In a note yesterday to Digest readers, we made the following prediction:
By 2020, all bioenergy businesses that are still businesses, will consider their partnerships to be their #1 asset. For feedstock, finance, processing technologies, in downstream markets, and on the policy front.
It’s not an idle prediction, for several years we have been tracking the growing complexity and size of the partnerships and strategic investments in bioenergy, as the industry inches towards the commercialization of advanced biofuels.
It was partnership that funded the first wave of bioenergy construction – often in the form of investments jointly made by first-generation project developers like Broin and groups of farmer-investors.
But the costs and opportunities for advanced bioenergy are daunting. Not only the projected $6-$10 per gallon capital expenditure for plant construction. It’s the 1.2 trillion gallons of fossil-based oil that are up for grabs. And the technologies are just as tough – with difficult challenges like dewatering algae, or the pretreatment, sugar extraction and fermentation of cellulosic ethanol.
Many, if not most, partnerships in bioenergy are of the traditional one-off type, or straight customer relationships. But a new class of alliances, partnerships, JVs and investments is emerging. We call them promise rings for their variety of commitments and promises as well as the promise inherent in the technologies. In many cases the relationships are voluntary, or temporal – in some, hardened into board seats, investments and JVs.
Here are eight promise rings of high interest in bioenergy (not in order of merit)
1. Shell – Cosan – Codexis – Iogen – PetroCanada – Virent – Dyadic – Abengoa – Honda - Cargill
2. BP – Verenium – DuPont – Danisco – Bio Architecture Lab – Qteros – Statoil – British Sugar
3. Total – Amyris – Gevo – Cobalt Technologies
4. Chevron – Solazyme – NREL – UOP – Sustainable Oils – Targeted Growth – LS9 – P&G – Unilever – Bunge – Boeing – Masdar
5. USN Navy – USDA – FAA – EPA -DOE
6. Waste Management – Terrabon – Enerkem – Valero – InEnTec- ZeaChem – Solix – Darling – Linde – Algenol – Dow
7. NAABB -NABC
8. Marathon – Mascoma – Coskata – General Motors – SunOpta
Shell – Cosan – Codexis – Iogen – PetroCanada – Virent – Dyadic – Abengoa – Honda - Cargill
This promise ring revolves around a series of investments made by Shell, in Iogen, Codexis, a massive JV with Cosan, and Virent. In turn, Dyadic is supplying vital technologies to Abengoa and Codexis, and Honda and Cargill are among the other key investors in Virent.
Brazil-based Cosan, Ltd. (CZZ – Analyst Report) announced its preliminary results for the second quarter of fiscal year 2011. Net revenue in the quarter totaled R$4,723.1 million (US$2,683.6 million), up 32.1% year over year.
In the second quarter, CAA (Cosan Açúcar e Álcool) accounted for approximately 37.2% of the net sales with revenue totaling R$1,758.5 million (US$999.1 million), an increase of 45.1% year over year.
Royal Dutch Shell announced an MOU with Cosan (CZZ) to make the largest investment in the history of biofuels, with an agreement to establish a 50-50 Brazilian ethanol joint venture with Cosan which will own 4,500 retail stations, sugar, ethanol, fuel distribution and power generation, and the Shell aviation fuel distribution business.
Under the terms of the proposed agreement, Cosan will merge its entire business into the as-yet unnamed JV, while Shell will contribute its retail, aviation distribution, and will invest up to $1.63 billion in capital into the venture. Overall, Cosan assets are valued at $4.93 billion, including its 60 million tones in sugar cane crushing capacity, and Shell’s retail and aviation marketing units are valued at $3 billion.
In March 2009, Codexis announced that it has received an increased investment from Shell to accelerate its development timetable for commercial biofuels. The company said that Shell will also take an additional seat on the Codexis board. Under the expanded agreement, Codexis will optimize the efficiency of Iogen Energy’s cellulosic ethanol catalysts, as well as developing new to convert biomass directly into green gasoline or green diesel.
In 2008, Dyadic International announced that it has licensed its biomanufacturing technology to Codexis for $10 million. Codexis said that it would use the technology in conjunction with its synthetic enzymes for cellulosic ethanol production under a deal between Codexis and Shell.
BP – Verenium – DuPont – Danisco – Bio Architecture Lab – DDCE – Genencor – Qteros – Statoil – British Sugar
This promise ring revolves around the series of investments and JVs established by BP with Verenium (which it now has fully acquired), the JV with Dupont to form Butamax, a JV with British Sugar to make ethanol in the UK, and its investment in Qteros. In turn, DuPont has partnered with Genencor in Dupont Danisco Cellulosic Ethanol as well as with Bio Architecture Lab in a macroalgae project. In turn, Statoil has lately invested in BAL.
