News | June 2014

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Rentech Acquires New England Wood Pellet

Rentech, Inc. has acquired New England Wood Pellet (NEWP), the largest producer of wood pellets for the U.S. heating market, for $34.5 million in cash in addition to cash and debt assumption.

NEWP, established in 1992 by Steve Walker, operates three wood pellet facilities with a combined annual production capacity of more than 250,000 tons. The facilities are in Jaffrey, NH, Schuyler, NY and Despoit, NY.

“NEWP is the leader in the growing U.S. market for wood pellets used in heating applications,” says D. Hunt Ramsbottom, president and CEO of Rentech. “The acquisition brings additional cash flows and profitability to our wood fiber business. In addition, NEWP’s business broadens our product offerings, customer base and geographic markets.

NEWP has most recently been owned by Walker and several private investors, according to the NEWP web site.

Built in 1999, the Jaffrey facility has a capacity of 85,000 tons. The facility underwent significant modifications and expansion in capacity in 2008. The plant purchases nearly 150,000 dry and green tons of wood residues each year.

The Schuyler facility began operations in 2008 and incorporates state-of-the-art design and engineering innovations of Walker himself. The plant has a capacity of 85,000 tons/year. All manufacturing and warehousing is contained within a 30,000 square foot building.

NEWP’s newest venture is an 85,000 ton/year manufacturing plant located on the site of the former Norbord Industries MDF manufacturing plant in Deposit, NY. Following a $14.5 million investment, the plant commenced production in June 2011 with new innovations in design including dryer gas recirculation and other modifications developed by Walker.

Wood Bioenergy magazine featured the Deposit plant startup in the third quarter 2011 issue.

In 2006 NEWP constructed a 20,000 sq. ft. research, development and fabrication facility in Jaffrey. The facility employs state-of-the-art SolidWorks 3D design software and advanced metal fabrication technology. Most of the components of the Schuyler and Deposit plants were engineered and built in this facility.

According to Rentech, NEWP commands an approximate 15% share of the market for heating pellets in the U.S. Northeast. The company is one of the largest suppliers of wood pellets to major retailers including Home Depot, Lowe’s, Tractor Supply and Wal-Mart.

Consistent with its 2013 performance, NEWP’s business is forecasted to have revenues of approximately $44.8 million and operating income of approximately $4.6 million.

Rentech acquired all of the equity interests of NEWP for $34.5 million in cash, funded from proceeds of Blackstone/GSO’s recent $150 million investment in Rentech. Rentech will assume NEWP’s cash of $2.4 million and debt of approximately $13 million, for a total initial purchase price of $45.1 million.

Rentech, Inc., based in Los Angeles, entered the wood fiber business in May 2013 when it acquired wood chips manufacturer, Fulghum Fibres, Inc., including 32 chip mills (26 in the U.S. and six in South America), for $112 million.

Rentech also acquired a former oriented strandboard mill in Wawa, Ontario and a former particleboard mill in Atikokan, Ontario, and is converting both to wood pellet plants.

Finland's TSE Confirms CHP Plant

Turun Seudun Energiantuotanto Oy confirmed it will replace an existing power plant in Naantali, Finland (Turku region) with a new cogeneration plant fueled at least in large part by biomass. Construction will begin in spring 2015 and operations will start in autumn 2017. Cost estimate is 260 million euros.

Turun Seudun Energiantuotanto Oy is owned by Fortum and Turku Energia, as well as Raisio, Kaarina and Naantali, which own smaller shares. In February Fortum said it would invest EUR 40 million in the plant.

TSE’s new power plant will replace a 50-year-old coal-fired power plant. The biomass used will consist mainly of locally sourced wood chips transported from a radius of 100-150 kilometers around the plant. The annual wood chip consumption is initially expected to be about 0.7 million cubic meters and eventually as much as 1.2 million cubic meters. Upon completion, the plant will produce 900 GWh electricity and 1,650 GWh heat annually. The plant’s production capacity will be 142 MW electricity and 244 MW heat.

By investing in a new power plant in Naantali, we are pursuing growth in energy-efficient combined heat and power production in line with our strategy. The fact that the new power plant aims to utilize as much domestic biomass as possible also makes the new project an interesting one for Fortum,” says Jouni Haikarainen, vice president, Fortum Heat Div.

In 2013, Fortum commissioned biomass-fired CHP plants in Järvenpää, Finland, and Jelgava, Lat­via. Production was also started at the new waste-to-energy CHP plant in Klaipeda, Lithuania and test-runs began at a similar facility in Brista, Sweden. Additionally, Fortum commissioned a bio-oil plant integrated with a CHP plant in Joensuu, Finland. The total value of these investments is about EUR 550 million.

