Nova Biosource Fuels finalizes unique financing deal for new Seneca facility

By Bryan Sims | January 01, 2008
Web exclusive posted Jan. 4, 2008, at 8:41 a.m. CST

Houston-based biodiesel producer Nova Biosource Fuels Inc. has finalized a $41 million senior secured credit facility with WestLB AG, one of the world's leading financial services providers for alternative energy companies. The facility-or credit loan-includes a $36 million construction loan that will convert to a term loan at the completion of the company's 60 MMgy biodiesel facility in Seneca, Ill., which is expected to be completed this month.

The financing deal also includes a $5 million working capital facility. The non-recourse finance structure-a loan where the lending bank is only entitled to repayment from the profits of the project the loan is funding, not from other assets of the borrower-will also be used towards the completion of the Seneca plant. WestLB AG, New York Branch assumed the role as sole arranger, bookrunner and administrative agent on this financing deal.

"This [finance deal] allows us to show that our projects are viable from an economic standpoint when everyone else is going out of business," said Nova Biosource Fuels Vice Chairman and President J.D. McGraw.

WestLB has a venerable presence in the global renewable fuel and energy sectors, providing corporate capital commitment strategies, advisory services and innovative financing solutions for its global clientele base such with Nova's unique finance investment.

According to McGraw, this is the first biodiesel plant in the nation to have been financed in this nature and the first for either party.

"[This deal] enables us leverage where we're going to be able to have some flexibility of the money we put into [the Seneca] facility to use towards other future plants," McGraw said. "We hope to announce something in the near future on our next facility."

Nova's 60 MMgy plant in Seneca continues on pace for mechanical completion this month with start-up operations anticipated to commence some time in February. The company is focused on building and operating a number of plants with a goal of attaining production capacity of between 180 MMgy to 220 MMgy. In particular, Nova is investing to improve the profitability of its 10 MMgy plant in Clinton, Iowa while also completing the Seneca facility.

Nova's business strategy for the next three years includes building up to seven biodiesel plants with production capacities ranging from 20 MMgy to 100 MMgy.

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