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  • Calumet Specialty Products Partners L.P.

New investments solidify Montana Renewables’ plan to increase biobased diesel capacity in 2024-’25

Calumet Specialty Products Partners L.P. announced Aug. 5 a series of transactions conducted by its unrestricted subsidiary Montana Renewables LLC, a renewable fuel business.

Warburg Pincus, a leading global growth investor, has agreed to invest $250 million in Montana Renewables in the form of a participating preferred equity security, which values Montana Renewables at a precommissioning enterprise value of $2.25 billion. The preferred equity investment is not interest-bearing and carries certain minimum return thresholds. In connection with the investment, Warburg Pincus will have a representative on Montana Renewables’ four-member board of managers.

Calumet also announced that Stonebriar Commercial Finance has invested an additional $350 million through a pair of sale and leaseback contracts on top of its existing $50 million commitment to Montana Renewables. The sale and leaseback transactions carry an approximate 12.3 percent cost of capital and offer certain strategic early termination options. Concurrent with these transactions, the $300 million convertible investment from Oaktree Capital Management L.P. in Montana Renewables has been retired.

Today’s transactions are accretive in the aggregate. Montana Renewables’ pro forma liquidity, after giving effect to these transactions, is approximately $300 million. Additional information will be reported in Calumet’s filing with the SEC on Form 8-K.

Once fully operational, Montana Renewables, based in Great Falls, Montana, will use waste feedstocks to produce low-emission alternatives that directly replace fossil-fuel products including renewable hydrogen, renewable diesel and sustainable aviation fuel (SAF). Renewable diesel and SAF created by catalytic hydroprocessing of renewable feedstocks significantly reduce the carbon footprint of hard-to-electrify industries.

“This investment will accelerate our mission to quickly produce low-emission alternatives that directly replace fossil-fuel products,” said Bruce Fleming, executive vice president of Montana Renewables and corporate development. “We are pleased to partner with Warburg Pincus, a world-class institutional investor, as well as to extend our longstanding multisite relationship with Stonebriar. We would also like to extend our gratitude to Oaktree for their initial investment in Montana Renewables. Oaktree’s alignment and support of our vision allowed the launch of this business in 2021. Today’s announcement of increased capitalization further solidifies Montana Renewables’ go-forward business plan to increase capacity in 2024-’25 to an estimated 18,000 barrels (756,000 gallons) per day, including the optionality to convert a large portion of the plant’s production from renewable diesel to SAF.”

Warburg Pincus has a strong track record of investing in companies committed to the growth of low-carbon opportunities. Notable energy-transition investments include ClimeCo, Eco Material Technologies, Gradiant, Monolith, Scale Microgrid Solutions, Solar Mosaic, and Viridi.

“Understanding ways to economically reduce our carbon footprint in the immediate term is incredibly important,” said Roy Ben-Dor, managing director at Warburg Pincus. “As the world recognizes a sustainability responsibility and as demand for low-emission fuels increases, Montana Renewables’ ability to produce renewable diesel and SAF quickly and efficiently will result in immediate carbon reductions.”

Jeff Luse, principal at Warburg Pincus, added, “We believe the partnership with Bruce and the Montana Renewables team, combined with our strong network and longstanding experience in energy transition, will help establish Montana Renewables as one of the most advantaged renewable fuel producers in North America.”

Todd Borgmann, CEO of Calumet, said, “Stonebriar Commercial Finance, an Eldridge business, has been a collaborative, creative, and valued business partner to Calumet and Montana Renewables, and we are excited to grow that partnership through their additional investment into Montana Renewables. Montana Renewables is now fully capitalized with a healthy balance sheet as we approach startup in the near future and the identified organic growth opportunities shortly thereafter.”

Nicholas Sandler, president of Stonebriar, added, “Stonebriar is pleased to continue our partnership with Montana Renewables and to expand our investments in decarbonization and more sustainable opportunities. This transaction demonstrates Stonebriar’s commitment to providing comprehensive solutions to our customers.”

Calumet will continue to market the potential share sale to strategic and other investors via the formal process being conducted by Lazard.

Gibson, Dunn & Crutcher LLP served as legal advisor to Montana Renewables. Cleary Gottlieb Steen & Hamilton LLP, Jackson Lewis P.C. and Arnold & Porter Kaye Scholer LLP served as legal advisors to Warburg Pincus.

Montana Renewables is modifying existing assets at the Great Falls, Montana, facility to process up to 15,000 barrels (630,000 gallons) per stream day of renewable feedstocks (such as used cooking oil, distillers corn oil, tallow and seed oils) into low-emission sustainable alternatives including renewable diesel and SAF.

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