Eastman and Green Rock Energy, L.L.C. Agree to Joint Investment in Beaumont, Texas Industrial Gasification Project
Project to Develop Facility with Advantaged Cost Position for Intermediate Chemicals
Eastman Chemical Company (NYSE:EMN) today announced that it has entered into an agreement with Green Rock Energy, L.L.C. (Green Rock). Green Rock is a company formed by the D. E. Shaw group and Goldman, Sachs & Co. to invest in gasification projects that address demand for more environmentally friendly sources of energy production. Eastman and Green Rock will jointly develop an approximately $1.6 billion industrial gasification facility in Beaumont, Texas. The facility, which is expected to be online in 2011, will use petroleum coke as the primary feedstock to produce hydrogen, methanol, and ammonia. Eastman previously announced its intention to co-develop the Beaumont facility as part of efforts to leverage its technology and operational expertise for future growth.
The project will be equally equity financed by Eastman and by Green Rock. A subsidiary of Eastman will operate, maintain, and provide other site management services for the facility. In addition, Eastman will purchase methanol produced by the facility under a long-term supply agreement. Other terms of the joint agreement with Green Rock were not disclosed.
“Eastman is pleased to work with Green Rock on this project” said Brian Ferguson, Eastman chairman and CEO. “This project combines Green Rock’s financial resources and development capabilities with more than 20 years of Eastman’s technology and operational leadership in industrial gasification to create a unique growth opportunity for both organizations. For Eastman, this will provide us with important chemical feeds that support future growth. We expect to sell nearly all of the carbon dioxide produced into the enhanced oil recovery market. This project also underscores Eastman’s commitment to the long-term energy security of the U.S., the environment, and domestic job creation.”
“We welcome the opportunity to work with Eastman on such an innovative project,” said Bryan Martin, a member of Green Rock’s Board of Managers and co-head of the D. E. Shaw group’s U.S. growth and buyout private equity unit. “We believe the Beaumont gasification project is an environmentally responsible energy solution that takes advantage of abundant solid-carbon based resources available in the United States, and, like several other projects in which Green Rock participates, offers our strategic partner the opportunity to obtain a long-term cost advantage. We believe that gasification projects such as Beaumont can play a role in lessening our reliance on foreign energy resources and further enhance our nation’s energy security.”
Eastman and Green Rock expect to complete the front-end engineering design for the Beaumont gasification facility by mid-year 2008, and to obtain non-recourse project financing for the development, design, engineering, construction, start-up, and testing of the facility by the end of 2008. Construction is expected to begin in early 2009, creating between 1,300 to 1,500 jobs, with approximately 250 permanent jobs expected to be created by the project.
As previously announced, additional participants in the Beaumont project include:
Air Products and Chemicals, Inc. (NYSE:APD), which has signed a letter of intent to purchase hydrogen produced by the project on a long-term basis. Air Products will also construct and operate new world class air separation units to produce over 7,000 tons per day of oxygen, essential to the gasifier operation;
Fluor Corporation (NYSE:FLR), which is providing front end engineering design services; and
GE Energy, a business unit of General Electric Co. (NYSE:GE), which has completed a Process Design Package and licensed its gasification technology for the project.
Eastman also recently announced that it exercised its option to purchase the Terra Industries methanol and ammonia production facilities in Beaumont. These assets are expected to be purchased on or before January 1, 2009 and will operate in conjunction with the project.
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