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First Reserve backs construction of US’ first barley ethanol plants

The global private energy specialist has broadened its investment scope with a $300m biofuel investment, as it considers increasing its attention to renewables.

First Reserve has made a $300 million (€195 million) equity investment in Osage Bio Energy, a sister company to Osage, the largest distributor of ethanol in the Southeastern US. 

The investment will be used to fund the construction of the US’s first barley-based ethanol production facilities, First Reserve director Glenn Payne told PEO. The four planned facilities will also be the first ethanol facilities outside of the Midwest to service the Southeast and Mid-Atlantic regions.

Barley ethanol is not new to other areas of the world and is currently produced in countries including Canada and Spain. “The technology is very well understood,” Payne said. “It’s not like we’re taking any technology risk here.”

We have a cost advantage over every other form of ethanol produced in the US

Glenn Payne

Osage Bio Energy’s facilities will use regionally grown barley, reducing transportation costs incurred from relying on Midwestern producers. Barley is also environmentally superior to corn, does not compete for land for food production and is a winter crop enhancing the yield of regionally grown summer crops, First Reserve said.

Barley prices have also not been driven up in the way corn prices have. “We have a cost advantage over every other form of ethanol produced in the US,” Payne said.

“We are really producing three forms of energy,” he added.

One comes in the form of a dietary supplement for livestock, the result of a protein meal byproduct created during the process in which barley is turned to ethanol.

Renewable energy from the combustion of the barley waste products, husks and hulls will also be generated. The facilities will aspire to be self-sustainable and approximately 20 megawatts of excess energy from each facility will go back into the power grid.

First Reserve’s $7.8 billion fund has the capacity to invest around 10 percent in renewable energies and the firm is considering increasing its allocation either in the present fund or in later efforts. In April, the firm purchased Gamesa Solar, a Spanish solar energy company, for €261 million. It also acquired Ener3, an Italian solar power plant construction company with the intention of merging the two.

The US firm has chosen to avoid investments in corn ethanol and will continue to do so, said Payne. “Without being unduly pejorative, we are not invested in that industry for very good reason,” he said.

First Reserve has seen heavy dealflow this year, producing the largest number of fees for investment banks during the first quarter. Earlier this week, the firm acquired Canadian oilfield services company Saxon Energy Services for C$596 million ($593 million; €385 million). The joint purchase was made with global oilfield services company Schlumberger.