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Black start up working to capitalize on natural gas

By Jared Anderson
On December 29, 2015

Businessman Phillip Franshaw sponsors Annova,
a natural gas company, that could bring millions
in revenue for the state of Texas.
Credit: Annova LNG/Exelon

Houston-based businessman Phillip Franshaw’s recent power move on the energy sector could create hundreds of jobs in one of Texas’ poorest communities.

Franshaw is building Annova LNG, a multi-billion-dollar liquefied natural gas export facility, on the Brownsville Ship Channel along the Texas Gulf Coast. If successful, the project could support more than 650 construction-related jobs and another 165 permanent jobs once completed, providing an average salary of $70,000 a year or more.

Franshaw is gambling on a process called “liquefaction,” which super-cools and converts natural gas into a liquid. This makes it easier to transport via tanker to utilities and other major consumers in Asia and Europe. This kind of technology requires the construction of an approximately $3 billion plant, a massive undertaking on many levels.

A project that has been years in the making, Annova LNG was born as a two-man shop. President and founder David Chung asked Franshaw to help finance the facility. He got the name “Annova” from a twist on the word “innovate.”

The duo took the project to market and soon began collaborating with Exelon Corporation, a major U.S. utility that operates one of America’s largest fleets of nuclear power stations. Exelon purchased a controlling interest in Annova in July 2014 and maintained Franshaw’s management team.

“Having a quality sponsor of that magnitude has given us the leverage to aggressively approach the market and execute through the development phase of the project in a most effective way,” said Franshaw.

Yet, Annova faces stiff competition. At least 50 companies have applied for federal permits to export domestically produced liquefied natural gas. Two other plants are headed for the Brownsville Ship Channel.

The company distinguishes itself from these other ventures by building a facility that can offer buyers more flexibility, according to Franshaw.

“This approach decreases construction costs, limits risk, and can be scaled up if demand eventually grows,” he said.  “We think the future of the market will be small-scale facilities, and that’s how we differentiate ourselves,” he said.

Once running, Annova could yield state and local tax revenue that exceeds $60 million annually. More than half of those funds would support local governments in Cameron County, the southernmost in Texas. That $30 million could pay the starting wages for about 698 teachers, 850 cops or 1,029 firefighters every year, according to SalaryGenius.com.

Franshaw’s enthusiasm and determination are evident when he speaks about the project and describes the values that have helped him succeed in business.

“We all face a range of different challenges throughout our careers,” said Franshaw. “I think, fundamentally, one of the biggest challenges we face is credibility. Who are you? People want to know that.”

“Often, kids go to school and get a great education thinking that’s enough for them to sit in the captain’s chair and start making decisions,” he continued. “But everyone’s expected to pay their dues and learn the industry while developing a voice as well as credibility. It’s on that basis that people begin to trust you. Your track record is critical. It’s important that you buckle in, plan to pay your dues and grow.”

Annova plans to have its first stage operational by 2020.

One key hurdle is obtaining approvals from the Federal Energy Regulatory Commission. After reviewing Annova’s initial 1,670-page application, the commission will spend at least a year reviewing more detailed filings before it authorizes construction.

While liquefied natural gas sales have climbed recently, the market five years from now is expected to be quite different.

“There currently appears to be a glut of LNG in the market, and we think that while there is an oversupply now, much of that will be absorbed by 2020,” said Franshaw.

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