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First Reserve invests in Osage Bio Energy

9th May, 2008

First Reserve, an energy-focused private equity firm, has made an equity investment of $300 million (€195.4 million) in Virginia-based Osage Bio Energy (OBE), to fund the construction of four ethanol and protein feed production facilities, primarily in Southeast US.

The funding is a continuation of a series of First Reserve investments in the alternative energy space.

OBE is a sister company of Osage, Inc., which was founded in 1986 and is the largest independent distributor of ethanol in the Southeast, with throughput of approximately 100 million gallons a year. Osage Bio Energy's new ethanol production facilities will provide ethanol for the eastern seaboard through Osage, Inc., which currently distributes ethanol from Midwest producers.

The facilities will have a differential cost advantage over traditional Midwestern corn-based facilities by using regionally grown barley. Barley is a winter crop that will be grown for the production of ethanol and does not compete for land for food production. It is environmentally superior to corn, reduces the transportation requirements of moving Midwestern corn and enhances the yield of regionally grown summer crops. In addition the by-product of barley, a protein meal, is a superior supplement for local livestock. OBE's site selection model provides significant energy balance advantages through a combination of partnering with existing steam producers, using the company's own waste products for energy and procuring local biomass.

'The competitive pricing position derived from using a barley-based plant combined with the lack of ethanol supply to the Southeast, makes Osage Bio Energy an attractive investment for us,' Glenn Payne, director at First Reserve, says.

Osage Bio Energy has negotiated an exclusive agreement with Katzen International, one of the leading process design and technology company in the biofuels industry. The arrangement allows for exclusive use of Katzen technology capable of producing ethanol from barley within a 200-mile radius of each plant site.

First Reserve has an active investment programme in the renewable energy sector and has invested in a number of companies covering biofuels, waste to energy, carbon dioxide carbon dioxide offset origination, and solar and wind generation. With over $1.2 billion invested and committed to alternative and renewables companies, First Reserve is one of the largest investors in renewable energy and is targeting up to 15% of funds under management to this sector.