©2016 Michigan Economic Development Corporation

Bond issuance attracts investment, spurs economic development

Wednesday, February 26, 2014

Frank Provenzano
517.335.1821

LANSING, MI – The deal that will save a renewable-energy company in Canton Township $1 million while increasing local and state tax revenue offers a compelling illustration of how to foster growth and minimize risk. The private activity issuance of up to $13.3 million through Michigan Strategic Fund and managed by Michigan Economic Development Corporation was authorized Tuesday.

Clean Energy Renewables Fuels is a publicly traded company and one of the largest providers of natural gas fuel for transportation in North America. With an aim to create the “American natural gas highway,” Clean Energy identified the Sauk Trail Hills landfill in Canton Township as a site to reclaim biogas – methane and variants – and process the captured vapors into pipeline quality fuel, among other uses.

Recently, Clean Energy contracted to provide fuel to UPS, Lowe’s and other large fleet operators – and a combustible form of the biomethane to generate electricity for the city of Vernon, a suburb of Los Angeles; it currently provides natural-gas fuel to the Los Angeles Metropolitan Transit Authority. They expect to sell the energy from the biogas generated from the Canton site to DTE Gas.

“Companies are looking for ways to minimize the cost of capital when going into a new project, and the state of Michigan is looking to attract long-term investment,” said Eric Hanna, director of the debt-capital programs at MEDC. “We facilitate the process by which bond holders maintain a market-appropriate risk adjusted rate of return, companies reduce interest paid on their debt, and all while the state assumes no default risk. Long-term investment is good for jobs and the tax base. It helps the state and local communities. In this case, it’s also good for the environment.”

The Michigan-based project, entitled Canton Renewables, requires Clean Energy to lease gas rights and land from Republic Services, owners of the landfill and one of the nation’s largest solid waste handling and disposal companies. In 2013, a gas extraction and processing facility was constructed on the site, marking the second Clean Energy site of its kind in the U.S. The cost to construct the facility is financed by the bonds.

Clean Energy’s landfill in Dallas opened in 1975 and provides the third-largest landfill gas operation in the U.S. The Canton site features a high-BTU design, specifically created to produce renewable natural gas for injection in the natural gas pipeline system. A third facility is under construction in Memphis, Tenn.

Corporate bonds are typically issued to finance the cost of a new project with bond holders paying federal tax on the interest gained on the purchased bond. However, bonds issued through the Michigan Strategic Fund in this case are tax exempt. The MSF-issued bonds are set at approximately the market less anticipated federal taxes, thereby saving Clean Energy $1 million over eight years.Clean Energy is solely responsible for the repayment of money raised through the issuance of bonds, said Hanna.Biogas captured through the pipeline at the Sauk Trail Hills landfill in Canton Township could be used to fuel the fleet of Republic solid waste collection trucks. With a nationwide network of nearly 500 fueling stations, Clean Energy delivers more natural-gas fuel than any other company in the U.S.

In December, Gov. Snyder announced the goals for the state’s energy usage included less reliance on coal, and an increased dependence on renewable energy and natural gas.