Resource assessment for raw materials. A third-party assessment describing the availability of raw materials must be prepared, including competition for raw materials and price information. Fuel management plan. A plan or agreement with a third party will be required to describe how different raw materials are purchased, processed and stored and how working capital is needed to maintain a high-quality fuel supply. Producers will often agree to remove other ferments for their own use. However, any agreement must be clear as to when the fermentation facilities should be removed. Operators want it removed at regular intervals, as required by the operation of the facility. However, producers, especially when in nitrate-risk areas, will want to limit the amount they will take during NVZ closure periods. Several sources. Several sources of the same type of raw materials and different sources of different raw materials reduce the risk of supply and counterparty. Commodities generally have seasonal variations in availability and price, which should also be taken into account. Many sources of funding require a greater reduction in project risk. Commodity projects should develop a targeted approach to reduce perceived risks related to the raw material, its suppliers and long-term pricing.
A strategic approach with well-negotiated agreements can cover many perceived risks. Author: Mark HansonPartner, Stoel Rives LLP (612) 373-8823 Fuel-produced raw materials tend to have a more predictable energy density, but also have higher price and production profiles. Many raw material projects focus on waste raw materials because they are paid to take them or to pay low costs, which can advance profitable projects. With regard to the financing of such a project, there is a higher risk to be dealt with with respect to alternative production, lack of contractual coherence, transport and handling pricing and price risk in the event of competition for waste. Price collar or warranties. In the end, the best plans may not cover the perceived risks of raw materials. Project proponents should consider fixed-price guarantees or (very low) price passes under which the project can be operated. Indexing raw material prices for biomass is the most accurate and balanced instrument to meet the needs of all parties involved. Every year, millions of dollars are at stake, tied to procurement contracts. For an index to be acceptable to suppliers and buyers, both parties must have the highest degree of confidence in the fairness of the index. In our experience, there are three bases that an effective index must have.
In this article, we examine some of the key issues that AD operators and commodity producers need to consider to ensure that they not only have a viable business relationship, but also a successful long-term business relationship. Both sides are likely to want a long-term agreement. Producers will benefit from allowing them to plan investments on the basis of a safe buyer. Similarly (especially when third-party investors are involved), operators need a secure supply of raw materials. In particular, in the case of long-term agreements, the parties must be aware of the termination, including: biomass projects in the field of raw materials can be financed if the risk is treated strategically, with the awareness of the impact of regulatory requirements. Regulatory issues relating to the origin, handling and storage of raw materials, as well as regulatory requirements for the use of the raw material. Commodity requirements.