AT THE MAJOR CCS PROJECTS: TCEP

Tamar Hallerman
GHG Monitor
12/14/12

AT TCEP: FINANCIAL CLOSE PUSHED BACK TO Q2 2013

Developers of the Texas Clean Energy Project (TCEP) had hoped to declare financial close on their 340 MW integrated gasification combined cycle project by the end of the year, but that decision will likely get pushed to the second quarter of 2013, according to project officials. Ann Banks, chief commercial officer at the Seattle-based development company Summit Power Group, confirmed in an interview last week that language and cultural differences between Summit and Sinopec Engineering Group, the Beijing-based EPC contractor for the project’s chemical block, pushed back the financial close date. “TCEP is a complicated project and something like this takes a long time to develop,” she said. “We’re learning that we really just can’t move as fast as we would have liked to, but it’s nothing we didn’t expect.”

Laura Miller, director of Texas projects for Summit, said this week that the recent U.S.  presidential election, as well as Chinese leadership changes, have also slowed things down for the project. “We obtained all of the cost figures from our front-end engineering and design work about a year ago,” she said. “But now that we have a new entrant into the EPC contract, they want to refresh and confirm the numbers, which is all fine, and now we’re in the middle of doing that.” In September, Summit executed a memorandum of understanding with Sinopec for an EPC contract on the $2.9 billion project set for west Texas. With that award, Sinopec was also able to apply to the Chinese Export-Import Bank for all of the project’s debt.

TCEP Must Go Through CFIUS Process

Because TCEP now includes Chinese debt, Banks said, the project will also need additional time to close financially because it is required to follow procedures under the Committee on Foreign Investment in the United States (CFIUS). Headed up by the Department of Treasury, the interagency committee is tasked with reviewing all business deals that could result in the control of a U.S. business by a foreign entity. During the process, representatives from the Departments of Justice, Homeland Security, Commerce and half a dozen others review the deal to determine if it affects U.S. national security. But that process, which takes roughly two-and-a-half months to complete, can only begin once all of the project’s equity is committed, a process which is nearly, but not all the way complete, according Miller. “We’re in negotiations with several different parties at this time,” she said. “We’re getting close.” A company official confirmed in October that Summit had secured roughly $2.6 billion in financing but was still looking for $300 million in additional commitments.

TCEP is buoyed by a $450 million grant from the Department of Energy’s Clean Coal Power Initiative program. Summit has also secured income for the project by selling the electricity, CO2 and urea fertilizer produced at the facility. Summit previously announced that offtake agreements for all of the project’s products are already secured, as are additional EPC contracts with Siemens Energy Inc., the Linde Group and SK Engineering & Construction. Banks said the project, which has a four-year construction window, is still scheduled to come online in 2017.