Mayor of Turku Aleksi Randell comments, “Firstly, this will safeguard both the availability of the region of Turku’s most important form of heating, district heating and competitive production, as current production plants come to the end of their service lives. Secondly, the goal of using 100% biofuel in the new plant will significantly lower the region’s carbon dioxide emissions, which has proven to be a solution in negotiations, as it is one of the city of Turku’s aims. We are on an ambitious path to reduce emissions and eventually make the city carbon neutral.”

DTEES Starts Up Stockton Plant

DTE Energy Services, Inc.  (DTEES) began commercial operations at its biomass power plant at Port of Stockton (Calif.). The plant, known as Stockton Biomass, is a conversion of a shuttered coal-fired power plant. It is selling its renewable power to PG&E Co. to help it meet its renewable energy requirement.

The plant will use about 320,000 tons of woody biomass fuel annually to generate 45 MW—enough electricity to meet the needs of 45,000 homes. The fuel primarily is derived from urban wood waste, tree trimmings and agricultural processes.

The plant began operation in 1989 as a coal-fired power plant and ceased operation in April 2009. DTEES purchased it in June 2010 with plans to convert the plant to biomass. At its peak, the construction project employed 100. DTEES replaced the boilers and employed the best available control technologies to minimize air emissions.

DTEES, a subsidiary of DTE Energy, is headquartered in Ann Arbor, Mich. It has completed similar biomass conversions in Cass­ville, Wis. and Bakersfield, Calif. The company also operates biomass power plants in Woodland, Calif. and Mobile, Ala.

Vega Biofuels Torrefaction Pilot

Vega Biofuels, Inc. reports it has entered into a joint venture agreement to build and operate a pilot torrefaction facility in Allendale, SC that will manufacture the company’s bio-coal and biochar products.

Vega Biofuels (Vega) and its partners, including Agri-Tech Producers, LLC (ATP), will operate under the name ATP-SC, LLC and will produce various torrefied products.  The venture plans to build addi­tional plants.

Columbia, SC based ATP manufactures and sells torrefaction equipment. ATP has licensed and commercialized the torrefaction technology originally developed by North Carolina State University. ATP selected Kusters Zima Corp. (KZC) as its equipment design and manufacturing partner.

“ATP’s technology and know-how, and the pilot plant’s great site and supply arrangements are a tremendous boost for implementing Vega’s business plan,” states Michael Molen, Chairman/CEO of Vega Biofuels. “We are now on a very fast track to manufacture and deliver our bio-coal and biochar products to our clients. I’m also proud to announce that testing on our bio-coal samples has been completed and accepted by our EU clients and our plan now is to begin shipping product to Europe from the Allendale plant by the first quarter of next year, if not sooner.”

In addition to bio-coal, the company announced plans to manufacture and market its biochar product to agricultural industries, including the fast growing hemp industry. Vega Biofuels earlier announced it has entered into an agreement to acquire the Legal Hemp and Marijuana Div. of Colorado based Biochar Now, LLC.

UK Final Listing Draws Criticism

UK’s Dept. of Energy and Climate Change confirmed eight large-scale renewable energy projects that will receive support through “contracts for difference (CfD)” payments, part of the government’s Electricity Market Reform program. Included are two biomass conversion projects—RWE’s Lynemouth 420 MW power station at Ashington, Northumberland, and the Drax 645 MW Unit 1 at Selby, North Yorkshire; as well as a 299 MW dedicated biomass with combined heat Teesside project by MGT Power at Middlesbrough.

However, what was left off the final list has caused some negative reaction.

“Whilst we are pleased to have been offered an Investment Contract for our third unit conversion (Unit 1), we are disappointed by today’s decision on the ineligibility of our second unit (Unit 3),” says Dorothy Thompson, chief executive of Drax. “Nothing has changed, as far as our plans are concerned, between being deemed eligible in December and now. We have, therefore, commenced legal proceedings to challenge the decision. Sustainable biomass provides a very reliable, flexible and cost effective renewable power source for the UK consumer. The performance of our first converted unit (Unit 2), which was converted last year to burn sustainable biomass in place of coal, continues to be strong.”

She said Drax is committed to its strategy of transforming into a predominantly biomass fueled generator, initially through the conversion of three of six generating units, with a fourth unit conversion under evaluation.

The government stated, “More renewable electricity projects applied to the process than we can afford.” The government received 57 applications initially. In December, the government reduced the list to 16 projects that provisionally scored above the minimum threshold evaluation criteria. Included on that list were the two Drax conversions.

The government decision does not mean the Drax unit conversion project won’t go forward.

