Financial Innovation Yields Industry Dividends

By Tim Portz | October 29, 2012

In September, the Union of Concerned Scientists released a report, titled simply “The Promise of Biomass,” in which it establishes that some 680 million tons of various forms of biomass could be made available for conversion into energy products by 2030. The report offered by the UCS differs in its final numbers from the U.S. DOE’s most recent iteration of its “Billion Ton Study,” but the assertion is the same: the U.S. has the biomass feedstocks to satisfy a significant portion of its energy needs.The UCS report suggests 54 billion gallons of biofuels capacity could be supported by the available biomass in this country, a near quadrupling of the currently installed capacity. The list of questions that have to be answered to realize this incredible potential is long and varied, but ultimately not one gallon of the potential outlined in this latest, hopeful report will be realized unless capital can continue to be squeezed from an increasingly reluctant, cautious and skeptical investment community.  Even at modest “per-gallon” or “per-kilowatt” construction estimates, to fully realize the potential for biomass-based energy, hundreds of billions of dollars of debt and equity will be have to be secured.

Fortunately enough, the biomass industry is serviced by an experienced cadre of financial professionals with decades of experience, working to build financial packages and business models that help overcome any reservations they may have about investing in new projects, new startups and new technologies.

Luke Geiver’s cover story “Meet the Biobanker” examines the success that John May and Stern Brothers & Co. have had leveraging bond financing to bring investors with varied risk profiles to the same project as investors. The solution is complex, yet effective, and Geiver’s article takes a stepwise look at the credit enhancement strategies and risk allocation that May’s team has used to help an impressive number of projects get the financing they need to get under construction and operating. Anna Simet’s feature “Adding Dollars to Dairy” highlights the growing interest in owner/operator business models being deployed in the biogas space to drive operational risk out of projects to entice greater investment.

Continued private investment is the lifeblood of this industry and this month’s issue of Biomass Magazine convincingly argues that the most exciting innovations in this sector are not just next generation conversion technologies, but also the financing strategies being developed to ensure they can be capitalized and built.