New Energy Risk Back $260M Plastics-to-Fuel Plan with Innovative Insurance Solution
SAN FRANCISCO — April 22, 2019 — New Energy Risk, the leader in customized insurance solutions for renewable technology projects, has provided RES Polyflow, a leading plastics-to-fuel technology company, with a performance insurance program for its ground-breaking Ashley, Indiana plant. The project will be the United States’ first commercial-scale plastics-to-fuel project. Once completed, the facility will convert 100,000 tons of plastic into 18 million gallons of fuel and six million gallons of wax annually. By working with New Energy Risk (NER), RES Polyflow has reduced the overall cost of project capital, increased the certainty of execution, and made the bond offering more attractive to investors.
To finance this deployment, RES Polyflow and its parent development company, Brightmark Energy, raised an aggregate amount of $260 million, including $185 million in Indiana green bonds, underwritten by Goldman Sachs & Co. To streamline the financing, the companies approached NER, an affiliate of the global reinsurance group AXA XL, a division of AXA, to design a custom performance insurance policy that would mitigate technology risk for financiers interested in investing in this revolutionary project. NER used a systematic, data-driven approach to extensively assess the company’s technology, then developed an insurance product that covers the overall waste conversion process of the plant.
RES Polyflow’s plastics-to-fuel pyrolysis process sustainably recycles waste that has reached the end of its useful life — including items that cannot readily be recycled, like plastic film, flexible packing, Styrofoam, and children’s toys. The Indiana plant superheats and then converts plastic into ultra-low sulfur diesel and naphtha blend stocks, as well as commercial grade wax. In the future, the output could be turned back into plastic, creating the world’s first circular technology for plastics.
“New Energy Risk’s technology insurance solution was a critical factor in completing the financing for this project,” said Jay Schabel, President of Brightmark Energy’s plastics division and of RES Polyflow. “We have worked closely with New Energy Risk to assess the technical aspects of our project and design an innovative insurance solution. NER’s involvement successfully lowered our capital cost and served to raise bondholder interest in the project.”
“We’re proud to have supported Brightmark and RES Polyflow in their capital raise and are excited to see their leading plastics-to-fuel technology convert plastic waste into millions of gallons of low-carbon fuels,” said Tom Dickson, CEO of New Energy Risk. “Brightmark is leading the way in providing a technology solution to the world’s plastic waste problem, while replacing traditional fossil fuels in the process. We look forward to continue supporting their work in the years to come.”
This project is the latest in a string of industrial renewable projects New Energy Risk has supported. In total, NER has now supported $1.6B in renewable project financing, which will lead to over 500,000 tons of waste processed into 50M gallons of biofuel every year.
About New Energy Risk New Energy Risk is a provider of performance risk solutions for breakthrough energy technologies and pioneer in the development of large-scale technology performance insurance. The company was founded in 2010 to provide complex risk assessment and serve as an effective bridge between technology innovators and insurers. Since then, New Energy Risk has helped its customers gain over $1.6 billion in financing for renewable energy and new technology deployments. To learn more, visit www.newenergyrisk.com.
About AXA XL
AXA XL, a division of AXA, provides insurance and risk management products and services for mid-sized companies through to large multinationals, and reinsurance solutions to insurance companies globally. We partner with those who move the world forward. To learn more, visit www.axaxl.com.
Bioproducts are Seeing Major Tailwinds in Renewable Tech
By Tom Dickson and Brentan Alexander
Has Silicon Valley forgotten about cleantech after failures in solar, wind and batteries? Not quite! Several new and exciting renewable technologies are coming to market. Read Tom Dickson and Brentan Alexander’s TechCrunch article on Bioproducts re Seeing Major Tailwinds in Renewable Tech. Yes, companies are learning are how to turn trash into cash.
Here’s an excerpt via TechCrunch:
Today, entrepreneurs are approaching the space head-on, and there are dozens of cutting-edge companies coming to market and breaking through with major projects and customers. Companies in the space can be divided between the developers like Fulcrum BioEnergy, Red Rock Biofuels, RES Polyflow and Envia, and the technology providers, such as TCG, TRI, Velocys and many others.
These companies are targeting a variety of waste types, including household garbage (plastics and organics), as well as agricultural waste (like wood) and livestock waste (like manure). Waste is then converted into various products, including synthetic crude oil, natural gas, electricity, refined products (from diesel to high-value waxes) and specialty chemicals.
The Attributes that Define the Increasingly Critical Data-As-A Service Industry. Data is valuable but if it “don’t make dollars it don’t make sense.”
Here’s an excerpt via TechCrunch:
How to Avoid Looking like Theranos when Building Breakthrough Technology
Insurance solution provides performance coverage for the output of Fulcrum's garbage-to-fuels plant
By Dr. Brentan Alexander, Chief Science Officer, New Energy Risk
At New Energy Risk, we see many companies struggle to balance the competing needs of technology development and deployment. As with any industry, it’s a tug-of-war between the commercial imperative of demonstrating that all aspects of a technology are proven and the financial necessity of delivering product and building a revenue stream. By going to market too early, a company is likely to fail to find capital or customers. Going too late means having expended more time and money than necessary, and it’s possible the opportunity may have passed by.
