First commercial! Green Biologics raises $76M round in Debt and Equity Financing

Company now ready to Deliver 1st Commercial Plant in U.S.

From the UK, we hear that Green Biologics announced the closing of an internal follow-on equity round of $42 million co-led by Swire Pacific Limited and Sofinnova Partners. Existing investors Capricorn Venture Partners, Oxford Capital Partners, Morningside Technology Partners and ConvergInce Holdings also participated in the round.

The significance

Green Biologics has transitioned from a development stage company to a commercial company — and that we can expect to see commercial-scale construction throughout this year. This is bolt-on technology, so right now the plant will be running in full ethanol production mode while the new technology is built and installed on site in Minnesota.

Sometime in Q1 next year we can expect the existing plant to shut down while the new technology is tied in to the existing plant — and we can expect that by the end of Q2 the plant should be in full production of n-butanol and acetone.

For potential partners

Here’s a firm that’s going to be producing biobased n-butanol — a key chemical intermediate — in commercial quantities. Companies that have formulation chemistry capabilities and customer desires for a sustainable, renewable product choice — well, rev up your labs, time to start working on options that take advantage of a new supply stream.

Green Biologics: local or global?

The company is definitely in one-step-at-a-time mode, heads down, focused on the first comerfcial. But as commercial business development chief Tim Staub told the Digest, “partners, in the long run, aren’t going to want regional supply, regional partners. The demand is global for acetone and n-butanol, the companies themselves are global, and they are going to want global supply from global partners. We know that, we see that.

“Pace Yourself”

GBL Americas president Joel Stone says, “ the key to derisking is the way you pace yourself. In the case of ethnaol in the 2000s, there was a mandate and a regulatory enviroment that was pushing people to build plants very quickly. Here, this is the chemical industry where there is no regulation making you [go renewable]. So, you aim for a steady flow, you do one, you move on to the next, and then the next, and you keep in mid that it’s a 3-4.5 million ton market, far smaller than the fuels markets, and you have got to be selective.”

The path to scale-up

Why could Green Biologics succeed with a smooth transition to full scale, where others have stumbled?

You may well find that the answer comes in two parts.

First, taking all the full de-risking steps, side-stepping nothing, minimizing nothing. At the demonstration plant, GBL has run 70 replications of its production organism to ensure it can tolerate at-scale conditions and behave as predicted. (The demo plant is 1/30th full scale).

Second, great attention to cleanliness and good tight designs that are very cleanable and can be minimized for contamination. Less than for a pharmaceutical plant — after all, this is industrial biotech, but clean nonetheless.

The fact that this is a well-known organism — clostridium — which has been advanced through traditional mutation techniques, but has a long history of production at scale, might give you a degree of added comfort.

The financing

In addition to the $42 million internal equity round, an additional $34 million in funding was raised predominantly in debt financing from Tennenbaum Capital Partners, along with equity and debt investment rolled over by existing members of Central MN Ethanol Co-op LLC in Central MN Renewables, a U.S. affiliate of GBL. This $76 million financing follows GBL’s previous equity round of $25 million in December 2013, bringing GBL’s total fund raising to just over $100 million since late 2013.

The importance of leverage

Here’s one of the beauties of bolt-on technologies where a company can acquire an existing asset and make it perform financially at a level it has never done before: the possibilities with debt, and the opportunity to raise less equity and bring larger returns to equity partners.

Larger returns mean you can get over equity hurdle rates without crazy timelines, which allow companies to pace the innovation and the scale-up.

The Green Biologics backstory

On December 23, 2014, GBL announced the completion of the acquisition of the assets of CMEC, a 21 million gallon per year ethanol producer in Little Falls, Minnesota through its CMR affiliate. In addition to the acquisition, the proceeds of the round will be utilised by GBL to repurpose the Minnesota plant to produce n-butanol and acetone, along with funding GBL’s advanced technology process technology platform.

Green Biologics’ new plant

In December 2013, Green Biologics announced the closing of a $25 million Series B round led by Sofinnova Partners with strategic participation by Swire Pacific Limited. Follow on investments were also made by Capricorn Venture Partners, Oxford Capital Partners, Morningside Ventures and ConvergInce Holdings LLC.

Also back in December 2013, the original asset purchase agreement was executed and approved by Central MN Ethanol Co-op shareholders.

In July 2013, Green Biologics announced a collaboration and planned investment in facilities with Iowa’s Easy Energy Systems. The collaboration resulted in the modification of Easy Energy’s ethanol demonstration plant in Emmetsburg, IA to produce renewable n-butanol and acetone. In mid-2012 GBL successfully produced butanol and acetone from corn mash at the Emmetsburg facility in Iowa at a 40,000 liter fermentation scale.

About the technology

GBL has a broad technology platform that is unique, highly differentiated and world leading. We have demonstrated significant improvements in fermentation performance and we have the skills to deliver further improvements in strain and fermentation process performance for ABE and other renewable chemicals.

The GBL technical program focuses on the production of low cost, high quality chemicals around a C4 platform. Leveraging a leadership position in Clostridia microbiology, biochemistry and fermentation, GBL develops microbes and processes that utilize sustainable and diverse feedstocks to produce a portfolio of valuable chemicals and future biofuels. While maximizing performance GBL focuses on minimizing environmental impact.
Clostridia are highly suited to commercial use for the production of industrial chemicals. Proven commercially for a century, they are robust, solvent tolerant and can utilize a variety of feedstocks and sugars including C5 and C6 monomers, dimers and some polymers. Most importantly more of the energy provided (in the form of sugars) is recovered in the form of usable products (solvents and energy) than is the case for most commercially utilized organisms, such as yeast.

Reaction from the principals

“We are grateful for the strong support from our board, and the continued support of our existing investors as well as from our new investors and partners, TCP and CMEC,” said Sean Sutcliffe, GBL Chief Executive, adding, “Our objective since last year has been to demonstrate our technology and secure our first U.S. commercial plant in Minnesota, and raise the necessary capital to repurpose the plant to begin production of renewable n-butanol and acetone for our customers – this financing sets us squarely on our course.”

Commenting upon the investment round, Philippe Lacamp, Head of Sustainable Development for Swire Pacific, said, “Swire Pacific is committed to advancing promising renewable product technologies by identifying high quality teams able to accelerate the use of renewable resources to meet global needs. The GBL team has achieved remarkable technical and strategic results since December 2013, and we are pleased to support Green Biologics’ vision to become a global leader in renewable chemistry utilising sustainable feedstocks, with an ultimate objective to see their technology in advanced fuels.”

Denis Lucquin, Managing Partner at Sofinnova Partners added, “We are delighted to have co-led this investment in Green Biologics, and we believe GBL management have developed a clear path to profitability with a capital efficient approach leveraging existing assets to produce renewable n-butanol and acetone. We are confident that Green Biologics will continue to deliver exceptional value to shareholders as well as to customers.”