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.

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.

Every financing is different

Sometimes the risk freak-out factor focuses on long-term performance, sometimes around start-up and commissioning.

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.”