Most companies have vastly different ideas for what they need to demonstrate, from a technology perspective, to reach their market. For hardware and industrial technology companies, there is little room for error because deploying at commercial scale requires raising significant capital to cover the large capex costs associated with the construction of manufacturing, processing, and energy facilities. Companies looking to self-develop projects generally need access to lower cost capital markets, primarily debt markets, to ensure project viability. Startups that sell their hardware need to scale beyond first-adopters and find big buyers with deep pockets. These markets are by definition risk-averse, with strict guidelines to ensure loans don’t go bad and capital expenditures aren’t squandered. So how much validation do new-to-the-world technologies need to convince hyper-skeptical banks and customers to lend or buy?
We’ve seen many entrepreneurs latch on to examples of irrational exuberance: with a good story and slick marketing, willing customers and investors can be found with little to no technology validation. In fact, our experience performing diligence on hundreds of capitally intensive technology companies shows the opposite: a business plan predicated on mythmaking and vaporware is a plan to fail. Technology should never appear to be a black box — financiers and customers do not want to bet on magic, despite the occasional counterexample. Rather, the path to capital involves leveraging technology testing in real-world conditions to demonstrate to others that the science and engineering are thoroughly understood and vetted.
In short: show it works in the real world and don’t fall for the Theranos trap!
Here are some of the most common mistakes in demonstrating a technology that we’ve seen erode the chances of securing financing or closing a sale:
Companies try to jump from the lab to commercial scale
Breakthrough technology companies make a mistake when they do not build pilot demonstration facilities or hardware with similar scale, features, and equipment as their end product. These companies will have a hard time convincing skeptical financiers that what they’re selling is going to work as described. In general, a per-unit scale-up of over 10x for key components of the technology will raise eyebrows and dampen enthusiasm. Exceptions can be made for proven kit from third parties, such as pumps and valving or standard operations like heat exchange. The expected duration of a test campaign is dependent on the technology and expected maintenance cycle: once-through systems or systems with independent unit operations will need less time on test than systems with recirculation loops or highly integrated systems. In general, anything less than a 100-hour test campaign is disqualifying, and more complex systems will need many times that to satisfactory demonstrate system reliability. The longer the anticipated system life or time between overhauls, the longer the test campaign to validate projected life.
Companies don’t test under real-world conditions
We also regularly see companies test their devices or facilities shielded from the real-world conditions that could significantly undercut performance of the technology. Using super-refined, ultra-pure feedstock for a new kind of biomass energy facility does not demonstrate a technology will work on the dirtier and less consistent biomass available for a commercial plant. Validating a predictive algorithm on the very data that was used to train the system, even if only a subset of the validation dataset was used in training, provides little guidance on whether the algorithm will perform on the wide variety of datasets likely to be encountered in the field. Running controlled charge/discharge tests on a battery in a specially conditioned laboratory does not validate that the battery will perform under variable loading conditions in the desert sun.
Controlled testing is useful to validate science, but real-world testing is a requirement to validate an engineered system. Take the kid gloves off, because no customer wants to be a guinea pig!
Companies declare victory too early
At any company, there is a lot of pressure to get a product out the door, into the field, and selling. The biggest believers in a new technology are also generally part of the company. This combination leads many entrepreneurs to optimistic conclusions about the status of their technology progression. In the world of breakthrough technology, this typically ends poorly. Premature declarations that an innovation is commercial-ready inevitably leads to fits and starts and brand damage that hurts long-term growth and threatens overall success. Early production units and field installs will experience unexpected troubles and failures, and companies that fail to message appropriately and do not prepare potential investors, partners, and customers for these growing pains will find their reputation damaged and expertise questioned. Moreover, large potential partners, including EPC contractors like AECOM, technology packagers like Siemens, manufacturers like Pegatron, and strategic partners like BASF, will see through the hype and avoid working with companies that do this in order to maintain their trusted status in the industry. Brand matters.
Companies skip 3rd party verification
Another unforced error in moving from testing to real-world deployment is a failure to utilize a reputable third-party expert, such as an independent engineer (IE) like Fluor, Black and Veatch, or Leidos, to validate technology readiness. Many startups attempt to skip this key step and instead rely solely on their internal work or cut-rate third-party reports from unknown sources to get to market faster, reduce consulting fees, and start generating revenue. When I see this strategy, it is an immediate red flag and dampens my enthusiasm to work with a client company. I have found that companies which lack reputable third-party validation generally are also lacking in key technology development milestones, including a lack of testing data, unreasonable scale-up expectations, poor QA/QC processes, or erroneous capex and opex assumptions. Our partners in industry have reported similar experiences. A company lacking an IE report from a reputable vendor is actually signaling to the market that it is not serious, thorough, or ready for primetime. Worse, a company sharing a poorly written report from a relatively obscure third-party will project a ruinous lack of expertise and know-how.
