🤠 May Roundup

Good Morning. This is the Sunya Scoop. The newsletter that takes energy transition news and turns it into an easy-to-read email for you.

Howdy folks, and welcome to the May Roundup – the only place to be if you want to catch up on the ten most engaging announcements that had you and your fellow subscribers glued to your screens this month.

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RENEWABLE FUELS

#10 – Infinium hits critical milestone in eFuels development

• Infinium manufactures a ton of proprietary CO2 conversion catalyst at its West Sacramento facility

• Catalyst is a critical component for creating electrofuels (eFuels), which replace carbon-intensive petroleum products

• Infinium eFuels are made from renewable power-derived green hydrogen and captured carbon dioxide using a proprietary process

• Company will start delivering eFuels to Amazon in 2023 to help decarbonize its middle-mile trucking fleet

• Infinium eSAF, eDiesel, and eNaphtha can replace petroleum fuels and be used in existing engines and distribution infrastructure

FUNDRAISING

#9 – Hamilton Lane raises $850 million for sustainable investments

• Hamilton Lane, a private markets investment management firm, has raised over $850 million in impact and sustainable capital since early 2021.

• The final closing of Hamilton Lane Impact Fund II brought total commitments to the fund to $370 million, over 3.75 times larger than its predecessor fund.

• In addition to the fund, Hamilton Lane raised over $500 million in sustainable-focused investment capital within separate accounts as part of its broader sustainable investment platform.

• Fund II aims to generate attractive private equity returns while making a positive social and environmental impact by investing in businesses focused on clean energy transition, sustainable processes, health and wellness, and community development.

• The fund has made nine investments so far, with a focus on growth investments leveraging transformative technologies and innovation.

• Hamilton Lane’s sustainable investment platform has a strong pipeline of opportunities, with deal flow in 2023 tracking at 30% above the record deal flow numbers from the previous year.

• The firm manages more than $2.9 billion in impact strategies, generating significant environmental impact, including over 10 million metric tons of CO2e reduced or avoided.

• Hamilton Lane’s sustainable investment platform is part of its broader private markets investment platform, which oversees nearly $832 billion in assets under management and supervision.

HYDROGEN

#8 – NEOM Green Hydrogen locks in 8 billion for green hydrogen in Saudi Arabia

Just when we thought Chevron would have the largest deal this week, the Saudi’s said…

• NEOM Green Hydrogen Company (NGHC) has achieved financial close on the world’s largest green hydrogen production facility, with a total investment value of $8.4 billion.

• NGHC is an equal joint venture between ACWA Power, Air Products, and NEOM, aiming to produce green ammonia at scale by 2026.

• The project is being financed through $6.1 billion non-recourse financing from 23 local, regional, and international banks and financial institutions.

• NGHC has secured an exclusive 30-year off-take agreement for all the green ammonia produced at the facility.

• The engineering, procurement, and construction (EPC) agreement for the project, valued at $6.7 billion, has been concluded with Air Products.

• The project will integrate up to 4GW of solar and wind energy to produce up to 600 tonnes per day of carbon-free hydrogen in the form of green ammonia.

• The financial close has been certified as adhering to green loan principles and is one of the largest project financings under the green loan framework.

• NGHC’s project aims to accelerate the adoption of green hydrogen and contribute to Saudi Vision 2030’s sustainable development goals.

• The construction of the facility is well underway, with production scheduled to begin by the end of 2026.

• Air Products will be the exclusive off-taker of the green ammonia produced, supporting decarbonization efforts in the transportation and industrial sectors.

• ACWA Power sees this project as a significant step toward accelerating the shift to clean energy and supporting Saudi Arabia’s decarbonization goals.

• NGHC’s financial agreements involve a diverse mix of local, regional, and international banks and financial institutions.

• NGHC was awarded its first industrial operating license by Saudi Arabia’s Ministry of Industry and Mineral Resources in January 2023.

CARBON CAPTURE

#7 – EPA proposes new emissions standards for power plants

• The Biden administration has proposed a plan to reduce greenhouse gas emissions from power plants in the United States.

• The proposal aims to limit carbon dioxide emissions from power plants, which account for over a quarter of U.S. emissions.

• Power companies will be required to install carbon capture equipment or use low-emissions hydrogen as a fuel to meet the new standards.

• The plan is projected to reduce carbon emissions from coal and gas plants by 617 million tonnes between 2028 and 2042.

• The proposal aligns with President Biden’s goal of achieving net-zero power sector emissions by 2035.

