EQTEC (LON:EQT), the technology solution company for waste gasification to energy projects, has provided an update on the biomass project in North Fork, California. The Project relates to the proposed construction and operation of a 2 MW biomass plant by North Fork Community Power LLC. As announced on 4 June 2019, the Company entered into a legally binding agreement to acquire a 19.99% interest in NFCP on financial close of the Project.
On 23 July 2019, NFCP was granted final approval by the State of California to issue tax-exempt bonds totalling US$9.3 million and non-tax-exempt bonds totalling US$5.5 million (together, the “Bonds”), a key milestone before the Bonds can be issued to potential investors. The proceeds of the Bond issue, once subscribed for, together with EQTEC’s investment in-kind of US$2.5 million, is expected to enable the Project to reach financial close. In addition, as announced on 3 September 2019, the Company has signed an Equipment Sale and Services Contract with NFCP, with a sales value of €2.2 million to the Company.
Due diligence being conducted by potential subscribers for the Bonds and the finalisation of legal documentation has been ongoing for several weeks. The Company initially expected the process for the issue of the Bonds, which includes the sale of tax credits awarded by the State of California attaching to the Bonds, would complete towards the end of October 2019. However, the situation in California, where forest fires have continued to cause disruption, has unfortunately meant that it has taken longer than expected to complete this process.
In order to potentially accelerate the closing of financing, Phoenix Biomass Energy Inc. and the Company have agreed, in principle, a path to financial close with the potential investors in the Bonds, which does not require the sale of the tax credits.
The legal documentation to finalise the subscription for the Bonds is currently being reviewed by all relevant parties and the Company expects financial close to now take place before the end of 2019. The Company will update the market in due course.
The Company also notes that California Senate Bill 901, enacted in 2018, authorises US$200 million per year for five years from the state’s Greenhouse Gas Reduction Fund for wildfire prevention, primarily in the form of hazardous fuel reduction projects. In addition, California Senate Bill 1122 stipulates that 20% of the additional 250 MW capacity outlined in the bill must come from projects that rely on forestry sources.
Greg Stangl, CEO of Phoenix Energy, commented:
“Senate Bill 1122 was designed to combat the tree mortality crisis in the Sierra. The bill dictates that 20% of the additional 250 MW capacity outlined in the bill must come from projects that rely on forestry sources. There’s a reason the state passed a law forcing PG&E companies to buy power from projects like ours. Our proposed plant in North Fork will help promote environmental sustainability and reduce forest waste – and the chances of future fires. This is a crucial mission that cannot wait. It is very encouraging for us to have a technology partner such as EQTEC which has not only addressed any engineering challenge that we have thrown at them, but also now are heavily involved assisting with the financial close of the Project.”
David Palumbo, CEO of EQTEC, commented:
“It has been a busy number of months with numerous work streams being progressed, with particular focus on introducing project funding options to our partner, Phoenix Energy. We are encouraged by the strong local support for the Project and the growing realisation that the Project will have such an important positive environmental impact, improving California’s current critical situation with forestry wood waste. We are confident that this would be the first of many more projects in California with Phoenix Energy. California Senate Bill 901 authorises US$200 million per year for five years from the state’s Greenhouse Gas Reduction Fund for wildfire prevention, primarily in the form of hazardous fuel reduction projects. We continue to progress conversations with Phoenix Energy to further our collaboration to address this crucial social and environmental appeal in the state.