Trusted reports do cost real dollars, but they more than pay for themselves by cutting initial diligence time with new customers or financiers and validating technology readiness for potential partners through a recognized seal-of-approval. Most companies even learn a thing or two because the IEs have seen many failures and can identify and help mitigate potential faults and problems that could become expensive headaches later.
While it’s hard to determine the exact right time to move from technology development to deployment, avoiding the common pitfalls above will set any company apart from many competitors in the field. Although it may be appealing to take shortcuts around the time and capital needed to properly validate a breakthrough technology, most customers and investors are savvy enough to see through the charade.
After all, nobody is looking to work with the next Theranos.
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New Innovative Insurance Instruments Will Accelerate Project Development And Deployment For TRI Biorefineries
BALTIMORE, Jan. 29, 2019 /PRNewswire/ — ThermoChem Recovery International, Inc. (TRI), the Baltimore-based gasification technology company at the forefront of commercializing biorefineries, is pleased to announce that it has signed a memorandum of understanding (MOU) with New Energy Risk (NER) that can help accelerate project development, increase profitability, and provide certainty of execution.
After completing due diligence on TRI’s suite of biorefinery-enabling technologies, NER, a leading provider of performance risk solutions for breakthrough technologies and affiliate of global insurance company, AXA XL, is prepared to provide various insurance solutions to biorefinery owners and projects which utilize TRI’s equipment and technology.
TRI has named New Energy Risk and AXA XL as its preferred supplier of technology performance insurance for TRI customers and projects.
“With NER taking the lead on providing solid insurance options to owners using our technology, we have eliminated a key obstacle to making commercial-scale biorefineries profitable and replicable,” said Dan Burciaga, President and CEO of TRI. “NER studied TRI’s 20-year track record of accomplishments and recognized a great opportunity to help make our projects more bankable. This is a great development for us, and for the whole industry.”
TRI is a leading provider of steam reforming gasification systems suitable for Municipal Solid Waste (MSW), woody biomass, agricultural residues and other waste feedstocks. Its systems have been selected for and deployed on various commercial North American projects including the Fulcrum Bioenergy Project Sierra Biorefinery in Nevada and Norampac black liquor gasification, a division of Cascades Paper. Additionally, TRI’s multi-feedstock, fully-integrated biorefinery in Durham, North Carolina has run for over 13,000 hours, successfully producing syngas that is particularly well-suited to generating Fischer-Tropsch liquids and upgrading to ASTM-certified fuels.
Burciaga said, “New Energy Risk understands this sector, and they understand our technology. What’s more, they know the types and levels of risk mitigation our project owners and investors need in order to get these projects over the finish line and to get steel into the ground.”
“Our business is in backing technologies with demonstrated reliability,” said Jon Cozens, Chief Commercial Officer at New Energy Risk. “We find the rigor to which TRI has developed and proven its technology to be one of the most thorough we’ve found, and over the last several years TRI has been associated with many of the highest quality projects New Energy Risk vetted. We look forward to accelerating the deployment of the TRI technology and providing assurance to owners and investors that the TRI technology will perform.”
About TRI
Founded in 1996 and headquartered in Baltimore, Maryland, TRI is a global leader in steam reforming, an ultra-clean and high-efficiency gasification technology well-suited to a range of biorefinery and power generation applications. TRI’s proprietary process converts cellulosic feedstocks (including post-sorted Municipal Solid Waste (MSW), bark, forest residuals, agricultural waste, energy crops and low rank coals) into a synthesis gas (“syngas”) which can be converted into biofuels, biochemicals and power. TRI partners with world-class technology and EPC providers and licenses its proprietary technologies — including feeder, gasification and gas clean-up systems — as well as provides specialized equipment and engineering services to the global renewable energy sector.
About steam reforming gasification Steam-reforming gasification is the first stage in the biomass-to-liquids process that converts woody biomass and other solid feedstocks into premium fuels. Gasifiers convert carbon-containing materials into carbon monoxide, hydrogen and carbon dioxide. This is achieved by reacting the material at medium temperatures (>700 °C), without combustion, with a controlled amount of oxygen and/or steam. The syngas is then cleaned and the carbon monoxide to hydrogen ratio adjusted if necessary to meet the specifications needed for input to chemical catalytic reactors, for example the Fischer-Tropsch (FT) process.
http://tri-inc.net/steam-reforming-gasification/
About New Energy Risk
New Energy Risk is a provider of performance risk solutions for breakthrough technologies and pioneer in the development of large-scale technology performance insurance. The company was founded in 2010 to provide complex risk assessment and serve as an effective bridge between technology innovators and insurers. Since then, New Energy Risk has helped its customers gain over $1 billion in financing for renewable energy and new technology deployments. To learn more, visit www.newenergyrisk.com.
