While all eyes are on the $54 billion for clean energy in the proposed stimulus package, federal aid from previous green bills is starting to kick in. This morning, cellulosic ethanol startup Range Fuels says it has secured a conditional commitment for a loan guarantee from the U.S. Department of Agriculture out of the 2008 Farm Bill worth $80 million to help the company finish construction of its commercial scale plant near Soperton, Ga. Essentially, a loan guarantee is a promise by the government to back a loan if the company can’t pay it, and it enables companies to finance projects with a better interest rate and at a lower cost.
With the serious lack of debt and tax credit financing for clean power projects, the federal government is one of the better sources to help with fundraising for large-scale projects these days. Range Fuels has turned to the government before, securing a $76 million federal grant from the Department of Energy. For the loan guarantee, the USDA called it the “the first ever loan guarantee to a commercial-scale cellulosic ethanol plant,” though we’re waiting to hear back from the company of the conditions of the guarantee.
Range Fuels started construction of its 100-million-gallon-per-year plant in Soperton in November 2007, but it has been moving a bit slower than it expected, pushing back the timeline of the first phase of construction.
When the markets were better back in 2007, Range Fuels was considering an IPO to raise money for the plant, which will likely cost in the range of hundreds of millions of dollars. The venture-backed company also managed to raise $100 million in early 2008 (before the markets crashed), from Passport Capital, BlueMountain, Khosla Ventures, Leaf Clean Energy Company and Pacific Capital Group (with participation by the California Employee Retirement System.)
The loan guarantees in the Farm Bill are supposed to be allocated for building the first wave of plants for non-corn based biofuels, and companies can apply for up to $250 million per project. There’s a variety of competing companies rushing to build some of the first cellulosic ethanol plants in the United States. Verenium told us that it’s slated to break ground on its first commercial facility in the second half of this year. And Coskata plans to build a 50-million- to 100 million-gallon-per-year ethanol plant, but the company told us it has also pushed its timeline back a bit. So far, Range Fuels is leading the pack, but even headstarts don’t guarantee success in this economic climate.