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AMCREF and partners provide $18.8 million in financing for Zilkha Biomass to renovate former Dixie Pellets facility in Selma

World’s first full-scale Zilkha proprietary “black” pellet plant to create more than 55 jobs in rural community

On August 5, 2013, AMCREF Community Capital announced the closing of $18.8 million of combined federal and Alabama state New Markets Tax Credit financing for Zilkha Biomass Energy. Zilkha will use the financing to transform an existing facility in Selma into the world’s first full-scale Zilkha Black Pellet plant. Zilkha’s hydrophobic Black Pellet is an important advancement in compressed wood pellet fuel, providing an environmentally sustainable and low carbon fuel, which can be transported and burned by coal plants using their existing equipment.

U.S. Bank and Stonehenge Capital Company served as the federal and Alabama state New Markets Tax Credit equity investors in the transaction.

The project, located in a county with the third-highest unemployment rate in Alabama, will generate 55 jobs at the Zilkha facility as well as 120 jobs in the trucking and forestry industries for the surrounding the community.

“Flexible, low-cost NMTC financing will allow Zilkha to offset the higher cost of capital associated with alternative funding sources, helping make the project more viable,” said Susan Seagren of AMCREF. “Zilkha’s expansion will position the company for full-scale operations, while creating much needed jobs and providing environmental benefits, a win-win for both the company and the community.”

“We’re proud to promote economic development and job creation in Alabama using the benefits of federal and state New Markets Tax Credits in partnership with Stonehenge and AMCREF,” said Matt Philpott, director of New Markets, Historic, and Renewable Energy Tax Credit Investments for U.S. Bancorp Community Development Corporation (USBCDC), the subsidiary of U.S. Bank that made the investment. “With the help of NMTCs, projects like this one are moving forward across the country, strengthening rural communities like Selma.”

As the project’s sole federal and Alabama state New Markets Tax Credit allocatee, AMCREF was able to raise investments from U.S. Bank and Stonehenge and attract other funding to provide patient capital to Zilkha, which will use the funds to renovate and retrofit the former Dixie Pellets plant. The plant is located in a county with an unemployment rate of 11.1 percent, the third-highest rate in Alabama according to the Bureau of Labor Statistics. Zilkha acquired the facility in 2010 after the former manufacturing company stopped its operations. In addition to the 55 permanent Zilkha positions and 120 supporting jobs, it is estimated that the project will bring 380 construction jobs to the area. Construction is under way on the plant, set to begin operations in 2014.

“We’re excited to open the world’s first full-scale Zilkha Black Pellet plant in Alabama,” said Jack Holmes, CEO for Zilkha Biomass Energy. “Selma offers the workforce and training that will help make this facility successful. The plant will produce 275,000 tons of our Black Pellets per year, which can generate enough clean, renewable electricity to supply 50,000 homes per year.”

Wood pellets – which are already a staple in Europe’s energy sector and gaining popularity in the United States – can be used as a substitute for coal in coal-fired power plants. A mix of coal and pellets can generate the same electrical power, but with reduced emissions. Unlike traditional compressed wood pellets, the Zilkha Black Pellet cannot be damaged or compromised by contact with water. Because it is waterproof, it can be transported and stored outside like coal, increasing its safety, reducing product loss and providing a low capital solution to power plants transitioning to a low carbon future.

Alabama enacted the state’s New Markets Development Tax Credit in 2012.

“The purpose of the Alabama New Markets Tax Credit is to help make capital available to job- creating projects located in economically distressed areas of the state,” said Steven LeBlanc, assistant vice president of Stonehenge Capital Company. “This project accomplishes that mission, and we’re excited it will lead directly to more jobs, more economic development, and more demand for Alabama timber and services.”