AMCI II (NASDAQ:AMCI) target LanzaTech, an innovative Carbon Capture and Transformation (“CCT”) company, announced this morning that it has secured a $500 million partnership for its proposed business combination.
The sustainable materials-maker will partner with Brookfield Renewable, and its institutional partners, to co-develop and build new commercial-scale production plants that will utilize LanzaTech’s CCT technology. Brookfield Renewable has committed an initial $500 million in an effort to construct and operate new CCT projects that have achieved certain pre-agreed milestones.
Following the initial investment, Brookfield has disclosed that it could commit to making an additional $500 million available if sufficient projects are available at the agreed milestones, which would bring the total for the partnership to $1 billion.
The funding will be provided through the Brookfield Global Transition Fund, which is the largest fund in the world focused on the energy transition. Brookfield will be LanzaTech’s preferred capital partner for its CCT opportunities in Europe and North America and hopes to play a key role in an emerging area of infrastructure in a decarbonized economy.
As part of the agreement, LanzaTech will present Brookfield with projects that require equity funding of at least $500 million in the aggregate. With respect to projects acquired by Brookfield, LanzaTech is entitled to a percentage of free cash flow generated by the projects determined in accordance with a hurdle-based return waterfall. Brookfield, however, does not have any obligation to invest in any of the projects. LanzaTech also agreed to recommend Brookfield to customers that, in LanzaTech’s reasonable judgment, are likely to need third-party funding to develop, construct and own projects subject to the Brookfield Framework Agreement.
Further, Brookfield will also invest $50 million in LanzaTech to support further corporate development in exchange for the right to certain shares of LanzaTech capital stock. This will be done following the first of either a transaction with the principal purpose of raising capital, pursuant to which LanzaTech issues and sells preferred stock at a fixed valuation, or the completion of an IPO, direct listing, or a de-SPAC transaction. Brookfield may, at any time at its option, convert all or a portion of the initial purchase amount less any amount that has already been converted or repaid into shares of LanzaTech capital stock or, in the case of a de-SPAC, shares of common stock of the surviving public company in a de-SPAC transaction.
On the 5th anniversary of the Brookfield Simple Agreement for Future Equity (“SAFE”), LanzaTech will repay in cash any remaining unconverted portion of the initial purchase amount, plus interest in the high single digits, compounded annually.
For each $50 million of aggregate equity funding required for qualifying projects acquired by Brookfield in accordance with the Brookfield Framework Agreement, the remaining amount would be reduced by $5 million. Equity funding for any one or more projects in excess of $50 million in the aggregate will be counted towards the next $50 million of equity funding required for qualifying projects. Brookfield has the option to extend the repayment date to the 10th anniversary of the date of the Brookfield SAFE if no equity financing, liquidity event or change of control occurs prior to the 5th anniversary of the Brookfield SAFE.
LanzaTech, however, may be required to repay the Brookfield SAFE prior to the 5th anniversary. This would occur if upon a conversion event, the requisite stockholder approvals for the issuance of equity into which the Brookfield SAFE converts are not obtained or if LanzaTech takes certain actions that would cause it to be unable to satisfy its obligations under the Brookfield SAFE, including failure to provide for certain rights to Brookfield in an equity financing or taking any action that would reasonably be expected to cause the fair market value of LanzaTech to fall below $200 million.
AMCI II originally brought $150 million into the deal from its current trust and supplemented it with a $125 million PIPE at $10 per share. The PIPE drew contributions from the SPAC’s sponsor as well as strategic investors ArcelorMittal (NYSE:MT), BASF (DE:BASF) and Shell (NYSE:SHEL), among others.
The SPAC announced its $1.8 billion business combination with LanzaTech on March 8. The Chicago-based company is developing carbon-capture plants designed to provide a number of carbon negative outputs ranging from jet fuel to consumer packaging materials.
