Zilkha lands financing to convert Alabama plant to Black Pellets

By Sue Retka Schill | August 13, 2013

Zilkha Biomass Fuels has closed an $18.8 million finance package to convert an idled facility in Selma, Ala., to a full-scale Black Pellet plant with an annual capacity of 275,000 tons.

AMCREF Community Capital announced the closing which combines federal and state programs. As the project’s sole federal and Alabama state New Markets Tax Credit allocatee, AMCREF raised investments from U.S. Bank and Stonehenge Capital Co. and attracted other funding for the Zilkha project.

Zilkha will use the financing to renovate and retrofit the former Dixie Pellets plant, acquired in 2010. In operation for less than two years before closing, the plant has 15 pellet mills along with coolers, dryers, conveyers and loading facilities.

The plant is located in a county with an unemployment rate of 11.1 percent, the third-highest rate in Alabama. In addition to the 55 permanent Zilkha positions and 120 supporting jobs, it is estimated that the project will bring 380 construction jobs to the area. Construction is under way on the plant, set to begin operations in 2014.

 “Flexible, low-cost NMTC financing will allow Zilkha to offset the higher cost of capital associated with alternative funding sources, helping make the project more viable,” said Susan Seagren of AMCREF. “Zilkha’s expansion will position the company for full-scale operations, while creating much needed jobs and providing environmental benefits, a win-win for both the company and the community.”

“We’re proud to promote economic development and job creation in Alabama using the benefits of federal and state New Markets Tax Credits in partnership with Stonehenge and AMCREF,” said Matt Philpott, director of new markets, historic, and renewable energy tax credit Investments for U.S. Bancorp Community Development Corp., the subsidiary of U.S. Bank that made the investment. “With the help of NMTCs, projects like this one are moving forward across the country, strengthening rural communities like Selma.”

“We’re excited to open the world’s first full-scale Zilkha Black Pellet plant in Alabama,” said CEO Jack Holmes. “Selma offers the workforce and training that will help make this facility successful. The plant will produce 275,000 tons of our Black Pellets per year, which can generate enough clean, renewable electricity to supply 50,000 homes per year.”

Unlike traditional compressed wood pellets, the Zilkha Black Pellet cannot be damaged or compromised by contact with water, according to the company’s website. Because Black Pellets are waterproof, they can be transported and stored outside like coal, providing a low-capital solution to power plants transitioning to a low-carbon future by using the pellets as a substitute for coal. A mix of coal and pellets can generate the same electrical power, but with reduced emissions.

Zilkha’s first commercial black pellet plant is located in Crockett, Texas. Rated at 40,000 metric tons of pellets per year, the plant started production in October 2010 to supply test volume to potential customers. The company has shipped pellets to over a dozen utilities in Europe and North America for use in coal-fired power plants.