Chinese utility signs MOU with BlueFire to finance Fulton project

By Kris Bevill | November 01, 2011

BlueFire Renewables Inc. announced Oct. 31 it has signed a Memorandum of Understanding with utility firm China Huadian Engineering Co. Ltd. to finance BlueFire’s cellulosic ethanol facility and power production plant in Fulton, Miss. As part of the MOU, Huadian has agreed to purchase an interest in BlueFire Renewable Energy LLC and has the option to purchase debt for the Fulton project to complete financing and construction for the facility. The utility may also invest additional equity and/or provide debt to develop five additional plants in the U.S. following the initial success of the Fulton plant. The companies are also considering a joint venture to develop similar projects in China.

Huadian is currently completing its due diligence process, but BlueFire CEO Arnie Klann said he expects the deal to be finalized as early as Dec. 1 with construction of the facility taking place immediately following the close of financing. “That’s the goal right now,” he said. “As soon as we have cash we’re going to mobilize and get back on site.” Klann declined to release the specific amount of financing agreed to in the MOU, but said the deal with give BlueFire “everything we need,” to continue the project. In its quest for financing, BlueFire had previously been a candidate for a U.S. DOE loan guarantee, but dropped its application earlier this year to focus on a potential $125 million USDA loan guarantee instead. Klann said he remains optimistic that the USDA guarantee will be approved, adding that the agreement with Huadian will hopefully help the process along.

The total project cost for BlueFire’s Fulton plant is estimated at nearly $300 million.

According to Klann, Huadian was attracted to BlueFire’s technology for several reasons, but the primary attraction is BlueFire’s planned 24 megawatt cogeneration power plant to be located within the 19 MMgy wood waste-to-ethanol facility. “What interests them is the fact that you have a biomass-fired power plant that’s embedded within the biorefinery,” Klann said. “They have some biomass-fired power plants that they own in China but they’re not as efficient as they could be because they don’t have the cogen application associated with it. When they look at this, they see a solution to some of the projects they have in China.”

Another benefit of BlueFire’s technology is its ability to be used to produce a range of biofuels and biochemicals, Klann said. China has placed emphasis on producing biofuels, biochemicals and achieving overall reductions in greenhouse gas emissions, and Huadian can use BlueFire’s technology to meet some of those goals. “We’re not stuck with cellulosic ethanol, so to speak,” Klann said. “We have an intermediate step of sugars and those sugars can be used to produce biodiesel, bio-jet fuel [and] biochemicals. They see our technology as being much more flexible than most of our competitors.”

Klann credits the National Center for Sustainable Development for facilitating the meeting between his company and Huadian. The Washington, D.C.-based non-governmental organization collaborates with the China Clean Development Mechanism Fund Management Center, commonly referred to as the CDM Fund, to promote the advancement of sustainable, low-carbon projects in a variety of industries by partnering U.S.-based technology providers with compatible project developers in China. Mitchell Stanley, president and trustee of the NCSD, said he was alerted to BlueFire’s technology capabilities earlier this year and saw it as an opportunity for China to produce a variety of products from waste-based materials. “What we try to do is find these applications of technologies that have a very broad base, not small, sector-specific,” he said. “The Chinese had tried a lot of biomass-to-energy projects and … this was something that is really different.” After meeting with BlueFire executives and reviewing its technology platform, both CDM and Chinese government officials concluded that it could play an important role in reducing the country’s emissions, he said. “China has huge amounts of agricultural waste that just rots away and they think Arnie’s got the answer,” he added.

BlueFire’s Fulton plant site has been vacant since June, following the completion of site clearing and early-phase construction activities. Klann said he expects up to 700 jobs to be created through the construction of the facility, which is expected to take up to 24 months to complete.