Financing speeds up Conn. biomass plant development

By Luke Geiver | January 11, 2012

A Plainfield, Conn., biomass power facility that has been under development for more than four years has received $225 million in financing.

The 37.5 MW facility will use construction and demolition waste, along with other woody biomass, to provide power for up to 37,000 homes. Enova Energy Group acquired the project site just over a year ago, and after an agreement between global engineering firm Science Applications International Corp. (SAIC), global asset manager The Carlye Group, and Enova, the facility will be up and running by the end of 2013. According to Frank Codispoti, SAIC’s environment, energy and infrastructure executive vice president for facilities and design build operations, the site has already been cleared and portions of the foundation already laid.

“This project has been around for a long time,” Codispoti said. “It has been pursued by a number of different companies and developers. For various reasons it never really got off the ground.” After acquiring the project site rights, Enova brought the project to SAIC. The two companies decided, based on the economics, the status of the permits and funding opportunities through the American Reinvestment and Recovery Act (ARRA), that it would be a good opportunity.

According to Codispoti, the project would not have happened without the innovative project finance approach the parties created to come up with the $225 million. “It’s a very non-typical approach,” he said. “There is an outside group (The Carlyle Group) that has financed a good portion of the project, and SAIC is also providing funding.” In essence, he explained, the financing happened because a number of parties were willing to share the risk in the project. “If you look at the deal structure it is very, very complex but it spreads the risk around for everybody.”

“We are always looking to work with quality counterparties on compelling projects where we can look for creative solutions,” said Daniel East, vice president of Global Energy Mezzanine Group, the organization responsible for bringing The Carlyle Group into the deal. He added that the existing 15-year offtake agreement with Connecticut Light & Power, the 300 plus jobs to be created during the build out, and the permits already acquired for the project, all made the project intriguing. Such an approach is typically offered as a debt and equity combination that allows the lender to convert its ownership or equity interest if the initial loan is not paid back in full and on time.

Under the financing terms, SAIC will also be supplying EPC (engineering, procurement and construction) services for the project. “We typically go out to the experts in the industry and buy all the parts and pieces and put it all together,” Codispoti said of the build out plans. The facility will feature a gasifier that an unnamed provider has supplied to 12 other sites around the U.S. The turbines, scrubbers and material handling equipment and service will also be provided by major vendors. “It’s an exciting job,” Codispoti said. “It is not new technology but it has a lot of interesting things that make it fun.”

But  the project wasn’t always easy or fun for the SAIC team, he said. Although Enova approached SAIC with much of the development aspects already in place, the project was difficult to pull off. During the process, a handful of banks dropped out of the project, some because of the European debt crisis that forced them to hunker down. There were times when the team could have said the project was too difficult to finance, Codispoti explained, but it continually looked for ways to overcome those challenges. “At the end of the day, it was the drive that people had to get this thing done to make it happen.”

SAIC will contract with local and regional workers to complete the job. The facility’s successful financing structure shouldn’t be viewed as a one-of-a-kind project, he said, and it’s one SAIC and Codispoti’s team hopes to replicate in the future.