Blue Sphere Corporation (Bulletin Board: BLSP), which acquires, builds, and manages projects for the generation of electricity from organic waste, has signed an agreement in principle with Caterpillar Inc. (NYSE: CAT) to provide $21 million in financing for Blue Sphere's first two projects in the US.
Blue Sphere will establish a special US subsidiary to manage the projects. Caterpillar will supply the electricity generation equipment and finance 70% of the projects' total cost. Caterpillar will provide $14 million in financing for the first $20 million project, and $7 million for the second $10 million project.
These are the first two of ten projects for the generation of 44 megawatts that Blue Sphere is planning in the US.
As a condition for the financing, Blue Sphere has already signed multiyear power purchasing agreements for the two projects with local utilities. The return on investment in the two projects is over 20%.
On August 21, Blue Shere signed a joint venture agreement with Germany's Biogas Nord AG (XETRA: BG8), a manufacturer of equipment for the generation of electricity from methane, jointly to develop, finance, and operate biogas plants in the US. Blue Sphere will own 75% of the joint venture, which will operate the two projects under the agreement with Caterpillar, among others.
Biogas Nord has a major advantage in the industry thanks to an agreement with European insurance giant AXA SA (Euronext: AXAF), which insures payment for the company's electricity projects. Under the agreement, if a project's electricity output falls below 88% of capacity, AXA will cover the shortfall in income from electricity sales. Blue Sphere's agreement with Biogas Nord guarantees Blue Sphere the highest technology, set-up, and management capabilities, as well as guaranteeing income from electricity sales, effectively turning a project into a kind of income-producing real estate project.
Blue Sphere founder and CEO Shlomi Palas said, "The joint venture agreement with Biogas Nord and the agreement in principle with Caterpillar are votes of confidence by two leading companies in their fields in Blue Sphere's capacity to acquire and manage these complex projects in the US. The production of electricity from biogas is the perfect solution for two major contemporary problems: the growing need for energy, and the need for proper handling of the unbelievable amount of waste being produced. The comparison with the income-producing real estate industry is in the sale of all the electricity we produce to utilities, which are considered as long-term tier-1 tenants."
Palas estimates that Blue Sphere will have to raise $140 million over the coming years to realize ten projects in the US, and it has begun preparing its road show for US and foreign investment institutions.
Published by Globes [online], Israel business news - www.globes-online.com - on September 2, 2012
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