About AXA XL
AXA XL provides insurance and risk management products and services for mid-sized companies through to large multinationals, and reinsurance solutions to insurance companies globally. We partner with those who move the world forward. To learn more, visit www.axaxl.com
Source provided by: ThermoChem Recovery International, Inc. (TRI) Jan 29, 2019, 07:00 ET
Insurance for TCG Global’s gasifiers
New Energy Risk’s new performance insurance for TCG Global’s gasifiers and a significant project advance from Velocys in the UK are on the docket today.
These companies and the news this morning are united as key project components in the Red Rock Biofuels project which breaks ground in Lakeview, Oregon next month, aiming to supply 15 million gallons per year of renewable jet fuel to FedEx, Southwest Airlines and potentially the US Navy, made from waste woody biomass. TCG supplies the gasifier system and Velocys microchannel FT technology is converting that syngas to fuels.
Let’s look at the news.
New Energy Risk Develops Performance Insurance For TCG Global and Red Rock project
In California, New Energy Risk has created an insurance product for TCG Global that will cover TCG Global’s high-efficiency gasifier as it is field-tested and installed, beginning with the Red Rock Biofuels’ Lakeview, Oregon plant.
In order to cover delivery and installation of its gasifiers and reduce uncertainty for new customers, TCG Global turned to New Energy Risk and its affiliates. New Energy Risk’s custom insurance solution not only accelerates time to market but also provides support for TCG Global in terms of warranting and insuring performance through delivery and startup of the gasifier. This support greatly mitigates the gasifier technology risk to project financing partners and other stakeholders.
We’ve seen New Energy Risk at work with other advanced projects in recent months. We reported several months back that NER provided Fulcrum BioEnergy with a technology performance insurance solution for Fulcrum’s Sierra BioFuels Plant near Reno that broke ground last month. Fulcrum recently raised $150 million in bond financing for the Sierra BioFuels project, and turned to New Energy Risk, an affiliate of global insurance giant XL Catlin, to provide a performance insurance product to support the financing.
Velocys secures £4.9M for next stage of UK waste-to-jet fuel project from Shell, BA, UK gov’t
In the UK, Velocys has secured funding to deliver the next development phase of the waste-to-sustainable jet fuel project that the company is developing in the UK. A grant of £434k has been secured from the Department for Transport under the Future Fuels for Flight and Freight Competition. The award of this grant, together with ongoing policy support provided by the Renewable Transport Fuel Obligation, will help this innovative waste-to-fuels project bring jobs and clean growth to the UK. The project is being developed with the financial and technical support of Shell and British Airways, and £4.5m has been committed by the industry partners including Velocys.
The team is developing the engineering and business case for the construction of a first plant in the UK. Subject to a final investment decision, this plant will take hundreds of thousands of tonnes per year of post-recycled waste, destined for landfill or incineration, and convert it into clean-burning, sustainable fuels. The jet fuel produced, to be used by British Airways, is expected to deliver over 70% greenhouse gas reduction and 90% reduction in particulate matter emissions compared with conventional jet fuel. This would contribute to both carbon emissions reductions and local air quality improvements around major airports. The project partners expect to reach a final investment decision in the first half of 2020.
The next development stage will include detailed pre Front End Engineering and Design engineering study and site permitting activities. Advanced Plasma Power has been selected as preferred gasification technology licensor for this UK waste-to-fuels project. APP offers an efficient and tested solution for conversion of waste to synthesis gas (for onward conversion to fuels via Velocys’ Fischer-Tropsch process).
In a boost to the long term commercial viability of the project, changes to the Renewable Transport Fuels Obligation came into force on the 15 April 2018. For the first time, renewable jet fuel is to qualify for credits under the RTFO, providing long term policy support for sustainable aviation fuels.
Meanwhile, Velocys has partnered with PQ Corporation for the supply of commercial quantities of Velocys’ proprietary catalyst to be used in multiple biorefineries incorporating its technology. PQ is a leading global provider of specialty catalysts, services, materials and chemicals for the refinery, emissions control and petrochemical industries.
Catalyst produced by PQ has already been used to successfully produce renewable transportation fuel and other products at ENVIA, the world’s first commercial smaller scale gas-to-liquids plant, which incorporates Velocys technology. In addition, PQ will manufacture the catalyst to be used by Velocys’ licensees as well as by the biorefinery projects that the company is developing with its industry partners, including the Red Rock Biofuels project and the proposed UK project.
Reaction from the New Energy Risk and Red Rock stakeholders
“New Energy Risk has been a tremendous partner for us,” said Creg Hughes, CEO of TCG Global. “Insurance was the critical element in supporting the performance of our gasifier, and no other team had the ability and dedication to understand our technology and creatively structure insurance around it, thereby creating a financeable product we could provide to Red Rock Biofuels.”
