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Warburg Pincus invests in Calumet subsidiary Montana Renewables

Warburg Pincus invests in Calumet subsidiary Montana Renewables
Photo courtesy of Montana Renewables

Warburg Pincus, a leading global growth investor, has agreed to invest USD250 million in Montana Renewables LLC (MRL), the renewable fuel business of Calumet Specialty Products Partners, L.P. 

The investment, which is in the form of a participating preferred equity security, values Montana Renewables at a pre-commissioning enterprise value of USD2.25 billion. The preferred equity investment is not interest-bearing and carries certain minimum return thresholds. In connection with the investment, Warburg Pincus will have a representative on MRL’s four-member board of managers. 

Calumet also announced that Stonebriar Commercial Finance has invested an additional USD350 million through a pair of sale and leaseback contracts on top of its existing USD50 million commitment to MRL. The sale and leaseback transactions carry an approximate 12.3% cost of capital and offer certain strategic early termination options. Concurrent with these transactions, the USD300 million convertible investment from Oaktree Capital Management L.P. in MRL has been retired. 

Once fully operational, Montana Renewables, based in Great Falls, Montana, U.S.A., will use waste feedstocks to produce low-emission alternatives that directly replace fossil fuel products including renewable hydrogen, renewable diesel (RD) and sustainable aviation fuel (SAF). Renewable diesel and sustainable aviation fuel are created by catalytic hydroprocessing of renewable feedstocks to significantly reduce the carbon footprint of hard to electrify industries.

“This investment will accelerate our mission to quickly produce low-emission alternatives that directly replace fossil fuel products. We are pleased to partner with Warburg Pincus, a world class institutional investor, as well as to extend our longstanding multi-site relationship with Stonebriar,” said Bruce Fleming, EVP, Montana Renewables and Corporate Development. “We would also like to extend our gratitude to Oaktree for their initial investment in MRL. Oaktree’s alignment and support of our vision allowed the launch of this business in 2021.  Today’s announcement of increased capitalization further solidifies MRL’s go-forward business plan to increase capacity in 2024-25 to an estimated 18,000 barrels per day, including the optionality to convert a large portion of the plant’s production from RD to SAF”.

Calumet will continue to market the potential share sale to strategic and other investors via the formal process being conducted by Lazard.

Gibson, Dunn & Crutcher LLP served as legal advisor to Montana Renewables. Cleary Gottlieb Steen & Hamilton LLP, Jackson Lewis P.C. and Arnold & Porter Kaye Scholer LLP served as legal advisors to Warburg Pincus.