• The EPA, under Administrator Michael Regan, believes the plan relies on proven technologies and supports a cleaner future.

• The proposal has faced criticism from fossil-fuel-producing states, who argue it represents government overreach and could destabilize the electric grid.

• The EPA’s authority to regulate power plants was constrained by a Supreme Court ruling, which prevents a system-wide shift from fossil fuels to renewables.

• The proposal will undergo a regulatory rule-making process and a public comment period before being finalized.

• The EPA estimates the proposal will cost the power industry over $10 billion but yield health and climate benefits of around $85 billion.

• The plan relies on tax incentives and credits from President Biden’s climate bill to lower costs for deploying carbon capture and hydrogen technologies.

• The proposal sets different standards for new and existing natural gas and coal plants, with more stringent requirements for older coal plants.

• Environmental groups have welcomed the proposal, stating that it has been carefully crafted to withstand legal challenges.

LITHIUM

#6 – Exxon dips toe into water on lithium extraction

• Exxon is seeking to produce lithium, a key ingredient in batteries for electric cars, by purchasing drilling rights to Arkansas land.

• The move indicates Exxon’s anticipation of a decline in demand for internal combustion engines and a future less dependent on gasoline.

• Exxon bought 120,000 acres in Arkansas from Galvanic Energy for over $100 million.

• The company aims to test the viability of extraction technologies and potentially expand its operations if profitable.

• Galvanic Energy estimates the prospect could have 4 million tons of lithium carbonate equivalent.

• Exxon projected that electric vehicles could account for over 50% of new car sales by 2050, with the global fleet reaching 420 million by 2040.

• The shift to EVs has triggered a race to secure lithium supplies, and the U.S. aims to encourage domestic production of the mineral.

• Exxon’s foray into lithium production would diversify its portfolio and tap into a rapidly growing market.

• Exxon has plans to spend $17 billion on carbon emissions reduction and low carbon technologies but has focused on investments aligned with its oil and gas business.

• Other oil producers, like Oxy, are also exploring the lithium business.

• Southern Arkansas has emerged as a potential lithium hub due to high lithium concentrations in Smackover brine and favorable infrastructure.

• Large-scale deployment of direct lithium extraction technologies may take years.

Separately – Exxon is selling Williston Basin assets to Chord Energy for $375 million

FUNDRAISING

#5 – Mitsubishi to launch $1 billion decarbonization fund

• Mitsubishi Corp. plans to launch a decarbonization fund, investing $1 billion in startups with promising technology

• The fund will focus on renewable energy, next-generation fuels, storage batteries, and other areas, mainly investing in startups’ projects that are yet to be commercialized

• Mitsubishi will create the Marunouchi Climate Tech Growth Fund through a management company jointly established with MUFG bank and South Korean private equity fund Pavilion Private Equity

• Mitsubishi’s stake in the management company is over 90%, and it will take the lead in selecting investments

• The fund aims to expand to $1 billion by April 2024 and will be one of the largest funds led by an operating company in Japan

• Investments are expected to range between $20 million and $100 million per startup, with around 20 investments to be made by April 2029

• Mitsubishi plans to facilitate collaboration between the startups and Japanese and other Asian companies via its global business network to promote decarbonization efforts

• To achieve net-zero CO2 emissions by 2050, an average annual investment of $2 trillion will be required in 2022 to 2025, rising $4 trillion per year in 2026 to 2030

• Mitsubishi plans to put 2 trillion yen ($15 billion) into decarbonization projects by fiscal 2030 and has already invested $100 million in Breakthrough Energy Catalyst in 2022.

FUNDRAISING

#4 – Neos raises $800 million for energy transition

• Neos Partners, a clean-energy-focused investment firm founded by former executives of Oaktree Capital Management, has raised about $800 million for its debut fund, Neos Partners I LP.

• The San Diego-based fund has attracted backing from some of the largest U.S. endowments, including those of Yale University, Stanford University, and the University of Pennsylvania, among others.

• The fundraise was carried out with the assistance of UBS’s private funds group as placement agent.

• Neos focuses on supply-chain businesses that benefit from the shift to clean energy, a strategy similar to that of Oaktree’s power opportunities group, where Neos’ managing and senior partners worked before founding Neos.

• Neos Partners has plans to invest in critical infrastructure and clean energy services and equipment providers rather than infrastructure operators, a strategy that other firms investing in clean energy have also favored.

• The managing and senior partners at Neos participated in deals at Oaktree that included Shoals Technologies, a supplier of equipment used in solar, battery, and electric vehicle-charging systems.

