Photo source: Taronis Fuels, Inc.
A subsidiary of Technology Credit Union of San Jose, Calif., announced Wednesday it has closed on a $10 million line of credit to an Arizona company that makes a welding gas safer to use and cleaner to produce than traditional gases.
The asset-based revolving line of credit is one of the largest provided to date by Tech Capital LLC, a CUSO founded in 2015 and a wholly-owned subsidiary of Tech CU ($3.5 billion in assets, 131,977 members).
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The recipient is Taronis Fuels, Inc., a publicly traded company based in Peoria, Ariz., that owns a patented method to make an alternative cutting gas it calls MagneGas that competes with acetylene and other industrial gases. The company had $16.9 million in debt to $38.2 million in equity as of Aug. 1.
Asset-backed loans from Tech Capital leverage accounts receivable, inventory and equipment. Joe Anzalone, managing director, said the loan shows how Tech Capital provides flexible lending solutions so borrowers can pursue opportunities for growth.
"I'm pleased we were able to do just that for Taronis Fuels," Anzalone said. "This loan arrangement with Taronis Fuels is an excellent example of how we work to design a structure that uniquely fits the needs of our clients."
Taronis plans to provide gases for the propane market starting this year, and compressed natural gas market in 2025. A third-quarter investor presentation said its fuels are hydrogen-based, have a low carbon footprint and are derived from common industrial waste materials.
The company's MagneGas Welding Supply now operates in California, Arizona, Texas, Louisiana, Indiana, Georgia and Florida. It plans to expand into 14 other states.
"This loan allows us to accelerate growth by providing working capital to support our acquisition and expansion strategies," Scott Mahoney, CEO of Taronis Fuels, said. "As an innovation leader in clean-fuel alternatives, it made sense to partner with an innovation leader in the financial industry. Tech Capital understands our mindset and our needs, and they have tailored a credit facility that will grow with us."
The company said its production costs have been falling, and its welding gas is now 25% to 35% cheaper to produce than acetylene. In addition to environmental benefits, it can now use price to compete in the $3 billion metal cutting fuel market.
Its MagneGas burns at 10,400 degrees Fahrenheit, compared with 5,612 degrees for acetylene. For metal fabricators, its benefits also include faster cutting times, and the ability to cut thicker plates with little slag and soot.
Tech CU is now nearing $2 billion in funding for sustainable energy in the form of residential solar systems.
In business lending, Tech CU originated $27.3 million in commercial and industrial loans from January through September, up from $9.3 million a year earlier.
Tech CU generated net income of $23.9 million in the nine months ending Sept. 30, yielding an annualized return on average assets of 0.97%, down from ROA of 1.17% for the first nine months of 2019. Its net worth ratio was 9.91% at Sept. 30.
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Jim DuPlessis
Jim covers economic data trends emerging for credit unions, as well as branch news and dividends.
