SCS ENERGY HOPES TO DECLARE FINANCIAL CLOSE ON HECA BY YEAR’S END

Tamar Hallerman
GHG Monitor
2/22/13

The head of the development company behind the Hydrogen Energy California gasification project is hoping to declare financial close on the $3.9 billion poly-generation plant by the end of the year. In a recent interview, SCS Energy CEO Jim Croyle said he is “pretty confident” his company can make a final investment decision on the southern California project in the fourth quarter and begin construction in early 2014 despite the fact that the company must still receive permission to construct from the state, negotiate a power purchase agreement and secure financing for the 390 MW facility. “All the things that need to happen are happening,” Croyle told GHG Monitor.

The main focus for SCS in the coming months will be obtaining permission to construct from the California Energy Commission, said HECA spokeswoman Tiffany Rau. SCS Energy has been moving forward with that process with the CEC and the Department of Energy for the better part of a year. CEC documents indicate that regulators will file a preliminary staff assessment and draft environmental impact statement on March 15, with final versions expected in mid-May, clearing the way for evidentiary hearings this summer. Rau said SCS hopes to have a CEC decision “ideally by the third quarter.” Meanwhile, Occidental Petroleum Corp., the project’s CO2 offtaker, must also apply for CO2 injection permits with state regulators as SCS begins negotiations for a power purchase agreement with the California Public Utilities Commission. Front-end engineering and design (FEED) work is expected to wrap up next month, Rau said. “This is one of those situations where we’re doing everything in parallel. It’s not subsequential and we’re not waiting around,” she said.

SCS Tees Up Financing

Croyle said SCS is also focusing on lining up financing for the project. He said SCS commissioned financial services giant Societe Generale to be HECA’s banker and financial adviser and is also working with Mitsubishi Heavy Industries on capital and financing issues. HECA has seen some interest from companies abroad, Croyle said, but he would not name specific financiers. “We do not see financing as an ultimate impediment for HECA,” he said. Croyle clarified that unlike the similarly-structured Texas Clean Energy Project, SCS has not sought nor has been approached by Chinese companies about investing in HECA.

Despite all of the project components that must fall into place in the coming months—and delays that other CCS projects have faced in terms of lining up financing and offtakers—Croyle said he is confident HECA can stay close to its projected timeline. “These projects are large and complex and must navigate regulatory frameworks that at are times unpredictable. I think the current schedule we have for the project is realistic. Could it be delayed? Of course. But over the last year our schedule has only slipped by about six weeks, so we’ve been relatively pleased in terms of timing and schedule,” he said.