“TCG’s gasifier presents the best gasification technology for producing fuels with this feedstock,” said Jeff Manternach, CFO of Red Rock Biofuels, “However, at this first commercial scale, the financing partners wanted additional security around the performance of the technology. New Energy Risk’s insurance solution completed the package, allowing us to move forward.”
“Our team at New Energy Risk, with the support of our XL Catlin insurance affiliate, has developed extensive expertise in gasification technologies and is deeply dedicated to bringing TCG’s best-in-class gasifiers to market, at scale, beginning with Red Rock Biofuels this year,” said Tom Dickson, CEO of New Energy Risk. “TCG Global is one of the leaders in gasification technology and we look forward to supporting their roll-out and fostering increased customer adoption.”
Reaction from Velocys, Shell, British Airways and the UK government
“Today the UK has taken another step forward towards becoming a world leader in low carbon aviation,” said David Pummell, CEO of Velocys. “Government funding, recent policy changes and successful completion of the feasibility study have enabled Velocys and its partners to move forward to the next phase in developing the UK’s first waste-to-renewable jet fuel plant. With Shell and British Airways we have a terrific set of partners to complete the project.”
“We are very pleased that the Government has recognized the importance of alternative fuels for aviation,“ said British Airways CEO Alex Cruz, “and has supported our joint project with Velocys which will help to reduce carbon emissions and create UK jobs and growth.”
“Shell’s ambition is to be a leader in advancing the sustainable solutions that can deliver a low carbon future for the aviation industry,” said Anne Anderson, Vice-President Shell Aviation. “In addition to combining innovative technologies with a diverse set of technical expertise and industry backgrounds, this project brings together partners across the aviation industry that share this aim. Biofuels can play a valuable role in a future low carbon energy system, and especially in sectors like aviation where the alternatives to liquid fuels are limited.”
“The waste-to-jet fuel project has the potential to help transform the aviation industry” said Chris Grayling MP, Secretary of State for Transport, “by reducing greenhouse gas emissions and improving the air quality around our country’s airports. That is why we are providing support to this important technology as part of our £22 million of funding for alternative fuels, which will pave the way for clean growth in the UK. Supporting important developments like this is just part of our work to help ensure our aviation sector is greener than ever, and we will explore further measures as part of our Aviation Strategy.”
Originally published at www.biofuelsdigest.com on June 20, 2018.
Finance, not technology
To compete with lithium-ion, flow battery costs need to come down; insurance could help bridge that gap. Lithium-ion batteries rule the market for energy storage. Flow battery makers want a share of that market, but they have a tough time competing on costs.
More Money Flows to Flow Batteries: ESS Nabs $13 Million Funding Round
The company wants to expand its annual iron flow battery production to 900 megawatt-hours.
Iron flow battery maker ESS raised $13 million in a Series B round, expanding the pool of cash available to upstart alternative storage companies.
The money will go to automate and expand the manufacturing facilities where the Oregon company makes its containerized long-duration storage product, the Energy Warehouse. If all goes according to plan, the improvements will raise the six-year-old company’s annual output to 900 megawatt-hours.
That’s significant for the small field of long-duration contenders challenging lithium-ion’s dominance in the energy industry today.
Flow battery makers like ESS tout the relative safety of their ingredients compared to lithium-ion, with its flammability and rare earth metals. The alternative chemistries also provide long-duration storage, maintaining high levels of discharge well beyond the 4-hour mark typical of lithium-ion systems today.
The challenge is that little market opportunity exists for 8 hours of storage, and customers and investors tend to be leery of a technology that’s even newer and more exotic than the mainstream batteries.
The new round of funding suggests that at least some investors are changing their minds.
The Series B brought back original investors, including Pangaea Ventures. But it also welcomed new investors global chemical company BASF, Cycle Capital Management, Presidio Partners Investment Management and InfraPartners Management.
“After conducting extensive research across a range of battery technologies, designs and developers, we’ve concluded that ESS offers a superior combination of low-cost, clean, safe and long-life chemistry; scalable architecture, and management experience,” BASF Venture Capital Managing Director Markus Solibieda said in a statement.
ESS closed its Series A in October 2015, raising $3.2 million from Pangaea Ventures, Element 8 and other angel investors. At that time, the company had also been awarded roughly $4.5 million in grants from ARPA-E, the Oregon Nanoscience and Microtechnologies Institute, and Oregon Best.
This summer, VP of Business Development Bill Sproull told GTM that the near-term strategy is to use demonstration projects to raise awareness about the technology, and to work with EPCs and project developers to get units in the field around the world.
But, Sproull said, ESS is already getting revenue from its demo projects. “We have not had to donate systems to anyone,” he said.
Flow batteries more broadly have made some headway over the past several months.
NEXTracker, a leading solar tracker vendor, recently relaunched its flow battery product and confirmed that it had deployed some units, without saying how much capacity.
