DG Fuels – the first $30m is the hardest


Christopher Chaput ended up in Sustainable Aviation Fuels (SAF) almost by accident.

A veteran banker, he started advising his friend Michael Darcy, the CEO and founder of DG Fuels, on his start-up more than 12 years ago. He was intrigued and eventually joined DG Fuel’s advisory board formally. “The more I learnt about SAF and the project, the more excited I became by it,” he says.

A few years later, with seed funding running out, Chaput became an investor in DG. Finally he joined the company as president and CFO.“I realised that we needed to get going and raise third-party finance to make sure that the project happens,” he says.

Chaput and the DG Fuels team started by tapping future suppliers: engineering consultants Black & Veatch; hydrogen equipment supplier HydrogenPro Power and energy storage company Energy Vault. Together they provided $7m in convertible debt.

This week DG Fuels announced a major financing bringing its first project closer to realisation – raising almost $30m.

Two Japanese investors – Chishima Real Estate and aviner & co – and one undisclosed investor have closed a round which will fund the engineering work needed to get the project to a Final Investment Decision (FID) next year. “We actually ended up raising more than we needed,” says Chaput. “When I worked at Morgan Stanley we had a saying that you should ‘take the cookies when they’re passed’ – if the capital is there you should take it.” 

DG Fuels also has a couple more firms looking at investing in this pre-construction equity round but it will not go over $30m.

DG hopes to reach Final Investment Decision early in 2024. Construction of its first 180 million gallon per year SAF facility in Louisiana is expected to take three years from then. DG is likely to start with a $3.4bn-$3.5bn plant and plans to expand this to a $4.2bn refinery later. Black & Veatch started the front-end loading engineering report for this facility in June this year.

“We are in a really good position to secure the project equity and debt for construction. The Inflation Reduction Act and demand from airlines help and we are in the process of applying for a Department of Energy loan,” says Chaput. “Major suppliers appear keen to take some capital and we have had some very strong interest from infrastructure funds that could write the cheque for all the project equity on their own. In fact, there is interest from equity for funding multiple future projects because of the commitment to deploying capital in this space.”

 DG Fuels uses the Fischer-Tropsch process to make SAF. Chaput says that it is “biomass agnostic” and that feedstock will depend on where plants are built. The first facility in Louisiana plans to use forestry and wood waste. The company may also process some waste left over from growing sugar cane. As well as supporting local farmers (the first site is surrounded by sugar plantations), DG Fuels is keen to stop the common process of farmers burning large amounts of waste leaves and stalks. The company may use corn stover left over from ethanol production in mid-West refineries – but not corn kernels.

“When Mike started the company – before I joined – we discussed how we would define success for DG Fuels. We decided it would be by being the most economically efficient producer of the cleanest jet fuel and this is what we are still aiming for,” says Chaput. “We want to be able to sell to airlines at a price that works for them and at a premium which rewards our investors. With low-cost feedstock, clean-sheet efficient technology and going for scaled up production –we are confident that we can do that.”

Chaput just needs to raise the next $3.5bn to start production in 2027. And then repeat the process for DG Fuel’s planned global network of refineries. If he achieves this, it will not be by accident.

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