Debt nearly in place, trash-to-fuel company considers equity

The $105 million commitment for a federal loan guarantee nailed down last week by Fulcrum BioEnergy for a trash-to-fuel plant east of Sparks solves a big piece of the facility's financing.

But not all of it.

The company headquartered at Pleasanton, Calif., still needs to raise more than $75 million in equity to build the $180 million facility at Tahoe Reno Industrial Center.

When it's completed in 2014, the plant will take up to 2,000 tons of municipal trash a week. It will process the garbage into approximately 10 million gallons of ethanol annually.

It's contracted with Waste Management and Waste Connections Inc. for trash deliveries, and it has a three-year deal to sell ethanol to Tenaska Energy of Omaha.

Fulcrum will get the trash that provides feedstock for its plant from Waste Management at no cost.

But it will need to pay for the plant itself, a big investment for a development-stage company that's only five years old and has yet to generate any revenue.

The conditional commitment by the U.S. Department of Agriculture to provide a loan guarantee allows Fulcrum to move forward on the debt side of the project financing, says Rick Barraza, the company's vice president of administration.

The company expects to use the guarantee to nail down a bank loan. Once fees are subtracted from the $105 million, debt will cover about half of the project's $180 million cost.

James Macias, Fulcrum's president and chief executive officer, says the guarantee does more than simply open the door for Fulcrum to talk with lenders.

"It allows us to secure private bank financing at reasonable prices and with favorable terms," he says.

Last September, the company filed documents with the Securities and Exchange Commission for an initial public offering that would raise up to $115 million.

That IPO was put on the back burner, Barraza says, while the company's executives thought some more about whether they wanted to raise equity through a public offering, a private transaction or some combination of the two.

The question still hasn't been decided, although the filing documents for the IPO remain active.

Assuming the equity and debt financing come together, Barraza says Fulcrum expects to begin construction next year. Commercial operation of the plant would begin in 2014.

Fluor Corp. of Irving, Texas, is the primary contractor on the job, which is in Storey County about 20 miles east of Reno. The facility is planned at 3600 Peru Drive, which is just west of USA Parkway.

Fulcrum says construction is expected to employ about 430 people. It says 53 people would be hired to operate the plant.

The company says the design of the Sierra BioFuels plant is intended to be modular, allowing it to be scaled up to handle more garbage and produce more ethanol.

The company also is working on trash-to-energy projects in other parts of the country, and it says projects currently in development would divert more than 13 million tons of garbage from landfills annually. The company projects that its current projects would produce more than 700 million gallons of ethanol each year.