Vanadium redox flow battery maker Vionx launched a third-party performance insurance product backed by New Energy Risk. This offering reduces the trust barrier for customers — instead of relying on a young company with a miniscule balance sheet to back a 20-year product, the burden shifts to an established insurer. ViZn Energy similarly developed a third-party insurance product.
Flow battery contender Primus Power secured a $32 million equity raise in April to fund global expansion to Europe, China and South Africa. That brought total equity funding to $94 million, plus another $20 million in government grants.
Originally published at www.greentechmedia.com.
Turning Garbage to Jet Fuel
Insurance solution provides performance coverage for the output of Fulcrum's garbage-to-fuels plant
New Energy Risk Designs Innovative Performance Insurance Program for Fulcrum BioEnergy, as Company Raises $150M for Landmark Waste-to-Fuel Project
Menlo Park, Calif., Dec. 12, 2017 /PRNewswire/ — New Energy Risk, a provider of customized insurance technology solutions for renewable energy projects, has provided Fulcrum BioEnergy, Inc., a company that turns municipal solid waste (MSW) into renewable transportation fuels, with a technology performance insurance solution for Fulcrum’s Sierra BioFuels Plant. The project, currently under construction outside of Reno, Nevada will have the capacity to process 175,000 tons of municipal solid waste into more than 10 million gallons of low-carbon synthetic crude oil on an annual basis, beginning in early 2020. The synthetic crude oil is then processed into transportation fuels. By turning municipal waste into fuel, Fulcrum is reducing greenhouse gas emissions by more than 80 percent, and providing a cleaner fuel alternative for airlines, the military, and other customers.
Fulcrum recently raised $150 million in bond financing for the Sierra BioFuels project, and turned to New Energy Risk, an affiliate of global insurance giant XL Catlin, to provide a performance insurance product to support the financing. The insurance complemented Fulcrum’s patented technology, industry-leading development team and process, as well as feedstock and off-take strategies, in order to increase project attractiveness to investors. Fulcrum’s existing investors include US Renewables Group, Rustic Canyon Partners, United Airlines, Waste Management, BP, and Cathay Pacific.
New Energy Risk is a specialty insurance technology company that acts as an effective bridge between new technology innovators, insurers and lenders. The company used a proprietary techno-economic model that synthesizes scientific understanding, engineering analysis, as well as actuarial and financial expertise to assess the performance of Fulcrum’s technology and potential output of the Sierra BioFuels Plant. After its extensive assessment of the MSW-to-fuels technology and process, New Energy Risk developed a custom solution, backed and provided by XL Catlin, to insure the performance of Fulcrum’s plant. The insurance program provides a significant technology risk mitigant for Sierra BioFuels Plant bondholders who have invested in this revolutionary project.
“The New Energy Risk technology performance insurance solution further strengthened our business model for the Sierra BioFuels Plant, and was an important factor in financing this project,” said Eric Pryor, Vice President and Chief Financial Officer of Fulcrum BioEnergy. “The New Energy Risk team worked closely with our engineering and technology teams to assess the technical aspects for our innovative project and were successful in creating an impactful and customized insurance product that provides significant risk mitigation for Fulcrum’s bondholders.”
“We’re proud to have supported Fulcrum in their capital raise and are excited to see their leading-edge technology and process grow in both scope and impact – taking a true waste product and converting it into millions of gallons of clean transportation fuels, and creating hundreds of jobs in the process,” said Tom Dickson, CEO of New Energy Risk. “Fulcrum is showing what is possible in the waste-to-fuel space, and doing it at unprecedented scale. We look forward to working with them on more projects in the years to come.”
About New Energy Risk
New Energy Risk is a provider of innovative data analytics and technology performance risk transfer solutions to the new and renewable energy industry worldwide, and pioneered the development of large scale technology performance insurance. It was founded in 2010 to provide complex risk assessment and serve as an effective bridge between clean-energy innovators and insurers, and is part of XL Innovate, an insurance technology venture firm. Since then, New Energy Risk has helped its customers gain over $1 billion in financing for renewable energy and new technology deployments. To learn more, please visit www.newenergyrisk.com.
About XL Catlin
XL Catlin is the global brand used by XL Group Ltd.’s (NYSE: XL) insurance and reinsurance companies which provide property, casualty, professional and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises throughout the world. Clients look to XL Catlin for answers to their most complex risks and to help move their world forward. To learn more, visit xlcatlin.com.
About Fulcrum BioEnergy
Based in Pleasanton, California, Fulcrum is leading the development of a reliable and efficient process for transforming municipal solid waste – or household garbage – into transportation fuels, including jet fuel and diesel. The company’s plants will provide customers with low-cost, low-carbon drop-in fuel that is competitively priced with traditional petroleum fuel. Fulcrum, a privately held company, has aligned itself with strategic feedstock, technology and fuel offtake partners to further strengthen and accelerate the company’s innovative approach to commercially producing large volumes of renewable fuel from municipal solid waste. For more information, please visit www.fulcrum-bioenergy.com.
