4/2/2008 – HH Capital Advisors LLC, a subsidiary of the real estate investment firm The Herrick Co., will spend up to $1.5 billion financing biomass projects over the next five years, Clean Technology Investor has learned.
The firm has already made two investments in alternative energy, including the recently announced deal to put up to $100 million behind a biomass-to-energy conversion project in Berlin, N.H., developed by project developer Laidlaw Energy Group Inc., of New York. Initially HH Capital will provide $8 million in financing for the development stage of the project, including siting and permitting. Eventually that stake could rise to $100 million, according to both executives.
Structured as a sale-leaseback agreement with a Laidlaw Energy subsidiary, Laidlaw Berlin BioPower LLC, the deal requires Laidlaw to sell the project to a newly formed entity affiliated with HH Capital Advisors LLC, which then leases the project back to Laidlaw through a long-term lease.
According to an interview with HH Capital Advisors President John Halle the sale-leaseback structure of the agreement provides several advantages over traditional equity investing. "That's the only vehicle we understand and like and we use it in many other different asset classes," said Halle. "It bifurcates the tax equities, which the independent power producers have no appetite for, [and] it's a good way to define relationships between owners and operators."
The structure is similar to the financing that HH Capital put together in 2004 to back the development of a $202 million, 55 megawatt, poultry litter fueled power plant in Benson, Minn. developed by Fibrowatt LLC. HH Capital intends to invest in large projects in the $225 million to $250 million range, Halle said in an interview.
Laidlaw had initially intended to raise project finance from private equity investors, but ultimately saw better terms in the leaseback agreement with HH Capital. "For us it was advantageous to finance the entire deal rather than finance it ourselves and then go to the long term debt markets for mezzanine financing and find that it's not available," said Bartoszek. Laidlaw is currently finalizing the definitive asset purchase agreement without the North American Dismantling Corp., the current owner of the Berlin, N.H.-site, the company said.
The Berlin project involves the conversion of a former Fraser Paper pulp mill into a biomass-to-energy project that will produce approximately 60 megawatts of renewable power from wood waste. National Grid, the U.S. subsidiary of National Grid PLC, has signed a power purchase agreement for all of the power generated by the biomass to energy facility, according to Bartoszek. "Our business model is basically identifying these facilities that are non-economic, unproductive facilities that we can upgrade," said Bartoszek. "We have about 250 megawatts of new projects in the pipeline."
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AI
