Target company details: Elysian is a provider of comprehensive carbon capture and storage (CCS) solutions to industrial and power facilities aiming to achieve emissions reduction objectives. Their focus is on implementing systems on emission points, such as power plant smokestacks or factory facilities, capturing CO2 with an efficiency as high as 90%. The captured gas is then transported either to underground storage sites or utilized elsewhere. The company is actively developing multiple systems at sites located in Texas and Illinois. With the current deal, EnCap Flatrock Midstream exits from the platform after making their initial capital commitment of $350mn just 19 months before.
Deal rationale: The acquisition of Elysian enables Buckeye to enhance its service offerings, catering to the growing demand for cost-effective carbon management among its existing customer base. Historically, the economic viability of carbon capture and storage (CCS) projects faced challenges due to expensive technology and high operating costs. Emitters found it more cost-effective to generate carbon-free electricity through wind and solar farms than implementing CCS systems at existing facilities. However, Elysian's adoption of modular systems offers a cost-effective alternative to traditional projects, resulting in reduced installation and operating expenses. Moreover, the recently passed Build Back Better Act has increased the tax credit under section 45Q from $50 to $85 per ton of CO2 that the companies capture and permanently store, further enhancing the economic feasibility of such projects. As a result, CCS emerges as an important tool in addressing the climate challenge.
Furthermore, the acquisition presents an opportunity for Buckeye to leverage operational synergies between the two platforms, particularly in engineering, construction, and logistics capabilities. Buckeye believes that its rights to run pipelines through certain areas could speed up permits for Elysian’s own projects in those areas. The deal will thus support Buckeye’s commitment to reduce carbon emissions and become a net-zero energy business by 2040 across Scope 1 and 2 greenhouse gas emissions.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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