SOURCE XL Catlin
I Don’t Like Losses, Sport
We have news you can use today on the subject of the most powerful, inevitable, fearsome, mysterious, taboo, and untouchable four-letter word in the advanced bioeconomy lexicon.
Risk.
The problem of Investor risk is ridiculously easy to understand and ridiculously hard to solve. If you think back to your own 401(k) or IRA for a second, you’ll understand risk tolerance among financial investors in a jiffy.
Financial investors will tolerate very short-term cases of marginally sub-par returns and they have no tolerance at all of losses.
As Michael Douglas, in his Oscar-winning turn as Gordon Gekko in Wall Street, elegantly explained it:
“I don’t like losses, sport. Nothing ruins my day more than losses. Now you do good, you get perks, lots and lots of perks.”
The poor distribution of technology risk is a market failure, especially corrosive in the bioeconomy because risk concentrates like a hurricane and blows down those least able to bear it, like a bully picking out a mark on the playground.
And risk induces panic and suffocation long before it induces death, which is one reason why the Valley of Death is so unimaginably painful to ventures and the people in them. Chilling early-stage venture investing far more effectively and absolutely than the absence of good deal flow.
What’s to protect the bondholders? The technology risk insurance program.
The remedy
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. More on Fulcrum’s progress here — and our most recent Multi-Slide Guide is here.
Fulcrum’s existing investors include US Renewables Group, Rustic Canyon Partners, United Airlines, Waste Management, BP, and Cathay Pacific. Their strategic equity capital is at risk — as it should be.
“There’s a lot that’s special about the Fulcrum project,” New Energy Rick CEO Tom Dickson told The Digest. “They have Abengoa as an EPC, and despite what has happened to the corporate paren, Abengoa’s core US EPC unit is strong. They have offtake, great management, irreplaceable equity partners. But it’s not GE standing behind a technology with a performance agreement. There’s a perceived technology risk.
So, who’s measuring that risk in order to efficiently spread it. Turns out, not many.
“Each party has a focus on the risk they have a mandate to assume,” Dickson noted. “Lenders have a mandate to take credit risk, and some market risk. But they are not really into assuming technology risk. Because of that, when it comes to the technology process risk, they are not trying to understand that, and someone has to do that to get first commercials financed, and put capital behind that assessment.”
How’d that “first of kind” project get done? For one thing, Fulcrum brought in New Energy Risk, an affiliate of global insurance giant XL Catlin.
New Energy Risk is a specialty insurance technology company that acts as an effective bridge between new technology innovators, insurers and lenders. It was founded in 2010 to provide complex risk assessment and is part of XL Innovate, an insurance technology venture firm. It’s not a small potatoes thing. The firm has helped its customers gain over $1 billion in financing for renewable energy and new technology deployments.
In this case, New Energy Risk developed a custom solution, backed and provided by XL Catlin (the global brand used by XL Group Ltd’s insurance and reinsurance companies which provide property, casualty, professional and specialty products around the world).
What happened?
“We start with the engineering data,” explained NER’s Jon Cozens, “ and we end up with actuarial output. From the engineering data we are creating a model and looking at failure modes, and the impact on financing and the risk position. In the event of a failure, we ask, how long will it take to alleviate, is the capital there to handle it, and could the timelines impact loan covenants.
“We step in when there is underperformance,” Dickson added, “when the project has run out of alternative means — warranties, it’s own cash — and the failure is due to the technology. Not because of a hurricane, but because of the science; you turn it on, it doesn’t work or at a low percentage of nameplate and because of that , in default of a loan covenant. We alleviate that shortfall.”
Every financing is different
Sometimes the risk freak-out factor focuses on long-term performance, sometimes around start-up and commissioning.
To complicate matters, every project is so darn different. It’s not as simple as: here’s a wind turbine, here’s the standard power purchase agreement, here are the wind curves. The feedstocks are different, the molecules vary, the technologies are unique, the offtake agreements are one-offs, the lenders are not the same, some bonds are rated and others are not, the loan periods don’t line up, the covenants change with every deal.
Dickson explains, “it depends on the policy. if it is short term and responding to risk around completion and commissioning, for us we’re looking really at moving stuff through the pipes, and what are the failure modes, and how do you recover from those. Does it mean adding a unit or redesigning — and does the project have enough time to fix it?”
“In a 10 year policy where we are looking at failure at any time during amortization when it falls below X. By then, the pipes have been figured out, and it is about long-term science, and becomes more about reliability than the expected efficiency. Also, we do work, actively with the USDA loan guarantee program. 9003 loan guarantees require an EPC wrap, and while a lot of EPCs do will wrap completion and delay, it’s been tough relating to the technology itself. Some are successful, some get there some do not. We’ve been working in that area as well.”
So, it’s complex and time consuming.
“It can take 3–4 months for our work,” Dickson noted. “But we’re never the long pole in the tent when it comes to timelines.”
