Impact Investment with EB-5 Immigrant Investor Capital (Vol. 2, Issue 4, December, 2014 , pgs. 30-32)
by Lincoln Stone
Alternative energy development is an important national policy goal: Energy independence is essential for national security; reduced fossil fuel consumption is essential to environmental health; and, the addition of alternative energy sources to the national supply of energy sources helps to contain energy costs, which is essential to the national economy. (Energy Independence and Security Act of 2007 (“EISA”). But major national policy goals of this kind come with multi-billion dollar price tags. Consider too that certain states, like California, also impose renewable energy mandates. It is a good thing, then, that at least some of the foreign investment capital coming through the EB-5 immigrant investor program is helping to stimulate alternative energy production. Bearing in mind a theme of channeling immigrant EB-5 capital for impact investment (see Increasing Economic Opportunity In Distressed Urban Communities With EB-5), there in fact have been very substantial expenditures of EB-5 capital in major alternative energy projects. This briefing features just a few of the alternative energy EB-5 projects we have represented as US immigration counsel.
Utility Scale Solar Power
Ivanpah Solar
A total $90 million of EB-5 capital was raised by CMB Regional Centers and invested to help fund the development of the Ivanpah Solar power generating facility in San Bernardino County, California. Located in the Mojave Desert on public land managed by the Bureau of Land Management, this is the first large-scale solar thermal power development in the United States in two decades. The developer, BrightSource Energy, met the project costs exceeding $2 billion with the aid of a $1.6 billion loan from the U.S. Department of Energy, and the equity investments from Google, NRG Solar, and BrightSource Energy.
The new facility is designed to deliver 392 megawatts of power, as required under contracts between BrightSource Energy and the two major utility companies in California. The power generating facility includes three solar concentrating thermal power plants, based on distributed power tower and heliostat mirror technology, in which the heliostats focus solar energy on power tower receivers near the center of each heliostat array.
As of February 2014, the facility is up and running. When at full operating capacity, it will produce enough clean energy to power more than 140,000 homes. It is expected to reduce carbon dioxide emissions to the tune of 400,000 tons annually. It stands as the world’s largest solar thermal project, and has received numerous accolades – including POWER magazine’s plant of the year, and the Project Excellence award from the Council of Development Finance Agencies in recognition of the creative financing structure for the project.
Tonopah Solar
Another solar power project is located in Nevada, near the city of Tonopah in Nye County, on public land managed by the federal government. Two different partnerships sponsored by CMB Regional Centers provided EB-5 capital totaling $160 million. The developer is a subsidiary of SolarReserve, a privately-held alternative energy company based in California. The total cost of the project is approximately $974 million, which has been funded by a $715 million loan from the U.S. Department of Energy, and equity investments by SolarReserve, Santander Group, and Grupo COBRA, a Spanish company specializing in energy production with presence in over 40 countries.
The solar plant has a 25-year power purchase agreement with Nevada Energy. Using proprietary technology, the new facility will deliver 110 megawatts of power using a molten salt system with a central receiver tower and heliostat mirror technology. The facility also will include storage tanks for the heated and cooled salts, and a steam turbine building to generate electricity from the heated salt. It will be operational first quarter 2015.
Ethanol Production
In another alternative energy EB-5 project, $75 million in EB-5 capital raised by CMB Regional Centers was invested to help fund the costs of infrastructure construction of “Dakota Spirit AgEnergy,” an ethanol production plant near Jamestown, Stutsman County, North Dakota, under development by Midwest AgEnergy Group, LLC (“MAG”). Other funding sources include the developer, construction loans, and the county economic development corporation.
Ethanol currently is used in low-level (for most vehicles) and high-level (for only flexible fuel vehicles) ethanol blends. As required EISA, the federal Renewable Fuel Standard mandates what effectively is a 400% increase of ethanol usage in vehicles over a 10-year period. Studies have estimated that ethanol and other biofuels could replace 30% or more of U.S. gasoline demand by 2030.
And, according to the federal government, ethanol as a form of renewable biomass is reducing oil dependence and greenhouse gas emissions.
MAG is an upper Midwest-based biofuels company owned by Great River Energy, LLC, a large not-for-profit cooperative that invests in the production and transmission of electricity. The ethanol production facility is located adjacent to Great River Energy’s combined heat and power plant. As a result, the biorefinery will purchase steam from the power plant, making the biorefinery one of the most cost effective, energy efficient and environmentally friendly biorefineries in the country. It also is the first corn ethanol plant to be built since EISA required new corn-based plants to reduce greenhouse gas emissions by 20%. The groundbreaking ceremony was held in 2013. The plant will become operational in mid-2015, and at capacity it will produce 65 million gallons of ethanol annually from North Dakota corn.
Lithium Extraction for Green Vehicle Batteries
Green vehicle production is hugely complex, and requires hundreds of innovations and new technologies. Skyrocketing demand for lithium has particularly focused on battery-grade lithium derivatives used in electric and hybrid vehicle batteries and for alternative energy production. The global battery market for electric vehicles is expected to grow five times from 2013 to 2020, putting enormous stress on lithium hydroxide supplies and potentially fueling dramatic price inflation.
American Regional Center Group is raising up to $35 million in EB-5 funding to be used for the development of a new commercial lithium extraction and lithium derivatives production facility under development by Simbol, Inc. in the Salton Sea geothermal field in Imperial County California.
Simbol—a joint venture of Mohr Davidow Ventures, Itochu Corporation, and Firelake Capital Management—is a sustainable materials technology company that has developed proprietary processes to extract lithium and other minerals from geothermal brine, and to produce specialty chemicals used in consumer electronics and electric vehicles, among other applications.
The Imperial County facility will process mineral-rich brine drawn from the operations of the neighboring Hudson Ranch I geothermal power generating facility by EnergySource LLC. The mineral extraction facility will have a capacity of 15,000 tons of lithium products, primarily lithium carbonate and lithium hydroxide, which would make Simbol the largest lithium producer in the United States. The facility is expected to begin operations in early 2017. The lithium extraction and manufacturing plant is situated in Imperial County, which has consistently experienced unemployment rates above 25%, the highest of any county in the United States.
Certainly, there also is a smattering of EB-5 capital investment in relatively smaller-scale enterprises such as with distributed solar and solar panel installation. (See here as well as here) The larger-scale projects featured in this briefing, though, demonstrate the huge potential for EB-5 capital in substantially advancing the cause of alternative energy production and in making high impact investment in the green energy economy. ■
Lincoln Stone practices immigration law in Los Angeles with Stone Grzegorek & Gonzalez LLP – www.sggimmigration.com — and over the course of 23 years he has successfully represented more than 3,000 EB-5 investors with their I-526 petitions, and more than 1,000 investor families with removal of conditions on permanent residence. His EB-5 capital group clients have raised and expended more than $3 billion in EB-5 capital in more than 100 separate projects in a wide variety of industries.
RCBJ Retrospective articles are reprinted from IIUSA’s Regional Center Business Journal trade magazine. Opinions expressed within these articles do not necessarily represent the views of IIUSA and are provided for educational purposes.
