Rentech Inc., the owner of nitrogen maker Rentech Energy Midwest Corp. (REMC), said June 24 that it has agreed to sell approximately 11 million common shares to current institutional shareholders of Rentech who are clients of a large, Boston-based investment advisor. Rentech has entered into a definitive agreement to sell the shares of its common stock through a registered direct offering at a price of $0.58 per share and for gross proceeds of approximately $6.4 million. There are no commissions related to the transaction. Rentech intends to use the net proceeds from this offering for general corporate purposes, which includes funding a portion of the development costs related to its recently-announced renewable synthetic fuels and power project in Rialto, Calif. The shares are being offered pursuant to the company’s effective shelf registration statement on Form S-3 as filed with the Securities and Exchange Commission. The closing of the offering is expected to take place on or about June 29, 2009.
Rentech also announced that it has completed two investment agreements with biomass gasification technology companies. It has signed a definitive agreement to acquire 100 percent of SilvaGas Corp. and its commercial-scale biomass gasification technology, which converts urban waste feedstocks into synthesis gas. Rentech has also executed agreements with ClearFuels Technology Inc., a bio-energy gasification and project development company whose technology converts rural virgin cellulosic biomass feedstocks into syngas. Rentech has acquired a 25 percent ownership interest in ClearFuels, and has agreed to the installation of a ClearFuels biomass gasifier at the company’s Product Demonstration Unit (PDU).
The SilvaGas biomass gasification technology was developed with approximately $100 million in funding from sources including private investors and the U.S. Department of Energy (DOE). Rentech says the technology has operated successfully on a commercial scale at a facility in Burlington, Vermont. The acquisition will be completed as a merger of SilvaGas Holdings into a wholly-owned subsidiary of Rentech. The initial consideration will consist of approximately 14.7 million shares of Rentech common stock, approximately 6.8 million of which will be held in escrow for up to three years to provide for certain possible expenses and to support indemnifications provided by the shareholders of SilvaGas. The shares are subject to certain restrictions on sale. Additional consideration may be paid upon the completion and testing of Rentech’s first commercial gasifier using the SilvaGas technology. Depending on the performance of that gasifier, such additional consideration may vary from zero to the sum of 6.25 million shares of Rentech common stock and $5.5 million of shares of Rentech common stock, evaluated at the trading price of Rentech stock at the time of determination.
ClearFuels has signed an exclusive worldwide license with Rentech for the use of Rentech’s patented and proprietary Fischer-Tropsch synthetic fuels technology for the production of renewable drop-in fuels from sugarcane bagasse, the fibrous residue from stalks. ClearFuels has also signed a license with Rentech for the use of the Rentech Fischer-Tropsch Process for the production of renewable synthetic fuels from virgin wood waste at up to twelve U.S.-based projects to be developed by ClearFuels. ClearFuels has begun development of multiple commercial scale biomass-to-energy projects in the southeastern United States, Hawaii, and internationally. These projects will use an integrated ClearFuels-Rentech design pursuant to the licensing agreements and will be co-located at sugar mills and wood processing facilities. The U.S. wood waste projects alone are estimated to have an aggregate annual capacity of more than 100 million gallons of renewable synthetic fuels and 30 MW of renewable power.
ClearFuels plans to build a 20 ton-per-day biomass gasifier designed to produce syngas from bagasse, virgin wood waste, and other cellulosic feedstocks at Rentech’s PDU in Colorado, which it believes is the only operating synthetic transportation fuels facility in the U.S. The gasifier will be integrated with Rentech’s Fischer-Tropsch Process and UOP’s upgrading technology to produce renewable drop-in synthetic jet and diesel fuels at demonstration scale. The agreement provides that Rentech will continue to operate the PDU as already planned, but using the syngas from the ClearFuels gasifier, while ClearFuels will pay all incremental costs of building and operating the biomass gasifier. This joint demonstration is anticipated to lead to the final design basis for the commercial facilities that will use the combined technologies.
As consideration, ClearFuels will receive a warrant to purchase up to 5 million shares of Rentech common stock, access to the PDU for construction and operation of a ClearFuels gasifier, and certain rights to license the Rentech Fischer-Tropsch Process, including the exclusive right for projects using bagasse as a feedstock. The warrant will vest in three tranches based on the achievement by ClearFuels of established milestones. Exercise prices for the three tranches of the warrant will be set at the market price of Rentech stock at the time of vesting.