In September, Bio Architecture Lab and Norway’s Statoil announced a wide-ranging strategic partnership for the production of renewable, sustainable and low cost ethanol derived from macroalgae grown off the coast of Norway.
Also in September, Verenium (VRNM) announced the closing of the sale of its cellulosic biofuels business to BP Biofuels North America for $98.3 million, subject to the additional financial terms of the transaction announced on July 15, 2010. In the transaction, BP acquired the Company’s facilities in Jennings, LA, including the pilot plant and demonstration-scale facility, the San Diego, CA R&D facilities, as well as cellulosic biofuels and cellulosic enzyme technology and related IP.
Bio Architecture Lab and DuPont have secured a $9 million grant from the DOE’s ARPA-E to examine the potential of macroalgae as a biofuels feedstock. The companies commented that most companies investigating algae as a biofuels platform have focused on microalgae – although some ventures in the US and overseas have focused on the harvesting of wild, macroalgae such as kelp.
This venture will investigate the potential to farm macroalgae and seaweeds, as a feedstock for the production of biobutanol, based on a microorganism that converts sugars from the seaweed which it utilizes as a carbon source.
DuPont and biotech firm Genencor announced a $140 million joint venture to produce cellulosic ethanol. Each company will contribute $70 million to form DuPont Danisco Cellulosic Ethanol, and the new company will use new enzymes by Genencor to dramatically reduce the cost of cellulosic ethanol production. The new company said that it would launch a pilot production plant next year and expected to have a commercial-scale demonstration plant open by 2012.
In late 2008, SunEthanol announced that it was changing its name to Qteros and that it had closed a $25 million Series B round of financing, led by venture capital firms Venrock (the Rockefeller family fund), and Battery Ventures. BP, Soros Fund Management, Long River Ventures and Camros Capital were among the second round investors. Qteros owns the rights to the naturally occurring Q microbe, which the company has been breeding over the past year to enhance its productivity.
Total – Amyris – Gevo – Cobalt Technologies
This promise ring stems from strategic investments made by Total in the newly-public Amyris (a massive $133 million stake), and a previous investment in IPO-candidate Gevo. Gevo and Cobalt are both joined by VC investors Burrill & Co, which has focused on biobutanol. A uniting factor? All three are focused on renewable chemicals either as a companion to fuels or in substitution.
French oil major Total agreed to acquire approximately 17% equity interest in Amyris for $133 million, and will have the right to appoint a member of the Amyris Board of Directors. Under their collaboration agreement, Total and Amyris R&D teams will work together to develop new products and build biological pathways to produce and commercialize renewable fuels and chemicals. The partnership combines Amyris’s industrial synthetic biology platform and emerging Brazilian production capacity with Total’s technological know-how, industrial scale-up capabilities and access to markets. More on the Total investment.
In April 2009, oil major Total invested an undisclosed amount in a series D investment round in Gevo, the advanced biofuel company focused on development of butanol as an alternative fuel as well as chemical intermediates including polyacrylates and PETE.
Chevron – Solazyme – NREL – UOP – Sustainable Oils – Targeted Growth – LS9 – P&G – Unilever – Bunge – Boeing – Masdar
This ring revolves primarily around partnerships and investments by Chevron in Solazyme, LS9 and with NREL. In turn, Solazyme and Sustainable Oils (and its parent Targeted Growth) are tightly partnered in the aviation biofuels movement, along with Boeing and UOP. P&G has latterly partnered with LS9, and Bunge and Unilever have invsted in Solazyme. This ring tends to focus on the use of advanced algal and e.coli platforms to generate higher-end cuts of fuel, diesel from LS9 and jet fuel from renewable oils produced by UOP using Sustainable Oils camelina oil and Solazyme’s algal oils. Masdar is joined with Boeing and others in the pursuit of aviation biofuels as well.
Bob Brooks in AI Online writes: “The Masdar Institute of Science & Technology is now up and running in Abu Dhabi, United Arab Emirates, aimed at the fundamental that “alternative energy is seen as the keystone for further development of the Emirates”.This leaves little room for doubt that the petroleum age is seen by those who have profited hugely from it as approaching the tipping point at which renewable fuels emerge as another energy source particularly as “drop-in” motor fuel. The Institute receives academic guidance from and collaboration with MIT. Others providing guidance and support are Boeing Aircraft Company, Etihad Airlines and UOP (leading provider of oil refining technology).
In August, Solazyme announced that Bunge and Unilever joined its Series D round as a strategic investors. The announcement comes on the heels of Solazyme’s Navy jet fuel delivery announcement and the recent announcement of $52 million in new capital from the Series D round, which included the announcement of strategic investors Chevron, and San-Ei Gen. The strategic investment by Unilever adds to the previously announced Series D round, which has brought in a murderer’s row of strategic investors and VC into what is increasingly being seen as a breakout platform for renewable oils produced from microalgae.