CARBON CAPTURE

#3 – CRC announces two new carbon storage agreements and additional Class VI permits

• Carbon TerraVault (CTV) submitted a Class VI permit to the EPA for 34 million metric tons of CO2 storage for CTV IV, bringing CTV’s total potential permitted storage to 174 MMT

• CTV signed two storage-only Carbon Dioxide Management Agreements (CDMAs) with Yosemite Clean Energy, LLC for 40,000 metric tons per annum (MTPA) of CO2 injection, and InEnTec Inc. for 100,000 MTPA of CO2 injection, bringing the total CTV injection rate to 610,000 MTPA with 200,000 MTPA targeted to Elk Hills reservoir and 410 MTPA targeted in the Sacramento basin area

• Yosemite Clean Energy, LLC CDMA involves sequestering at least 40,000 MTPA of CO2 at CTV carbon storage vaults from a new hydrogen plant to be constructed in Oroville, Northern California, and the produced CO2 will be captured and stored permanently underground by CTV

• InEnTec CDMA involves sequestering initially at the minimum 100,000 MTPA of CO2 from InEnTec’s facility in the CTV I carbon storage vault, and the facility is expected to produce 80 to 100 tons per day of renewable dimethyl ether (rDME) from waste materials

• Both agreements provide CTV with an injection fee on a per ton basis that fits within the previously disclosed economic type-curve for projects that require a storage-only solution

• Francisco Leon, CRC’s President and Chief Executive Officer, said they are evaluating the strategic positioning of their carbon management business which could include a potential separation from their legacy oil and gas business.

CARBON REMOVAL

#2 – JP Morgan to invest $200 million in carbon removal

• JPMorgan Chase plans to invest over $200 million to purchase carbon removal credits, including a preliminary 15-year agreement to purchase about 450,000 tons from CO280.

• Climeworks, a Swiss company, will receive over $20 million from JPMorgan for carbon removal, aiming to remove 25,000 metric tons over nine years.

• Charm Industrial, a startup turning plant waste into a carbon-rich liquid, has removed about 6,000 tons to date, and JPMorgan is buying nearly 30,000 metric tons of removal from them over five years.

• JPMorgan commits to matching its operational emissions from consuming natural gas and other fuels with equivalent carbon removals by 2030.

• The bank aims to reduce its emissions by 40% by 2030 from 2017 levels.

• JPMorgan’s commitment to funding about 800,000 tons of removal is the second-largest purchase in the market’s history.

• Microsoft, in a separate deal, plans to pay for about 2.8 million tons of removal through a wood-chip-fired power station in Denmark operated by Ørsted.

• Removal credits can cost 100 times more than conventional carbon credits, and JPMorgan is willing to pay hundreds of dollars per ton for each removal credit.

• JPMorgan’s commitment includes providing clients with access to up to $25 million in carbon removal credits through the Frontier alliance and committing $50 million in purchases to neutralize its own emissions.

FUNDRAISING

#1 – NGP raises a fresh $700 million for energy transition

• Specialist investment firm NGP Energy Capital Management has raised $1.23 billion across two funds: NGP ETP IV LP, a clean-energy fund with $700 million in commitments, and NGP Royalty Partners II LP, a fund for mineral rights and royalties in oil and gas with $527 million.

• The clean-energy fund received backing from over 30 investors, including the Kentucky Teachers’ Retirement System.

• NGP Energy Capital Management began investing in clean-energy businesses over 15 years ago and focuses on growth strategies supporting equipment and services providers in the clean-energy industry and developers of sustainable infrastructure.

• The firm has already invested about a fifth of the new clean-energy fund in companies such as Form Energy, EV Realty, and Dandelion Energy, focusing on renewable power sources, electrification, energy efficiency, and carbon management.

• NGP sees attractive investment opportunities in the clean-energy sector due to declining asset prices and the benefits of the Inflation Reduction Act, which extended tax incentives for solar, wind power, and other clean-energy technologies.

• Investment firms targeting the clean-energy sector are increasingly focusing on supply-chain businesses, while NGP’s royalty and mineral rights investments provide participants with a share of well revenue without production costs.

• Clean energy remains popular among investors, and NGP sees growth investment opportunities in the sector as underserved, typically involving minority stakes. Traditional energy also continues to attract investors seeking lower risk and cash-yielding attributes.

Separately, NGP co-founder, Ken Hersh, has a new book out that’s worth a read. (Unfortunately, we do not receive any royalties on this. Ken, you know where to reach us if you want to sponsor!)

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.