Texas landfill gas project financed with taxable revenue bond

By Friedman, Luzzatto & Co. | December 02, 2013

Dallas-based Friedman, Luzzatto & Co.  and Memphis, Tenn.-based Duncan-Williams Inc. announced the completion of a $9 million taxable revenue bond issue to finance the construction of a waste-to-energy project in San Antonio, one of just a few bond issues in the U.S. for a landfill gas-to-electricity project. Friedman, Luzzatto and Duncan-Williams were co-senior managers on the bond issue. Friedman, Luzzatto is a broker/dealer and financial advisor specializing in municipal securities nationwide. Duncan-Williams is a nationally recognized full-service financial services firm.

The landfill gas-to-electricity power plant, expected to be commercially operational by the close of 2013, will be constructed at the Nelson Gardens Landfill, owned by the City of San Antonio. The purpose of the project is to capture the methane emitted from the decomposing waste in the landfill to produce electricity.

The City of San Antonio authorized the issuance of the taxable revenue bonds through the Mission Economic Development Corp., a non-profit corporation which is authorized to issue bonds and lend the proceeds to a special purpose entity. MEDC does not guarantee the bonds. The proceeds of the bonds were loaned to Nelson Gardens Energy LLC, to construct the project.  Nelson Gardens Energy is a Texas limited liability company formed by New York-based Greenfield Energy, to own the project. The total size of the project including debt and equity is approximately $14.8 million.


“There have been very few methane gas power projects financed through the bond market,” said Barry Friedman, president of Friedman, Luzzatto. “However, because landfill gas projects are a growing sector in the alternative energy sector as utilities look for viable ways to capture unused sources of renewable energy and put them to use, I believe you will see more entities turning to the bond market for financing.”

When completed, Nelson Gardens is projected to produce 4 megawatts of electricity annually. CPS Energy, a utility owned by the City of San Antonio, has a 15-year power purchase agreement with Nelson Gardens Energy to buy the power.  Nelson Gardens is one of three landfill gas-to-electricity projects developed by Greenfield.

“This project will add additional electric capacity for the citizens of San Antonio and turn what was a waste product into an additional source of income for the city,” said Gary Craig, a Nelson Gardens member. “But more importantly, it will help the city achieve its goal of implementing green initiatives to reduce its carbon footprint by capturing methane instead of releasing it to the atmosphere.”

Greenfield was selected by the City of San Antonio in January 2010. In July of 2012, Greenfield retained the services of Friedman, Luzzatto’s affiliate, Dallas-based Carlyle Capital Markets Inc., as a consultant to assist in the development of the financing for the project. Carlyle specializes in developing project financing for private developers along with lease-purchase programs for municipal entities. 

A substantial boost to the project was Greenfield’s ability to secure a Section 1603 Grant for the project. The grant is  part of a Federal program that reimburses eligible applicants for 30 percent of the costs of installing specified renewable energy projects.

“We were successful in getting the bonds sold in light of the challenges presented by the relatively small size of the deal and the limited number of previous landfill gas-to-electricity projects financed through the bond market. Much of the success resulted from the unwavering commitment of the developer and the comprehensive due diligence process that allowed the investors to fully comprehend  the long-term potential of the project,” said Wayne Breunig, managing director of Duncan-Williams.

TDIndustries (TD) has been engaged to construct the power facilities to be located at the landfill. TD is one of the country’s leading mechanical construction and facility service companies, with broad-based experience in constructing energy efficiency projects. Once constructed, the plant will have facilities that capture the gas, bring it to the plant, and prepare it to be used as fuel for four engines that will power four generators to make electricity.