In 2009, advanced biofuels developer LS9 announced a new partnership with Procter and Gamble. In adopting LS9’s technology, P&G will employ one of the cleanest and most efficient technologies available to produce chemicals for consumer products. LS9’s technology converts renewable materials into high-value, low-carbon, cost effective fuels and chemicals. The multi-year collaboration will help develop the LS9 technology platform. This platform can produce a broad portfolio of chemicals used in production of key consumer chemicals within the P&G family of products, including sustainable chemicals and renewable transportation fuels. In the same investment round, LS9 received a commitment from Chevron.
US Navy – USDA – FAA – EPA – DOE
A partnership overview would not be complete without a look at the series of agreements within the US Government, linking the DOE, EPA and USDA in the Interagency Working Group on Biofuels, plus agreements with the USDA with FAA and the US Navy to pioneer the development of feedstocks for military and aviation biofuels.
Last January, the US Navy and the US Department of Agriculture announced a partnership that will bring USDA science and scientists to the Navy’s effort to develop a “sustainable, cost effective energy infrastructure,” through development of synthetic fuels and energy efficiencies.
According to a report in the Navy Times, the Navy paid $424 per gallon for a batch of algal-based biofuels, for testing purposes, purchased from Solazyme. Last year, the Navy announced its goal of establishing a “Great Green Fleet,” consisting of energy self-sufficient facilities and ships running by nuclear and alternative fuels.
In February, the Biofuels Interagency Working Group – co-chaired by USDA, DOE, and EPA, and with input from many others – released its first report: Growing America’s Fuel – a new U.S. Government strategy for meeting or beating the country’s biofuel targets. “The U.S .is producing 12billion gallons per year of biofuels, mostly from corn grain ethanol, but we are not on a trajectory to reach the Congressional 36 billion gallons per year goal by 2022 or to meet the 100 million gallons cellulosic biofuels target in 2010,” began the report. The report called for a “New approach, an outocme-driven, re-engineered system, managed by a small centrally-located team accountable to the President’s Biofuels Interagency Working Group that has clearly defined roles and deliverables for all participating federal department, private sector, tribal, and international partners.”
Waste Management – Terrabon – Enerkem - Valero – InEnTec – ZeaChem – Solix – Darling – Linde – Algenol – Dow
This promise ring is loosely formed around a series of strategic investments made by Waste Management in Terrabon, Enerkem, and a JV with InEnTec to form S4. The goal? Utilizing municipal solid waste as a feedstock for bioenergy. In turn, Valero has also invested in Terrabon, as well as acquiring its own string of ethanol plants and investing in both ZeaChem, Algenol and Solix for its own family of advanced bioenergy bets. Valero and Darling have also set up a JV to pursue renewable diesel. Algenol has established its own partnerships with Linde and Dow.
Last September, Darling International and a Valero subsidiary announced that they intend to form a joint venture to produce 135 Mgy of renewable diesel from animal fat at a plant near Norco.
In May 2009, Waste Management Inc. and InEnTec announced a joint venture, called S4 Energy Solutions, that will produce renewable fuel, power and industrial products as well as to generate electricity, using plasma gasification.
Waste Management has been in the news with a series of investments in renewable energy and recycling technologies in the past 18 months. What criteria do strategic investors apply? How do they look at technologies, feedstocks, and the value chain.
Last May, the company entered into a joint venture with InEnTec to create S4 Energy Solutions, which is commercializing plasma arc gasification technology to generate electricity or syngas for renewable fuel or chemical feedstock. In August, they partnered with Terrabon and Valero to commercialize a new technology that can create low-carbon liquid transportation fuel from organic waste. In November, Waste Management and Linde North America announced that their joint venture company has begun producing liquefied natural gas at the Altamont Landfill near Livermore, California. In January, WM announced an investment in Harvest Power, to develop an organic waste anaerobic digestion facility. In February, they announced our investment in Enerkem, to develop another waste gasification technology.
Last May, Valero announced a joint development deal with Florida-based Algenol Biofuels, describing a “relatively small investment” but not offering details on the deal. Algenol said in media reports that the development deal calls for the two companies to place algae farms next to refineries, and using the carbon dioxide as a feedback for the production of ethanol and renewable chemicals. Linde and Dow Chemical have previously partnered with Algenol, while Valero has previously invested in Solix, as well as the waste-to-ethanol company Terrabon.
