Greenhill Energy has begun market sounding to raise about AUD 200m (USD 131m) to help finance the first two stages of its Riverbend Energy Hub in South Australia, Managing Director Nicholas Mumford told Infralogic.

“We are sounding the market for debt and equity and seeking the full amount for stages one and two,” he said in an interview.

The developer and manufacturer is looking for a “strategic partner” to invest an initial AUD 34m in equity to acquire about a 50% stake in the project to fund construction of a combined cycle gas turbine (CCGT) power plant and two gasification units.

Greenhill expects the total cost will be an estimated AUD 425m once another stage is added, which will not be covered by this financing.

An incoming partner will have the opportunity to invest in further stages of the project as well as other projects Greenhill is planning around the country once Riverbend starts operating.

Mondial Advisory is leading Greenhill’s finance search.

“We’re getting some positive interest [from investors], and we would like to be at the exclusivity stage this year, but we don’t have a strict process,” Mumford said.

Apart from the equity investment from a new partner for the first two stages, the rest of the finance – about AUD 166m – will be debt. This will potentially be project finance or corporate debt, or a combination of both, and Greenhill will be seeking a 10-year tenor.

Mumford said the technology it is installing is widely used although it hasn’t been fed with sustainable fuel sources. Doing so now is feasible as Australia has a carbon pricing mechanism in the form of Australian Carbon Credit Units, and there are also landfill levies on the burial of waste, among other incentives.

Greenhill is claiming an internal rate of return of about 30% for the investment based on various revenue sources.

The first stage is the CCGT plant and an integrated gasification unit to produce syngas from waste. This is expected to have a capacity to process 60,000 tonnes of dry landfill waste and biomass, ultimately diverting about 200,000 tonnes of waste from landfill, according to Greenhill’s website.

The syngas will be about 40%-60% hydrogen, with the remainder comprising carbon dioxide, methane and carbon monoxide.

The second stage will involve construction of a second gasification unit that will be able to process 120,000 dry tonnes of agricultural and other waste to produce about 100,000 tonnes of urea per year.

Initially, revenue will be generated from selling power from the 100 MW CCGT plant to the South Australian electricity grid.

At first, this will run on liquefied petroleum gas to provide peaking power when demand is high, which is becoming critical in the state as it now has a high percentage of variable renewables. The plant will use the syngas it produces once the gasifiers are complete to provide baseload power.

The second revenue source will be urea that Greenhill will manufacture from the hydrogen the project will produce. It will also get income from landfill levies they can claim and state and federal grants.

Australia currently imports all of the urea it needs, which is primarily used for fertiliser. Greenhill plans to also supply urea for the production of AdBlue, which is used in modern diesel engines to reduce emissions.

There are a number of other urea manufacturing plants planned in the country, including an AUD 6bn plant being built in Western Australia by Perdaman Chemicals and Fertilisers, and Global Infrastructure Partners.

Other products Greenhill expects to make include ammonia and sustainable aviation fuel.

Greenhill targets to start installing the power plant by the end of next year although this is contingent on reaching a final investment decision early next year, and securing approvals from state grid operator ElectraNet to start construction on the grid connection.

The connection to one of the electricity interconnectors between South Australia and Victoria, which is about 200 metres from the project, should take about six months to complete once work starts, Mumford said.

The gas power plant will be a reconditioned unit manufactured by GE that the company is in the final stages of acquiring. Mumford said this would cost about a fifth the price of a new plant, could be procured much more quickly and take about three to six months to get operating.

The CCGT will be able to run entirely on hydrogen and in the final stage of the project, Greenhill plans to use green hydrogen to power the CCGT.

The final stage also envisages adding four open cycle gas turbines, a pipeline connection to the nearby SeaGas pipeline network and injecting green hydrogen into the gas supply.