What investment banks want
Kenneth S. Taratus Jr., the managing director of investment banking for Morgan Keegan & Co. Inc., spoke in San Diego at the Waste to Fuels Conference this week about what lenders are looking for in renewable projects.
Taratus said projects must have fixed-rate offtake and feedstock supply agreements in place, and they want those to match, meaning if you have a 20-year offtake agreement, you should also have a 20-year feedstock supply arrangement.
Investment banks are not looking for technologies with the serial No. 0001, he said. “They want proven, existing technologies.”
Also, minimum debt service coverage of 1.5 times is a must, said Taratus. Investment banks also want to see a high amount of equity—think in the area of $50 million.
“People also overlook construction risks,” he said, using Lurgi as an example. Lurgi built an ethanol plant for $200 million that ended up being sold for scrap at $8 million.
Ultimately, Taratus said, to get financing, “you’ve got to fit in a box.”