Drax has become a world leader in the renewable energy movement, especially for wood biomass and in particular as a market for wood pellets. One estimate is that Drax will consume 7.5 million tons of wood pellets by 2016.

Originally built, owned and operated by the Central Electricity Generating Board (CEGB), Drax Power Station was constructed and commissioned in two stages. Stage one (units 1, 2 and 3) was completed in 1974, and stage two (units 4, 5 and 6) was completed in 1986.

Each of the units has a capacity of 660 MW when burning coal, giving a total capacity of just under 4,000 MW, making Drax the largest power station in the UK. In 1988, Drax ­states it became the first power station to invest in the retrofit of flue gas desulphurisation (FGD) equipment, making Drax the cleanest coal-fired power station in the UK.

In 1990, the electricity industry of England and Wales was privatized under the Electricity Act 1989. Three generating companies and 12 regional electricity companies were created. As a result, Drax Power Station came under the ownership of National Power, one of the newly formed generating companies.

Over the years that followed privatization, the map of the industry changed dramatically. One significant change was the emergence of vertically integrated companies, combining generation, distribution and supply interests. In certain cases, it became necessary for generation assets to be divested, and so in 1999 Drax Power Station was acquired by the U.S.-based AES Corp. for £1.87 billion.

A partial refinancing of Drax was completed in 2000, with £400 million of senior bonds being issued by AES Drax Holdings, and £267 million of subordinated debt issued by AES Drax Energy.

Increased competition, over-capacity and new trading arrangements contributed to a significant drop in wholesale electricity prices, which hit an all-time low in 2002. Many companies experienced financial problems, and Drax Power Station’s major customer went into administration, triggering financial difficulties for Drax. Following a series of standstill agreements with its creditors, the AES Corp. and Drax parted company in August 2003.

During the restructuring, a number of bids were received from companies wishing to take a stake in the ownership of Drax, but creditors voted overwhelmingly to retain their interest in Drax. In December 2003, the restructuring was completed and Drax came under the ownership of a number of financial institutions. Late in 2005, Drax underwent a refinancing and shares in Drax Group plc were listed on the London Stock Exchange for the first time.

In July 2012, Drax announced that it had the mandate, means and expertise to transform the business into a predominantly biomass-fueled generator through burning sustainable biomass in place of coal. Drax announced plans to convert three of its six generating units to burn biomass. The first of the three units was successfully converted in April 2013, and the new biomass receipt, storage and distribution systems to support the converted units were officially launched in December 2013.

Upstream, the company has a presence in the U.S. wood pellet supply chain, and Drax Biomass International is also developing two wood pellet plants of 450,000 tons production capacity each, one in Louisiana and one in Mississippi, and a port facility in Louisiana to facilitate the export of wood pellets.

Another project that didn’t make the government’s final eight listing was the Eggborough Power biomass conversion of three units at Yorkshire. Eggborough has since questioned its ability to continue operations.

Eggborough Chief Executive Neil O’Hara commented, “To avoid the likelihood of becoming uneconomic to run beyond 2015, Eggborough must convert to biomass. This is based on what we know about market conditions and policies—we can’t and won’t base business decisions affecting the station and workforce on hypotheticals.

“We’ve spent two years and millions of pounds planning the conversion, worth upwards of three quarters of a billion pounds to the region. This would double our onsite workforce and boost jobs through our supply partners.”

O’Hara said the project would have commenced in January and was one of the most advanced on the (government) shortlist, meeting key criteria including cost-competitiveness, quick delivery and contribution to supply-security.

“Unfortunately, in December 2013,” O’Hara said, “government modified its scoring system to spread funding across different types of power generation, reducing funding for biomass conversion. Although many successful projects were costlier and nowhere near ‘shovel ready,’ Eggborough didn’t make the list.”

He said as a result Eggborough was forced to announce that Unit 2 would cease operating in September 2014. “Without support and certainty from government, we can’t justify the investment to keep it running. We will continue appealing to government on Eggborough’s behalf.”

In March, RES announced it was ceasing work on its biomass power station project at the Port of Blyth in Northumberland following the the withdrawal of a key project partner in late 2013 due to ongoing uncertainty in UK energy policy. “The government’s inconsistent support for dedicated biomass energy over the last two years—as well as increased uncertainty over the UK’s energy policy under the government’s Electricity Market Reform process—has critically undermined the investment case for the North Blyth Biomass Power Station,” the company stated.

RES’ Chief Operating Officer for the UK Gordon MacDougall stated, “It’s bitterly disappointing for RES that we are unable to bring this exciting project forward, and deliver the significant boost it would have represented for the Blyth and Northumberland economy. However, the gradual erosion of support for dedicated biomass leaves us with no other option.”

