StormFisher’s bargain acquisition of Recyclage Carbone Varennes will prevent a total loss

Unlike the federal and provincial governments, Quebec taxpayers could benefit, at least in part, from the bankruptcy of Recyclage Carbone Varennes (RCV), acquired for the paltry sum of $17.5 million by the buyer, StormFisher.

Quebec held a 24 per cent stake in RCV, shares worth $117 million at the time of the investment. This amount represents a net loss.

The remaining $365 million committed by Quebec in loans and grants, $248 million, and the $187 million in grants from Ottawa, already committed to the construction of the Varennes complex in Montérégie, are not completely lost, however, since StormFisher will resume construction work to complete the facility. The loans, of course, will not be repaid.

Still on the subject of public funds, the Canada Infrastructure Bank (CIB) had committed to lending $277 million to RCV, of which $210 million had already been committed.

In an interview with The Canadian Press, StormFisher’s Vice President of Finance, Ashkan Shoja-Nia, stated that “there is still a small portion of the CIB loan remaining with the project, but it’s not the full amount.” He did not specify how much, citing confidentiality agreements, but it can be assumed that the portion of the loan assumed by the Canadian-American company represents only a fraction of the total, with the remainder already recorded as a loss by the CIB.

A boon rather than a total loss

The Varennes complex, a facility originally intended to cost $1.5 billion and intended to produce biomethanol from biomass gasification, was 75 per cent complete for the biofuel plant portion, and the second component, the hydrogen electrolyzer, was 45 per cent complete.

StormFisher, which intends to produce synthetic “e-methanol” from green hydrogen and CO2, will therefore continue construction. “Most of the process steps we want to use were already planned for in the previous development and the investments made to date,” explained Shoja-Nia.

The company plans to capture and recover 100,000 tons of CO2 annually that would otherwise be released into the atmosphere and is finalizing agreements with a potential supplier. The company is primarily targeting markets in the maritime transport, aviation, and chemical sectors.

There remains “approximately $600 million” to be invested, he says, to complete the project, which he estimates will ultimately be worth somewhere between $900 million and $1 billion. In other words, StormFisher acquired already constructed assets for $17.5 million, whose current value is between $300 million and $400 million.

This latter amount contains taxpayer money that can be put to good use rather than being completely lost, which would have been the case if the Superior Court had granted the creditors’ requests to liquidate RCV’s assets. Furthermore, StormFisher, which plans to begin operations around the end of 2028, will create approximately fifty highly skilled jobs and twenty indirect jobs that would never have been created had the assets been liquidated.

Public money is already there

StormFisher also inherits the significant 110 MW block of electricity promised to RCV, which was transferred to it by the Court during the bankruptcy proceedings. Hydro-Québec also confirms that the work and commissioning of the 3.5 km 230 kV transmission line, comprising 20 pylons to connect the complex to its grid, were completed on Oct. 6, but specifies that the customer is paying the bill, the amount of which the government agency refused to specify.

StormFisher assures that it will not request public funds, a request that might not be well received after RCV’s setbacks. Ashkan Sooja-Nia acknowledges, however, that the fact of having acquired RCV’s assets for a pittance represents in itself a form of public assistance. “There are public funds involved, there are private funds too. It’s really important that we leverage everything we can. It’s clear that the fact that so much infrastructure is already in place helps us be competitive in the global market and here in Quebec.”

The Cost Challenge

However, as Normand Mousseau, Scientific Director of the Trottier Energy Institute at Polytechnique, explains, being competitive will be no easy feat. “Making hydrogen from electricity is expensive, it’s not very efficient. Plus, combining it with CO2 to make methanol involves additional energy costs. So, these are very expensive solutions, and the question is: who will pay for it? What is the business model?”

“When I talk to manufacturers, they all say: we’d love to have a zero-emission synthetic product, but there’s no way we’re paying for it, because we won’t be competitive.”

Jean-Michel Lavoie, a professor in the Department of Chemical and Biotechnology Engineering at the University of Sherbrooke, nevertheless notes that the buyer “saw a great opportunity because, if they have a good electricity supply contract, logically, they can produce green hydrogen at a relatively attractive price. It’s still expensive, but it’s still relatively attractive,” he says.

He and his colleagues have contacts with the maritime industry, which, he says, has been looking for greener propulsion for many years. “Yes, it will cost more, but that’s the price to pay to transition to a carbon footprint that will be significantly lower than simply using diesel.”

However, he agrees with his colleague Normand Mousseau when it comes to the magnitude of the price difference. “There are still companies willing to pay a premium for green methanol. I’ve met some who would be interested in paying a premium – not 400 per cent – but if it’s a reasonable percentage, I think there would probably be people who would be very interested in greening their food with methanol and paying a little bit more for it.”

Three to four times more expensive

Yet, Ashkan Shoja-Nia makes no secret of the fact that StormFisher’s synthetic methane “will be three or four times the price of traditional methane, that’s for sure.” He quickly adds, however, that “regulations are pushing toward decarbonization, in the maritime sector for example, and if they don’t decarbonize, they’ll have to pay fees.” Could these penalties be so high that this surcharge could become acceptable? “The answer we see coming is yes,” he says, because the penalties are expected to grow exponentially.

It’s a risky bet, but it’s also important to understand that StormFisher plans to produce 72,000 tons of methanol per year. “72,000 tons of methanol is marginal,” emphasizes Normand Mousseau. Just to give you an idea of ​​the scale, we consume 165,000 barrels of oil per day in Quebec, or roughly 20,000 to 25,000 tons per day.”

This was a deliberate choice, counters Ashkan Shoja-Nia. “We didn’t want to be too big. It’s a good size where it’s not really difficult to sell all the product, but it’s not too small either. It’s somewhere in between, and that helps reduce risk.”

Very Long-Term Profitability

When asked when he expects the Varennes complex to become profitable, he hesitates for a long time before answering: “It’s hard to say, but when you calculate the financing of this plant, it’s over a period of about 20 years or more.”

Jean-Michel Lavoie argues that there is a huge market for methanol, which is currently produced cheaply from fossil fuels. Producing it synthetically by recovering a greenhouse gas like CO2 will eventually reduce its price, like any new technology. “At some point, when oil starts to run out and prices rise, we’ll ask ourselves: why didn’t we take action when it was time? Why didn’t we implement a new alternative way to be independent of all this?”

It’s to avoid getting to that point that initiatives like StormFisher’s are worth the risk.

–This report by La Presse Canadienne was translated by CityNews