LanzaTech raises $58M in Series C round; Petronas becomes strategic investor

| January 23, 2012

Malaysia’s national oil company invests in early-stage advanced biofuels venture. Is SE Asia the next stop for LanzaTech’s magic microorganism?

In Illinois, LanzaTech announced that it has closed its Series C round with new investment totaling US $55.8 million led by the Malaysian Life Sciences Capital Fund.

New investors include Petronas Technology Ventures Sdn Bhd, the venture arm of Petronas, the national oil company of Malaysia, and Dialog Group, a leading Malaysian integrated specialist technical services provider to the oil, gas and petrochemical industry. Specific investments in the round were not disclosed by the company.

Existing investors Khosla Ventures, Qiming Venture Partners and K1W1 also participated in the round. To date, the company has raised more than $85 million.

LanzaTech CEO Jennifer Holmgren told the Digest “we managed a pretty large C round despite the fact that the funds are not for building production facilities- the funds are for R&D and continuing to develop our waste gas to fuels and chemicals platform.  So the money is to grow our R&D base.  Some of the money will also go to further develop Soperton as a chemicals platform launch site.

Why LanzaTech, why now?

Waste is white-hot – the lowest cost feedstock is proving to be the easiest-to-afford, lowest-risk path to commercialization, next to bolt-on technologies such as Gevo or Amyris offer that utilize existing feedstocks and sites.

Why are companies making haste with waste? The low-cost, long-term nature of feedstock agreements are simply easier to finance, and the waste-producing or aggregating companies are seeing real strategic investment opportunities to unlock new value in their companies by converting costly emissions into value streams.

Off-gases from industrial production represent an especially valuable class of opportunities, because the feedstock volumes are already aggregated at industrial sites, as opposed to the aggregation process that powers the development of landfills. LanzaTech estimates that there is as much as 15 billion gallons in potential biofuels annual production, from  the industrial off-gases from, for example steel mills.

The Petronas investment

Provising intrigue in the announcement are the several investments by related Malaysian ventures, and in particular the investment by Petronas, the country’s national oil company.

Haida Shenny Hazri, CEO of Petronas Technology Ventures Sdn Bhd, said that the investment made by Petronas provides a platform for Petronas to pursue the integration of LanzaTech’s technology on converting waste gases with PETRONAS’ operations.

The Malaysian NOC (national oil company) had been investigating biofuels since at least 2007, when reports filtered from Malaysia that the company was taking a look at alternative fuels. “Of course our focus is on oil and gas, but I think as we move into the future we cannot ignore the importance of biofuels,” Zamri Jusoh, senior manager of Petronas’ petroleum development management unit, told the Edge Financial Daily, at the time. http://www.malaysiakini.com/news/75667 By 2010, it had picked up R&D support from the national government, and had launched test programs for biodiesel blending.

The leap into advanced biofuels – specifically, the production of biofuels from off-gases generated in the company’s operations, represents a quantum leap in the company’s interests. The co-investment by Malaysia engineering concern Dialog, and the investment by the Malaysian Life Sciences Fund (a JV of Burrill and the Malaysian government) is an indication that the government is aimed at a Malaysian project. GHoweber, LanzaTech’s Holmgren would not confirm that such a project is on the drawing boards, only noting that companies like Dialog are capable of supporting projects in many areas around the world.

Chems or fuels

Increased R&D funding, and a pivot towards Malaysia, located at the heart of a lot of chemicals industry activity in Malaysia. This announcement is in so many ways all about expanding the LanzaTech capability from fuels towards a long line of renewable chemicals. For

LanzaTech in the Hot Four: Brazil, China, India, the US

The Hot Four – the burgeoning biotech giants, essentially the BRIC countries, subtracting Russia (which has yet to fully embrace the industrial biotech opportunity), and adding in the US, which has been a catalyst for much of the R&D powering the sector. LanzaTech is active in three of the four hot spots around the globe.

In China, development of a demonstration plant to convert waste flue gas from steel manufacturing at a Baosteel (China’s largest steel manufacturer) plant is mechanically complete, and expected to begin production of ethanol later this year. The company is also working with Capital Steel (China’s fourth largest steel company) on a similar project.

In India, LanzaTech is working with Indian Oil and Jindal Power and Steel Limited on a facility to convert industrial waste gases into ethanol. It also has partnered with Concord Blue on a project to convert municipal solid waste into ethanol throughout India.

In the United States, LanzaTech is developing a facility to produce renewable fuels and chemicals from regionally sourced waste wood in Soperton, Georgia – the old Range Fuel site, now named Freedom Pines. http://www.freedompines.com/ In addition, the company is working with the U.S. Department of Energy, the Department of Defense (Defense Advanced Research Projects Agency – DARPA) and the Federal Aviation Administration, to adapt its technology to produce aviation fuels for commercial and military use.

Next steps for LanzaTech

In the second half of the year, the company will bring its Bao Steel pilot plant in China online – a 100,000 gallon project – in the second half of the year. If results from the project are as expected, Baosteel is expected to back the construction of a commercial-scale  facility that will commence construction by year-end and commence commercial production before the end of 2013.

Meanwhile, plans for the Freedom Pines facility in Georgia are as yet unfinalized, but the company is expected to have its plans in place before August of this year. For now, the expectation is that the bulk of the company’s development of its chemicals opportunities will take place in Georgia.



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