Virdia ups the ante in the Race for the New Sugars

| March 6, 2012

Low-cost cellulosic sugar maker announces $100 million in financing; name change from HCL CleanTech, support from Mississippi. The race for leadership in low-cost sugars heats up.

In California, Virdia, formerly HCL CleanTech, a leading developer of cellulosic sugars, today announced major company milestones, including a new brand and CEO, its latest funding round, and a $75 million deal with the Mississippi Development Authority to build manufacturing plants in the state.

Founded in 2007 as HCL CleanTech, Virdia has developed the CASE process, which converts cellulosic biomass to high quality fermentable sugars and lignin using acid hydrolysis (the HCL in the company’s former name referred to ‘hydrochloric acid’).

New CEO Philippe Lavielle is a veteran of the industrial biotech sector. Lavielle replaces co-founder Eran Baniel as CEO, who now serves as vice president of business development. Before joining Virdia, Lavielle was a member of the executive management at Genencor, a $1 billion world leader in industrial enzymes recently acquired by DuPont, where his responsibilities included global business development in the fields of renewable energy and biochemicals.

To fund its piloting activities and engineering plans, Virdia recently closed its latest round of financing, raising over $20 million from insiders, Khosla Ventures, Burrill & Company and Tamar Ventures. In addition, the company closed a $10 million in a venture debt deal with Triple Point Capital.

Going down to Mississippi

The company also announces that it recently signed a memorandum of understanding with the Mississippi Development Authority to build manufacturing facilities in the biomass-rich state. The agreement includes an incentive package with $75 million in low-interest loans, as well as up to $155 million in various tax incentives over a 10-year period.

Applications for low-cost cellulosic sugars range from renewable fuels and fuel intermediates, including diesel, jet fuel, ethanol and butanol; renewable chemicals and materials such as biosurfactants, lubricants, plastics and synthetic rubber; and nutritional additives such as baker’s yeast and amino acids for the animal feed industry. Virdia’s CASE process also produces lignin in dry or soluble forms, which has proven to be feedstock for plant-based plastics and other thermo-chemical transformations.

Here and Now

In a discussion with the Digest, CEO Lavielle laid out what he saw as the advantages for the company in the near term.

“Pulp wood and hardwood substrates are available in mass quantitys today and that makes them the feedstock of choice for today. Our process has access to those materials and it will be some years before the enzymatic route is competitive there.

“Our CASE process has yields of 95-97 percent of the available sugars, both C5s and C6s, and by producing C5 sugars such as xylose, it gives you a very valuable product stream for producing furfural or xylene chemistries. By contrast, if you can of 80-85 percent with enzymatic process today, you are doing well.

The differentiation

“Acid hydrolysis has been around for a long time – the original, known process goes back to World War Two – though we have developed and improved it substantially. The real invention is in our complete recycle of the acid – extracting the acids from the sugar stream so that we can re-use.

Cellulosic sugars vs corn sugars, on price

“We are competitive with $4 bushel corn dextrose sugars, and we think we have a stronger long term position than companies producing dextrose.”

The long term price for sugars will depend on the market segments, but we see that 15 cents a pound is like a threshold. The question for all of us is ‘can we make it work at 15 cents?”

Building for scale

Lavielle noted that the company will build, own and operate it first plant, and after that the company will pursue other business models including licensing its technology. Lavielle said that, in terms of scale, a 150,000 tonne plant will show a financial return, but that the size of an individual project could range up to 500,000 tonnes. For its first commercial plant, the company is pursuing a 150,000 tonne and a 50,000 tonne project – the latter option is “not optimal financially,” said Lavialle, but will demonstrate the technology.

Timing

Lavielle said that financing for the first plant is now complete and the company will have a finalized engineering package complete in September. Following that, it will take 18 months to build, and the company expects to have its first commercial facility open in 2014.

How to win in the sugar wars

To win, aid Lavielle, “you have to be at scale, your cost has to be the cheapest, and you have to be able to work with the widest range of substrates, especially wood, so that you have options as feedstocks prices go up and down.”

The bottom line

Companies need low-cost sugars – no doubt about that, and the 15 cents per pound figure sounds just about right – above that, there’s a short-term competitive story against sugar at its current high prices. Below 15 cents, the floodgates start to open for the long-term.

Who are the players? Renmatix, BlueFire’s SucreSource and Virdia are out there in front, building towards scale right now. Codexis could well be there in a compellingly strong position based in bagasse, but is locked out of the fuel markets by its exclusive relationship with Shell. Proterro, Comet, Sweetwater Energy and Pure Vision Technology are developing in the wings.

In the end, the common enemy and current incumbent is traditional sugars, which are currently trading at 23-24 cents per pound for the May and June NYMEX contracts. The outlook for the new sugars looks good.

Longtime sugar trader Czarnikow noted this week, “Between 2009 and 2011, [sugar] consumption grew at just 1% per year, less than the underlying rate population growth and indicative of falling per capita consumption linked to increasing substitution…Current prices are not at levels that will reverse trends towards lower consumption growth and increased use of sugar substitutes.”

More about Virdia here.



Tags: , , , ,

Category: News Analysis, Top Stories

Comments (0)

Trackback URL | Comments RSS Feed

There are no comments yet. Why not be the first to speak your mind.

Comments are closed.