RES has called upon the government to clarify its support for renewable energy as a vital part of the UK energy mix, in order to ensure that independent generators and major investors alike have the certainty needed to continue investing in UK infrastructure.

RWE Supply & Trading confirmed that all activities to support the Lynemouth conversion project are continuing, including contracts for the engineering of the conversion and arrangements with local ports and rail companies for movement of biomass supplies to the station.

Pinnacle Plans Seventh Mill

Tolko and Pinnacle Renewable Energy Group announced that the Agricultural Land Commission has approved the non-farm use of agricultural land to allow for the construction of the proposed Lavington (British Columbia) pellet plant project.

The proposed $39 million, 250,000 tonnes pellet plant would be adjacent Tolko’s Lavington mill. The plant will procure sawdust from the Tolko mill. This would be Pinnacle’s seventh pellet mill and bring its total capacity to 1.5 million tonnes annually.

Port Townsend Nixes Cogen Project

Port Townsend Paper Corp. appears to be not pursuing a proposed 24 MW cogeneration project at Port Townsend, Wash.

Company President Roger Hagan told the Peninsula Daily News that the company’s construction permit will not be extended beyond the 18-month June deadline for the improvements and said the project was not financially viable.

According to the report, Hagan attributed the decision to environmental challenges that delayed the project, a strong market for cheap natural gas compared with biomass and the expiration of federal tax-credit incentive programs.

In February the state Supreme Court had upheld the company’s permit for the project, turning back an appeal by several environmental groups. The expansion project, slated for completion in April 2012, was delayed by court appeals and had been scheduled to be online by this year or 2015.

Hagan reportedly said that power produced by Port Townsend Paper’s cogeneration plant would have cost electricity customers “on the order of twice” what they would pay for natural gas.

Renewable Diesel Plant Gains Funds

The government of Canada’s $500,000 repayable investment, through the Atlantic Canada Opportunities Agency (ACOA) Business Development Plan, will support the purchase of equipment toward the startup of a renewable diesel fuel pilot plant

celluFuel will transform low-value wood fiber into renewable diesel fuel for the refinery market, debuting its technology at ReNova Scotia Bioenergy Inc. in Brooklyn, Nova Scotia with a long-term plan to launch a full commercial scale operation in Clare, Nova Scotia by 2015. The province of Nova Scotia previously announced a $1.5 million repayable investment in the project.

celluFuel Inc. is a Nova Scotia-based startup firm, established in October 2012. The commercial demonstration plant is expected to have an initial capacity of 1.3 million liters of diesel per year.

The business is reportedly pointing to a full scale plant at Clare because there is space at the former Comeau Lumber site, including 50 acres and existing infrastructure.

Wood Pellet Export Double In Two Years

Wood pellet exports from North America to Europe have doubled in two years to reach 4.7 million tons in 2013 with the U.S. South accounting for 63% of the volume, according to the North American Wood Fiber Review from Wood Resources International LLC.

North America exported wood pellets valued at more than $650 million in 2013, a dramatic increase of more than 250% in just two years, according to data compiled by the North American Wood Fiber Review. The U.S. South shipped almost 3 million tons last year, which was almost two-thirds of total export volume from North America.

With no slowdown in sight, North American wood pellet exporting companies keep building new facilities to manufacture pellets for the European market. The expansion is entirely driven by demand for biomass in Europe.

Many of the recent investments in pellet capacity in the U.S. South have occurred along the Atlantic Coast, with Enviva and Fram expanding production in the states of Georgia, North Carolina and Virginia.

The expansion in Canadian pellet export has been less dramatic, but still significant. In Canada, there have been two recent developments: 1) the first regular shipments of pellets to South Korea started in the second half of 2013 and, 2) exports from Eastern Canada from Quebec, Nova Scotia and New Brunswick increased during this same time period.

Eastern Canada will see additional pellet export volumes later in 2014 when Rentech begins operation at its two pellet facilities in Ontario. A Quebec pellet export facility under construction at the Port of Quebec is the first dedicated infrastructure for pellet exports along the St. Lawrence Seaway. Its presence, when completed, reduces the heretofore, substantial entry barrier for a number of smaller pellet companies which are interested in the international market.

Torrefaction Joint Venture Announced

New Biomass Energy LLC reports it has launched a joint venture with Solvay, an international chemical group, in order to expand its production of torrefied wood pellets.

New Biomass Energy reports that its plant in Quitman, Miss., owned by BTH Quitman Hickory LLC, is the largest torrefaction facility in North America. This project will complete the expansion of the Quitman plant, bringing annual production capacity to 250,000 metric tons by the end of 2014. Solvay Biomass Energy will promote its torrefied wood pellets for electricity production in Europe and Asia.

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