Dow Chemical announced that it will partner with Algenol to build and operate a 24-acre Texas-based algae biorefinery demonstration farm that will produce ethanol at a target cost of $1 per gallon. The facility will be constructed at the Dow facility in Freeport, and will make ethanol that can be used as a base for the production of a variety of green chemicals. Dow is expected to concentrate on the development of bioplastics. The test plant is expected to employ 300 people.
These two consortia are promise rings in their own right. Both were established in the past year by DOE to pursue, respectively, algal biofuels and advanced drop-in fuels. Though loosely structured, they each form two of the largest constellations of affiliations in the industry.
National Alliance for Advanced Biofuels and Bioproducts (NAABB). Led by the Donald Danforth Plant Science Center (St. Louis, MO), NAABB will develop a systems approach for sustainable commercialization of algal biofuel (such as renewable gasoline, diesel, and jet fuel) and bioproducts. NAABB will integrate resources from companies, universities, and national laboratories to overcome the critical barriers of cost, resource use and efficiency, greenhouse gas emissions, and commercial viability. It will develop and demonstrate the science and technology necessary to significantly increase production of algal biomass and lipids, efficiently harvest and extract algae and algal products, and establish valuable certified co-products that scale with renewable fuel production. Co-products include animal feed, industrial feedstocks, and additional energy generation. Multiple test sites will cover diverse environmental regions to facilitate broad deployment.
Partners are: Los Alamos National Laboratory, Pacific Northwest National Laboratory, University of Arizona, Brooklyn College, Colorado State University, New Mexico State University, Texas AgriLife Research, Texas A&M University System, University of California Los Angeles, University of California San Diego, University of Washington, Washington University in St. Louis, Washington State University, AXI, Catilin, Diversified Energy, Eldorado Biofuels, Genifuel, HR BioPetroleum, Inventure, Kai BioEnergy, Palmer Labs, Solix Biofuels, Targeted Growth, Terrabon, UOP.
National Advanced Biofuels Consortium (NABC)—Led by the National Renewable Energy Laboratory and Pacific Northwest National Laboratory, NABC will conduct cutting-edge research to develop infrastructure compatible, biomass-based hydrocarbon fuels. The result will be a sustainable, cost-effective production process that maximizes the use of existing refining and distribution infrastructure. NABC will investigate a variety of process strategies and down select to those closest to larger scale demonstration. The NABC plans to further develop these strategies to deliver a pilot-ready process, with full lifecycle analysis to measure the environmental benefits.
Partners are: National Renewable Energy Laboratory, Pacific Northwest National Laboratory, Albemarle Corporation, Amyris Biotechnologies, Argonne National Laboratory, BP Products North America Inc., Catchlight Energy, Colorado School of Mines, Iowa State University, Los Alamos National Laboratory, Pall Corporation, RTI International, Tesoro, University of California, Davis, UOP, Virent Energy Systems, Washington State University.
Marathon Mascoma Coskata General Motors SunOpta
This promise ring is based, initially, around the investments made by Marathon and GM in Coskata, and by Marathon in Mascoma. In turn, Mascoma has acquired SunOpta’s cellulosic pretreatment business and SunOpta now owns a large chunk of the Mascoma business. The goal of this promise ring? Low-cost cellulosic ethanol, though Coskata’s gasification system and Mascoma’s consolidated bioprocessing are quite different approaches to the problem.
Earlier this year, Mascoma announced the acquisition of SunOpta BioProcess, a division of SunOpta Inc. (STKL) This combination brings together the world-leading fiber preparation and pretreatment technologies of SBI and the world-leading consolidated bioprocessing technology of Mascoma, to create a company with comprehensive capabilities for converting non-food cellulose (wood chips, energy crops and organic solid waste) into ethanol and high value co-products.
In 2008, Mascoma received $10 million in financing with an equity investment by Marathon Oil. The company said that it had received a total of $61 million in its latest funding drive, putting the total of equity investment and research grants for Mascoma at more than $200 million. Mascoma’s “single-step” production system for cellulosic ethanol has attracted attention for its potential to eliminate cost and risk in scale-up towards commercial scale cellulosic ethanol.
Also in 2008, General Motors and Mascoma announced a strategic relationship to develop cellulosic ethanol, which included an undisclosed equity investment in Mascoma by GM. Mascoma’s single-step biochemical process has received support from a host of high-profile investors and partners including the Department of Energy, Khosla Ventures and Kleiner, Perkins.
Earlier in 2008, General Motors announced that it will invest in Coskata, a cellulosic ethanol venture backed by Vinod Khosla. GM is reported to have made the move in part to convince its customers that the company aims to be the leader among car makers in developing environmentally friendly vehicles. Coskata aims to produce 100 Mgy of cellulosic ethanol based on five bacteria strains developed at research labs in Oklahoma.
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