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May 31, 2021

CE+P project verified for green bonds

BRAWLEY – The developer of a long-discussed biofuel and power complex to be built south of here says the finish line is in sight for securing the necessary financing to begin construction.

David Rubinstein (sic), chief executive officer of California Ethanol and Power, said the company’s Sugar Valley Energy project has been verified as eligible for green bond financing.

Rubinstein estimated the verification puts the project two to three months from completing financing. Currently, the Fitch Ratings Inc. is assessing the company’s credit profile to assign a bond rating, he said.

From that point, the California Public Finance Authority will be a conduit issuer for an estimated $500 million of both federally taxable and tax-exempt green bonds to support the construction of Sugar Valley Energy.

The project is a 160-acre energy campus within the 5,000-acre Keystone Industrial Complex near Brawley. The complex as proposed would produce 68 million gallons of low-carbon sugarcane ethanol annually and would include a 49-megawatt biomass power generation island with related infrastructure. It would be the first facility of its kind to be built in the United States.

Sugar Valley Energy will also borrow approximately $300 million of green bonds through a private placement to support the construction of the ethanol biorefinery.

The project’s green bond verification was done through Kestrel Verifiers, an Oregon-based consulting firm that assists companies seeking green financing.

Green bonds enable capital-raising and investment for new and existing projects with environmental benefits. Projects eligible for green bond financing are identified according to their adherence to The Green Bond Principles (GBP). The principles were established in 2014 by the International Capital Market Association, a consortium of investment banks. Updated in June 2018. GBP are voluntary process guidelines that recommend transparency and disclosure and promote integrity in the development of the green bond market by clarifying the approach for issuance of a green bond.

GBP provide issuers guidance on the key components involved in launching a credible green bond. They aid investors by ensuring availability of information necessary to evaluate the environmental impact of their green bond investments, and they assist underwriters by moving the market toward standard disclosures that will facilitate transactions.

Kestrel determined the publicly sold green bonds to be issued by the California Public Finance Authority in the municipal market are aligned with the GBP in the Renewable Energy and Sustainable Water and Wastewater Management project categories. The privately placed green bonds are eligible in the Pollution Prevention and Control project category.

“We found that Sugar Valley Energy is designed to maximize environmental benefits through multiple stages – producing low-carbon ethanol, electricity, and biomethane,” said Kestrel CEO Monica Reid. “Meeting the low carbon intensity requirements of California’s low-carbon fuel standard for the sugarcane ethanol provides verification of the positive impact of the biofuel, and the integrated recycled water and wastewater treatment systems are a particularly innovative aspect of the project.”

Rubenstein said CE+P has obtained all necessary permits and environmental certification for the development of the Sugar Valley Energy project. According to a February 2020 economic analysis by Circle Analytics, the complex is projected to contribute more than a billion dollars in economic output, taxes and support more than 15,000 direct and indirect jobs in the surrounding region over the next 25 years.

In January, CE+P began soliciting local farmers to commit to growing the sugarcane required to produce the ethanol. The company plans to use a phased approach to contracting an estimated 48,000 acres of sugarcane production in Imperial County.

CE+P has also completed a 15-year offtake agreement with global agricultural cooperative CHS Inc. to be the exclusive marketer and distributor of ethanol produced at Sugar Valley Energy. Rubinstein said that agreement ensures growers will have a stable, long-term income from providing sugarcane for the project.

Rubinstein said the timetable of the expected release of the bonds would still put the project on track to break ground this year. He expects the plant to begin production in 2023.

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