The best projects survive
“If we can structure around the risk,” Cozens told the Digest. “There are going to be fewer failures and more successes. But we want to help the strong projects and keep the projects not yet ready on the back burner. Even if we structured our way out of a loss [from a single project], we all need to grow the capital base, and that means not just doing projects for the sake of it and making money for ourselves, but identifying and supporting the best projects.”
And Fulcrum fits that mould. As Dickson eplained, “Fulcrum is showing what is possible in the waste-to-fuel space, and doing it at unprecedented scale. We look forward to working with them on more projects in the years to come.”
Best of breed, multiple projects. Terms that were in the “future milestones” part of a corporate slide desk, say, five years ago. Today, we’re seeing the survivors from a culled flock beginning the breakout from the Valley of Death.
As Cozens noted, “The winners in the market are survivors and for a reason,”
Originally published at www.biofuelsdigest.com on December 11, 2017.
Vionx Secures Insurance Product for Its Flow Batteries
Let’s Get Bankable: Vionx Secures Insurance Product for Its Flow Batteries
The product adds a bigger balance sheet to the performance guarantee, potentially de-risking investments in vanadium redox flow batteries.
Flow battery maker Vionx took a step toward easier sales by releasing an insurance product for its technology.
The Massachusetts company teamed up with New Energy Risk to create a performance insurance policy that covers energy, power, round-trip efficiency and availability of the vanadium redox flow systems. This could open a new chapter in the bankability of insurgent battery technologies challenging lithium-ion’s dominance.
Flow battery makers argue that their long-duration systems can cycle for years without degradation, making them ultimately cheaper to own than lithium-ion batteries, which fade over time. The lifetime cost of ownership argument, though, requires the customer to believe the company’s claims about its new technology, even though it hasn’t been operating for more than a few years.
Having an outside entity vet the technology changes the dynamic of trust. Vionx asserts that this is the first insurance product for a utility-scale flow battery.
“It takes Vionx from, ‘We can compete on price; trust us,’ to ‘We can compete on price, but you don’t have to trust us, because it’s guaranteed by an insurance company,'” said Daniel Finn-Foley, an energy storage analyst at GTM Research.
Besides confidence in the technology, the end customer needs to feel secure that if something does go wrong, someone’s on the hook to fix it.
Performance guarantees have become standard for long-term lithium-ion storage contracts with major utilities, Finn-Foley noted. Recent utility-scale projects in California included 20-year performance warranties, which means the developer will absorb the cost of replacing batteries and inverters as they give out.
That’s a credible commitment from a company like AES, which has been building storage systems for a decade and has a market cap of $7.3 billion.
It’s a lot harder to convince customers when a company has only been around for a few years and has delivered just a few small pilot-scale projects. The insurance offering shifts the ultimate burden of accountability from Vionx to New Energy Risk, an affiliate of global insurance company XL Catlin.
The customer for the policy would be the engineering, procurement and construction contractor that purchases Vionx batteries as part of an energy storage project. If any issues arise with a deployed system, Vionx still has the affirmative obligation to repair or replace according to warranty. The insurance covers the scenario in which there’s a performance shortfall and Vionx can’t fulfill the warranty.
“Vionx is a small company, but you have this financial support if anything does go wrong,” said Alan Dash, a member of the Vionx board.
Phrased differently, this means that New Energy Risk (NER) has sufficient confidence in Vionx’s flow systems to put its name and money behind them.
Under the arrangement, NER is offering an initial tranche of $50 million of coverage for Vionx’s current pipeline.
“We are prepared to provide additional capacity as Vionx grows and customer adoption increases in the marketplace,” said NER CEO Tom Dickson.
The insurer’s confidence stems from a nearly 20-month vetting process. The NER analysts took a deeply technical approach, crunching through raw performance data from field units and accelerated lifetime testing, said Chief Commercial Officer Jon Cozens.
The company specializes in seeking out promising emerging energy technologies from companies with limited balance sheets, and offering them creditworthy support, Cozens said.
“In the energy finance construct, a lot of times lenders require balance-sheet support to finance the deal,” Cozens said. “Our business is fundamentally around enabling project finance.”
This boost comes at a pivotal time for Vionx, which is looking to expand from its first few demos to broader commercial production.
The company has two systems operating today in Massachusetts: a 160-kilowatt, 4-hour system at an Army Reserve base at Fort Devens, and a 500-kilowatt, 6-hour system at Holy Name High School in Worcester. Vionx has built partnerships with other veteran companies to help move the product, including UTC, Siemens and 3M.
I was able to track down one other flow battery insurance product. ViZn Energy has developed an insurance product that it is actively sharing with specific customers in three-way meetings with insurance providers, VP of Marketing Mike Grunow confirmed in an email.
In fairness to Vionx, ViZn has not broadcast this information, and insurance has not been needed on its announced bookings so far. The trophy for first flow battery insurance sold, then, remains up for grabs.
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