Case Summary: NLC Energy Denmark Chapter 11

Business Description

NLC Energy Denmark LLC ("NLC" or the "Debtor") is a renewable energy company specializing in the conversion of organic waste into biomethane, also known as Renewable Natural Gas (RNG), and valuable co-products.

• The Debtor operates an anaerobic digestion facility in Denmark, WI, designed to process food waste and agricultural manure into pipeline-quality RNG.
• Beyond RNG, the facility captures and monetizes environmental co-products, including carbon dioxide (sold as food-grade liquid CO2 or dry ice) and nutrient-rich residuals (digestate) suitable for use as fertilizer.

The Debtor’s vertically integrated anaerobic-digestion platform delivers low-carbon RNG and related environmental co-products by processing multiple waste streams. The platform serves industrial and transportation customers that substitute RNG for fossil gas, with emphasis on decarbonization programs in markets such as California.

NLC posted $10.4 million of revenue for FY 2024, down from $11.2 million in 2023. Gross margin contracted to 16.1% from 20.5% YoY. Despite the revenue and margin pressure, net loss narrowed to $14.5 million from $19 million. The improvement was driven by higher other income ($4 million vs. $0.3 million), lower other expenses ($13.2 million vs. $14.3 million), and reduced operating expenses ($6.9 million vs. $7.2 million).

• As of June 30, 2025, liquidity was limited with $1.5 million of cash and escrow and $6.8 million of current assets against $58.7 million of current liabilities, including $57.6 million of intercompany payables. Total assets measured $72.7 million versus $161.4 million of liabilities, leaving negative equity of $88.8 million.

NLC Energy Denmark LLC filed for Chapter 11 protection on August 16, 2025 (the "Petition Date") in the U.S. Bankruptcy Court for the Eastern District of Wisconsin.

Corporate History

NLC's journey traces back to 2008, when it was initially formed as NEW Organic Digestion LLC by individuals no longer associated with the company. This early iteration was a modest biogas developer operating a single anaerobic digester in Denmark, WI, producing electricity from local food waste.

Joint Venture and Early Expansion

• In 2016, NEW Organic Digestion joined forces with Bruce S. MacDonald and Douglas F. Blough, who created NLC Energy Venture 30, LLC (a wholly owned subsidiary of NLC Energy LLC). Together with Big Ox Energy, they launched NLC Energy-Big Ox LLC, a joint venture designed to drive business expansion.
• Nebraska Acquisition: The joint venture's first major step came in early 2016 with the acquisition of a troubled biogas plant in South Sioux City, NE. The facility was plagued by immediate operational issues, including sewer backups into nearby homes and environmental violations that later resulted in $1.8 million in settlements.
  • In May 2019, the Nebraska plant was forced to shut down after a prolonged foam-over, triggered when a supplier switched to a high-fat slurry without notifying management. The facility stayed offline for several years.
• Denmark Expansion & UCal Contract: Concurrently, the JV prioritized a major expansion of the original Denmark, WI, facility into a large-scale RNG production hub.
  • In August 2016, the company secured a critical 20-year off-take agreement with the University of California ("UCal") to purchase RNG, a deal instrumental in financing the expansion.
  • Construction on the Denmark expansion commenced later than anticipated, with its scope expanding to include a pipeline interconnection to the TransCanada network and off-site gas collection stations.
  • Following initial delays and UCal amendments⁽¹⁾ extending deadlines and reducing first-year delivery requirements, the facility reached mechanical completion by late 2017.
• Senior Secured Financing: On September 28, 2017, the Debtor closed on approximately $75.8 million in long-term financing through the issuance of 6.25% Series A1 and 7.75% Series A2 Senior Secured Notes to institutional investors. These notes were secured by first-priority liens on all Denmark assets, with Douglas Blough providing a conditional personal guaranty.
• Iowa Acquisition: In October 2018, the JV acquired another biogas digestion facility in Riceville, IA, for $3.2 million.

1) On Sep. 28, 2017, following Amendment 2 of the UCal contract, the JV’s holding company (NEW Organic Digestion Holdings) pledged 100% of its equity in the Debtor’s parent (NEW Organic Digestion Investors) to UCal, giving UCal the right to assume control of the Debtor upon default, subject to conditions.

Corporate Organizational Structure

Operations Overview

NLC Energy Denmark LLC specializes in the conversion of organic waste into renewable natural gas (RNG) and valuable byproducts through anaerobic digestion at its flagship facility in Denmark, WI. This vertically-integrated operation processes both food waste (e.g., industrial food processing byproducts) and agricultural manure.

Key Products and Revenue Streams

• Biomethane (RNG): Pipeline-quality renewable natural gas, primarily sold under long-term contracts (historically with the University of California).
• Environmental Attributes: Monetization of carbon reduction credits, particularly high-value credits from manure-derived methane under California’s Low Carbon Fuel Standard.
• Co-products:
  • Carbon Dioxide: Captured and sold as food-grade liquid CO2 or dry ice.
  • Nutrient-rich Residuals: Usable as fertilizer.
• Tipping Fees: Revenue generated from accepting organic waste for disposal.

Facility Infrastructure and Capabilities

• The Denmark facility initially operated a single anaerobic digester, a wastewater storage tank, and a generator producing "green" electricity from biogas.
• A major expansion completed in 2017 added a second large digester, advanced feedstock mixing equipment, and gas upgrading systems essential for refining biogas into pipeline-quality RNG.
• This expansion included the construction of a dedicated pipeline connecting the plant to the TransCanada interstate pipeline network, alongside two off-site "decant" stations capable of accepting third-party biogas for injection.
• The facility's strategic location within Wisconsin’s dairy region and its established pipeline access provide significant advantages in the growing RNG sector.

Operational Dependencies and Management

• The success of NLC's operations is highly dependent on maintaining reliable waste input agreements with various regional partners, including food processors and farms. Feedstock quality management is critical, as demonstrated by a past incident at a sister facility involving high-fat waste.
• Wells Fargo Trust serves as the collateral trustee for NLC’s senior lenders, directly receiving all revenue from the UCal contract and applying it to debt service before any surplus is released to the Debtor. This cash management structure ensures lender control over cash flows.
• As of the Petition Date, the Denmark plant is staffed by approximately 32 employees.

Prepetition Obligations

Top Unsecured Claims

Events Leading to Bankruptcy