NZ Super Fund makes $60 million investment in LanzaTech

December 8, 2014 |

Siemens und LanzaTech wollen Bioethanol aus Stahlwerksabgasen erzeugen / Siemens and LanzaTech partner to transform steel mill off-gases into bioethanolTakes Series D (last pre-commercial) venture round to $120 million.

Financial path to commercial-scale and beyond now set — all eyes now on scale-up of the technology, and expansion from carbon monoxide to carbon dioxide as a feedstock, as well.

In New Zealand, the New Zealand Superannuation Fund has made a US$60 million equity investment in leading gas fermentation company LanzaTech.

The LanzaTech investment is one of a series of ‘expansion capital’ investments made by the NZ Super Fund in recent years, providing capital to privately-owned, early-stage companies that are seeking to grow, but are not yet ready to list on the public markets.

“LanzaTech is one of the most exciting companies New Zealand has produced, with significant global potential,” said Nigel Gormly, NZ Super Fund Head of International Direct Investment. “We’re proud to continue the New Zealand connection and to be able to assist in LanzaTech’s ongoing growth.”

While only around 1% of the overall NZ Super Fund is invested in expansion capital, Gormly says it is appropriate that it is part of the mix. “The Fund is well diversified and expansion capital’s risk/return profile is a good match for growth-oriented investors with a long time horizon.”

More about LanzaTech

LanzaTech’s gas fermentation platform disrupts the current highly centralized global energy system by enabling the regional production of low-cost energy from local wastes and residues, including gases as varied as industrial flue gas, gasified biomass wastes and residues, biogas, and high-CO2 stranded natural gas. The company was originally founded in 2005 in New Zealand.

LanzaTech: Biofuels Digest’s 2014 5-Minute Guide
Junk or treasure? Looking at carbon monoxide and LanzaTech 
Readers select LanzaTech as #1 in The 50 Hottest Companies in Bioenergy for 2014-15
HSBC to join Virgin Atlantic, LanzaTech partnership for low carbon jet fuel

$120M raised in monster Series D round to date

While LanzaTech’s Series D round is not yet officially closed — the company has raised almost double its original target of $60-$80 million with a total of $120 million to date.

Last March, the round had a first close of $60 million led by Mitsui & Co. with a $20M investment. In all, the round to date includes new investors NZ Super Trust, Mitsui, Siemens via its Venture Capital unit, CICC Growth Capital Fund I and existing investors: Khosla Ventures, Qiming Venture Partners, K1W1 and the Malaysian Life Sciences Capital Fund. Existing investors Soft Bank Capital, PETRONAS Technology Ventures, and Dialog Group were not among the announced investors so far in this round.

Proceeds from this round not be used towards the first commercial plant, which is now slated to be operational in 2016. That first commercial facility is fully financed by BaoSteel, one of the largest steel manufacturers in China, and will use steel mill off gases to produce fuels and chemicals. The LanzaTech-Baosteel New Energy Joint Venture will operate the plant and it will produce ethanol and 2,3 Butanediol (BDO) at an annualized capacity of 20,000 tpa (10-12 millions gallons per year). A planned second commercial with Shougang is targeted to produce 25 million gallons of fuel per year.

The Series D funds, rather, will be used to extend LanzaTech’s core gas fermentation platform and further develop LanzaTech’s product portfolio. To date, products include fuels such as ethanol or jet fuel and commodity chemicals such as butadiene used in nylon production or propylene used in plastics manufacture.

LanzaTech_HOT50

The LanzaTech investment story

Seed – 2005/06 – New Zealand-based Angel investors and secured grants.

Series A – 2007 – $3.5M, led by Khosla Ventures
Success in the lab

Series B – July 2010 – $18M, led by Qiming Ventures
Successful pilot plant construction and operation (1000 liter fermenter, at New Zealand Steel at Glenbrook, near Auckland, for more than 2500 hours and continuously for more than 500 hours.)
2 products demonstrated
2 patents granted, 43 patent apps filed

Series C – 2012 – $55.8M, led by Malaysian Life Sciences Capital Fund
Two demo units under construction
6 products demonstrated
4 patents granted, 67 patent apps filed
Demonstrated alternative feedstocks
Also in 2012, LanzaTech closed on $15 million in debt financing from Western Technology Investment.

Series D – 2014 – $1200M, led by NZ Super Trust ($60M) and Mitsui ($20M)
Two demo plants completed and exceeding expectations
10+ products demonstrated
77 patents granted, 220+ patent apps filed
Within 24 months of first commercial

LanzaTech's strategy of diversification, illustrated

LanzaTech’s strategy of diversification, illustrated

Why all the added investment for expansion, now?

The company has been deeply involved with efforts to utilize CO2 for gas fermentation. One reason. “The steel waste gas source typically contains 40-50% CO, with only 1-2% H₂ (the balance being CO₂ and N₂),” LanzaTech co-founder Sean Simpson noted some years back.

The Demonstration facilities

LanzaTech has successfully operated two Demonstration facilities in China (one with Baosteel in Shanghai and one with Shougang near Beijing) each with 100,000 gallon/year ethanol capacity. The facility with Shougang received a world first sustainability certification from the Roundtable on Sustainable Biomaterials for the production of bioethanol.

In addition the company operates a demonstration facility in Taiwan (12,000 gallon/year ethanol capacity) with LCY and China Steel; an integrated syngas to Butadiene Demonstration facility planned Q2 2015 in Korea with SKI. The company is also finalizing an MSW demonstration facility in Japan (6,000 gallon/year ethanol capacity) expected to be ready in the next year.

The Freedom Pines facility in Georgia

“Our Freedom Pines facility in Georgia plays a key part in our chemicals strategy,” CEO Jennifer Holmgren told the Digest. “Our microbe has developed significant capabilities for the production of a variety of chemicals thanks to the work of our synthetic biology team. We have begun retrofitting the plant to enable our technology to be integrated into the existing infrastructure and we expect to begin production of chemicals in 2015. This timeline is dependent on the successful integration efforts currently underway.”

The company's facility at Freedom Pines.

The company’s facility at Freedom Pines.

Reaction from the principals

LanzaTech CEO Jennifer Holmgren said: “as we continue on our path to commercialization, we are tremendously excited to include the NZ Super Fund as one of our investors. Our roots and hearts are in New Zealand, and this investment will allow us to expand and develop our global platform, increasing our ability to play a part in New Zealand’s energy future.”

Welcoming the NZ Super Fund investment, Sir Stephen Tindall, one of LanzaTech’s first investors, said: “LanzaTech has been highly successful and the NZ Super Fund’s investment is a key step in continuing the company’s progress and global expansion. We have been involved with LanzaTech from the outset and take great pride in its success – LanzaTech has an important social contribution to make in reducing air pollution and at the same time turning waste gas into valuable products.”

The Bottom Line

We continue to see that strategic investors — those with, via NDA, almost unlimited access to the hard data around rates, titers and yields, have consistently placed higher value on companies than the public markets, at this stage of company valuation. We suspect that this round places the valuation of LanzaTech in the vicinity of $400 million, based on previous comparable valuation lifts between round. That’s more than double the market valuation of companies like Solazyme and Amyris, which have taken the public route during the critical scale-up stage.

LanzaTech_Hot30

So, we expect that we may not see a public listing for LanzaTech until after scale-up of the first commercial plant is complete — and that would see the company into 2016, for which this capital round should be adequate.  So – we may have seen the last private round go by for LanzaTech.

More on the story at lanzatech,com.

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