Calumet announces investors for renewable diesel project

Calumet Specialty Products Partners’ unrestricted subsidiary, Montana Renewables LLC has conducted a series of transactions.

Montana Renewables is a renewable fuel business.

The company is converting part of the existing Calumet refinery into a renewable diesel plant.

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Warburg Pincus has agreed to invest $250 million in Montana Renewables in the form of a participating preferred equity security, which values MRL at a pre-commissioning enterprise value of $2.25 billion, according to a release.

“The preferred equity investment is not interest-bearing and carries certain minimum return thresholds. In connection with the investment, Warburg Pincus will have a representative on MRL’s four-member board of managers,” according to a release.

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Calumet also said Stonebriar Commercial Finance has invested an additional $350 million through a pair of sale and leaseback contracts on top of its existing $50 million commitment to Montana Renewables.

With these transactions, the $300 million convertible investment from Oaktree Capital Management in Montana Renewables has been retired.

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Once it’s fully operational, Montana Renewables will “use waste feedstocks to produce low-emission alternatives that directly replace fossil fuel products including renewable hydrogen, renewable diesel and sustainable aviation fuel,” according to a release.

Renewable diesel and sustainable aviation fuel “created by catalytic hydroprocessing of renewable feedstocks significantly reduce the carbon footprint of hard to electrify industries,” according to Calumet.

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The investments will speed up the conversion to renewable fuels at Calumet, according to the release, and will help the company increase capacity in 2024-2025 to an estimated 18,000 barrels per day, and have the option to convert a portion of the plant’s production from renewable diesel to sustainable aviation fuel.

The city and county commissions both recently approved a tax abatement for Calumet’s project. The county is also planning to issue $550 million of tax exempt municipal bonds for the project.

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Commissioners voted in February to adopt a resolution announcing their intent to issue the bonds.

In the resolution, the county states the Montana Renewables will use the proceeds of the bonds to “finance all, or a portion of, the costs of acquiring, constructing, installing, converting, modifying and repurposing infrastructure and improvements…to create a renewable fuels refinery capable of processing renewable feedstocks into sustainable alternatives; a hydraulic expansion of the renewable fuels refinery, including construction and installation of various pumps, control valves, piping and compressors, a new hydrogen plant, and related improvements; acquisition and installation of equipment in the renewable fuels refinery to facilitate production of sustainable aviation fuel; and related improvements.”

If the bonds are issued, the county will enter into one or more loan agreements or other financing or credit agreements with Montana Renewables for repayment of the bonds, according to the resolution of intent.