Joe Renewable Energy Center (the Port St. Joe Project) had initially been developed by Biomass Energy Holdings (BEH), a subsidiary jointly held by Bianchi Energy Services, LLC and Biomass Gas and Electric, LLC. Rentech has acquired the project entity for no initial consideration. BEH may become eligible to recover from the project its development costs and a small carried interest in the project when it reaches financial close.
The project is designed to use a Rentech-SilvaGas biomass gasifier to provide synthesis gas to a combined-cycle power plant to produce approximately 55 megawatts net of renewable low-carbon baseload electric power from approximately 930 dry tons per day of woody biomass. Most of the project’s power output has been contracted for sale to Progress Energy Florida under a long-term Power Purchase Agreement (PPA), with a small fraction available for sale on a merchant basis. The PPA has been approved by the Florida Public Service Commission.
Rentech has signed a detailed term sheet with White Construction for the engineering, procurement and construction (EPC) work that is intended to serve as a basis for a definitive lump-sum turn-key EPC contract. White Construction and Ford, Bacon & Davis LLC are finalizing the engineering work necessary to enter the EPC phase of the project. Construction of the Port St. Joe Project is expected to begin in August 2011, with the facility anticipated to be in service in 2013. The Port St. Joe Project would create nearly 200 construction jobs and approximately 85 direct and indirect jobs once the facility is operational.
The Port St. Joe Project is estimated to have a total project cost of approximately $225 million, based on the feasibility engineering. The DOE has provided Rentech with a term sheet, still under negotiation, for a potential guarantee of debt that is expected to represent the majority of the capital required for the project. The provision of a term sheet by the DOE is not an assurance that the project will be offered a conditional commitment or a loan guarantee. Rentech expects the project to qualify for a federal cash grant equal to 30% of eligible project costs under the US Department of Treasury Section 1603 Grant Program for renewable power projects.
Rentech’s Rialto Project, which has been designed to produce both renewable fuels and power, remains in the due diligence stage of the loan guarantee process. Based on discussions with the Loan Program Office of the DOE (the LPO), Rentech will now pursue the Port St. Joe Project for a Section 1705 loan guarantee, and continue due diligence with the LPO on the Rialto Project under the Section 1703 loan guarantee program. The Section 1705 program, which was funded by the American Recovery and Reinvestment Act, imposes a requirement for start of construction by September 30, 2011. This deadline is absent from the Section 1703 program.
The Port St. Joe Project is better-positioned to compete in the Section 1705 process and begin construction before September 30, 2011, with an executed PPA for approximately 90% of its expected output with Progress Energy Florida. Compared to the Rialto Project, the Port St. Joe Project has a simpler design, and will have significantly lower capital costs and equity requirements.
The schedule for the Rialto Project under the Section 1703 program will enable Rentech to optimize the project in ways that would not have been possible under the approaching deadlines in the Section 1705 program. With the commercialization of Rentech’s biomass-to-power technology through the Port St. Joe Project, Rentech will focus the Rialto Project on commercialization of its synthetic fuels technology by shifting from the co-production of renewable power and fuels to a maximum renewable fuels configuration. Rentech will adapt the front-end engineering and design work recently completed by Fluor Corporation to maximize fuels production, and conduct a competitive RFP process for EPC contractors.
Rentech currently expects that the Rialto Project will be designed to produce approximately 1200-1500 barrels per day of primarily certified renewable diesel or jet fuel from approximately 1000 tons per day of green waste. The final choice between production of jet fuel or diesel will be determined by the highest value that can be commanded for the renewable and low-carbon attributes of the fuels. Rentech’s renewable fuels are expected to qualify for renewable identification numbers (RINs) as cellulosic fuels. Rentech’s drop-in renewable synthetic diesel is expected to generate a premium in California due to the state’s Low Carbon Fuels Standard. Rentech’s certified renewable synthetic jet fuel can offer significant value to airlines by helping them to comply with the European Union’s Emissions Trading Scheme which takes effect in 2012. Rentech is currently in discussions with several airlines regarding the potential purchase of fuels from the Rialto Project.
Rentech is targeting a financial closing by the end of 2012 for the Rialto Project with the support of a DOE loan guarantee under Section 1703.