((Left) The Element 1 L13 H2 Generator. (Right) The Ardmore Exporter, part of the Ardmore fleet | Photos Courtesy of Element 1 Corp.)
Element 1 Corp. (e1), a Bend developer of hydrogen generation technology, has signed a letter of intent with Ardmore Shipping Corporation (ASC) and Maritime Partners, LLC (MP) to create a new national partnership called e1 Marine. In the partnership, Ardmore will make a strategic investment in e1, and, together with MP, will establish a joint venture for the purpose of delivering e1’s unique methanol-to-hydrogen technology to the marine sector.
Element 1 designs and develops advanced hydrogen generation systems used to power fuel cells with broad use in mobile applications and remote locations such as marine, trucking, off-road vehicles, rail, warehousing and backup power supply sectors. E1’s proprietary technology produces hydrogen on demand at the point of consumption, eliminating the logistical challenges and costs inherent in distributing compressed hydrogen.
“It’s exciting that we’ve been doing this here in little Bend,” says Robert Schluter, president of e1 Corp. “We are developing technology that will reduce emissions from vessels, trains and trucks.” Schluter founded e1 in 2010 along with Dave Edlund, Ph.D., who worked at the former Bend Research. “E1 is one of the branches that spun off from the early days of Bend Research. We picked up where Ida Tech (now H2 PowerTech) left off; many of our engineers and employees have been researching this technology for 20-30 years. We have a handful of employees who have been working together that long. We brought them back together in 2010. E1 has been a pioneer in this for a long time.”
Ardmore owns and operates a fleet of product and chemical tankers ranging in size from 25,000-50,000 deadweight tons. Ardmore provides seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders and chemical companies with its modern, fuel-efficient fleet of mid-size tankers.
Maritime Partners, LLC, headquartered in New Orleans, is a leading provider of flexible financing solutions and newbuilding support to the maritime industry, with a focus on inland marine transportation and Jones Act vessels (The Jones Act is a federal law that regulates maritime commerce in the United States, requiring goods shipped between U.S. ports to be transported on ships that are built, owned and operated by United States citizens or permanent residents.)
“These two companies are aligning with us to bring our technology to the world of marine,” explains Schluter. “E1 has 17 people. We are not a commercial manufacturing company; it’s a big deal to have these two established industry leaders want to partner with us.” He adds, “They are using our brand, but we are all one-third owners. They are providing the capital, and we are providing the technology.”
The new partnership transactions will include the following:
- Ardmore, e1 and MP will establish e1 Marine, each owning 33.3 percent of the joint venture. E1 Marine will have a worldwide mandate for the marketing, development, licensing and sale of e1’s unique hydrogen generation systems for application to the marine industry, including shipping, refrigerated containers, offshore energy, renewable energy, passenger and leisure and certain port infrastructure and related applications.
- MP will make an investment in Ardmore in the form of $40 million in perpetual preferred shares in two tranches: the first tranche of $25 million fully committed, and the second tranche of $15 million, subject to final approval by MP. The preferred shares will carry a dividend of 8.5 percent per annum paid quarterly subject to potential increases upon the occurrence of customary events, incorporate payment in kind provisions and be redeemable by Ardmore commencing after three years.
- Ardmore will purchase a ten percent equity stake in e1 in exchange for $4 million cash plus 950,000 ASC common shares. The total consideration is estimated to be $11 million, based on Ardmore’s net asset value as of February 2021. Ardmore will also take a seat on e1’s board of directors from the date of the investment. MP will receive 20 percent of any profits paid to Ardmore from this equity investment in e1.
The transactions are expected to close simultaneously early in the second quarter of 2021.
“Element 1 is delighted to ally with Ardmore and Maritime Partners to deliver commercial solutions for the marine sector that will significantly reduce the carbon intensity, as well as other harmful emissions (particulate matter, NOx and SOx) traditionally associated with burning fossil fuels,” says Edlund, co-founder and CEO of e1 Corp. “This strategic relationship is the direct result of our partners’ vision as well as their commitment to environmental responsibility.” He continues, “Whereas fuel cell technology has matured substantially over recent decades, the supply of hydrogen as feedstock to fuel cells has lagged considerably, resulting in significant logistic and economic challenges to the wide-scale deployment of fuel cells. E1’s methanol-to-hydrogen technology offers a broad solution to this challenge. Importantly, Ardmore and Maritime Partners provide unique access to existing markets in international shipping and inland waterways.”
The partnership came into existence as a result of the International Maritime Organization (IMO) establishing an edict to create significant reductions in carbon within the industry by 2030, Schluter says. “These ships are massive and expensive. Ardmore and Maritime determined they had to adopt technology by 2025 in order to meet the IMO regulations by 2030. We started getting calls, and a financial analyst put us together,” he says. “Ardmore specializes in ocean-going shipping, and Maritime in inland waterways. In the land of COVID, we have gone from ground zero to where we are now since November. That’s unheard of.”
“We are very pleased to establish a strategic relationship with e1 and Maritime Partners to deliver this unique hydrogen delivery system to the marine sector,” says Anthony Gurnee, Ardmore’s CEO. “The establishment of e1 Marine and our investment in e1 advance our Energy Transition Plan, which includes a focus on transition technologies aimed at reducing carbon emissions in the shipping industry and utilizing Ardmore’s engineering and marketing capabilities to accelerate their deployment.” He continues, “We are excited about the market opportunity for e1’s methanol-to-hydrogen technology. We believe it is safer and cheaper than other alternatives for onboard hydrogen delivery and, when using standard methanol, is operationally cost-competitive with diesel engines even today, while emitting zero particulates, zero NOx, zero SOx and 30-50 percent less carbon than a diesel engine of the same power rating. The e1 system is carbon-neutral when run on renewable methanol, should prove to be very cost-competitive with other alternatives, and, if desired, can be built or retrofitted to run on ammonia.”
Schluter says that to facilitate this partnership and the company’s recent growth, e1 has been hiring new staff out of the engineering program at OSU-Cascades, and out of the strong relationship e1 has with EDCO. “We were early participants in the Bend Venture Conference; we came in second in 2012. EDCO has been very supportive of us for the past ten years.” He adds, “It’s very exciting; after ten years of effort, things have been really taking off now in the past couple of years.”
