Global Supply Chain Glory
Ask Markus Huwener, former investment banker from Germany and now CEO of First Climate, which biomass feedstock is best for power or thermal energy generation, and he might first tell you about First Biomass.
First Climate is a carbon funds management company that has invested roughly $309 million in emissions reductions technology. Formed through an Australian joint venture between First Climate and Spar Capital, First Biomass functions as an equity investment fund for pelletizing operations across the world.
It doesn’t matter what the biomass resource is. Huwener and his team at First Biomass plan to utilize pellets made from woody residues, straw, bagasse, rice husks and more. The team views Europe as a great offtake user for its pellet supply, but the company also sees China and Japan as intriguing users. The company’s strategic investment plan is simple: acquire, hold, manage and trade interests in a portfolio of biomass pellet production investments, all while keeping that portfolio diversified by source biomass, end contractor and geographic location of plants. The company has already made investments in nearly 25 different pellet projects.
“Over the past several years, we have seen a lot of biomass projects that failed due to one or another factor,” Huwener says. “The main challenge for First Biomass would be to originate good, solid projects.” That means projects located in favorable areas that provide a sufficient source of feedstock and can be managed by a proven professional team. Although Huwener’s perspective on creating a successful biomass feedstock supply chain seems to meet the status quo of project development in the biomass sector, his company’s willingness to overcome the unfavorable capital market conditions might be the main lesson.
Unfortunately, the pellet plants that would have supplied the demand of Japan or Europe are off the table. Instead, First Biomass has embarked on a $100 million pre-initial public offering (IPO) funding round that will net long-term investors a cash flow return per year of 15 percent, in advance of another shot at a successful IPO slated for 2013. Given that, and the upward trajectory of pellet demand in Europe, the company’s unwillingness to test the IPO market to raise the equity needed to create a global supply chain might be a good thing after all.