Total makes play in cellulosic sugars, invests in Renmatix, inks JDA

March 3, 2015 |

total-logoTotal takes equity and Board seat in licensor of supercritical hydrolysis tech for production of low-cost cellulosic sugars.

What’s up, what does it say about Total, the sector and Renmatix — and why might all this be aimed at a path to lower cost renewable jet fuel?

In California, Total New Energies is making an investment in Renmatix, has signed a joint development agreement, and is taking aboard seat.

renmatix-logoUnder the agreement, Renmatix and Total will utilize Renmatix’ s proprietary Plantrose process with specific feedstocks to extract sugar for use in production of biobased products of interest to Total. In concert with the investment and R&D projects, Total also joins the Renmatix Board of Directors.

The Digest’s Quick Take on the investment

Says something about the renewable fuels space that Total, in an era of low oil prices and clawbacks in investment, is doubling down on a renewable pathway by targeting a low-cost cellulosic sugars technology to unlock its hopes that there is a massive market available in cost-competitive renewable jet fuel.

Says something about Renmatix that a very large company, and the diligence that accompanies investment, adds validity to what Renmatix is doing.

Says something about the entire supply chain that Total is increasingly integarying the pieces, putting all the right partners in place.

The Total initiative

We had a tip-off that something was up around Thanksgiving last year, when we reported that Total was experimenting with methods to produce sugar from cellulosic materials to eventually produce aviation fuels. We did not know the identity of the cellulosic sugars partner at the time, but the company’s raw material supply senior manager told the International Sugar Organization’s conference that as the oil and gas industry is accustomed to decades of development, there’s no problem in waiting for the development of their new solution.

Besides that, neither Total nor Renmatix are chirping regarding the specific feedstocks or timelines, but The Digest reported last June that ASTM has revised the D7566, the Standard Specification for Aviation Turbine Fuel Containing Synthesized Hydrocarbons to include the use of renewable farnesane as a blending component in jet fuels for commercial aviation.

With that news, Amyris and Total said that they would now prepare to market a drop-in jet fuel that contains up to 10% blends of renewable farnesane.

It’s worth noting that the entity that has invested in renmatix is the Emeryville, California-based Total New Energies, not the Total Energy Ventures corporate VC entity.

About a year ago, in January 2014, we reported that BIOjet Abu Dhabi: Flight Path to Sustainability, will develop a comprehensive framework for a UAE biofuel supply chain, which is already in motion. Etihad Airways recently completed a 45-minute demonstration flight in a Boeing 777 powered partially by biofuel converted from plants by Total, and refined into jet fuel by Takreer, together representing UAE-produced sustainable aviation biofuel.

The jet fuel cost imperative

Back in June 2013, longtime Amyris exec Joel Velasco advised the Digest on feedstock costs.

“We don’t disclose current yields. But as we describe in at least one of our patents (See here.) the max theoretical yield for our Farnesene strains is about 30%.

“We have always offered the figure of about 3 kilos of sugar for a liter of farnesane (jet fuel/diesel) for our analysis of target production.

“So, at current sugarcane TRS pricing in Brazil (R$ 0.44/TRS kg according to public market data, here), the feedstock cost of producing a liter of biofene at these targets (and R$/$ exchange rate) would be about $0.61 per liter or $2.35 per gallon.”

So, how do you get those costs down? We’ve been thinking for some time that Renmatix’ sugar costs could run as low as a nickel — even allowing for margin you might see something in the 10-cent range — and that takes something like 40 percent out of the cost of sugars for jet fuel.

More about the Renmatix cap raise

Existing Renmatix investors, including BASF and Kleiner Perkins Caufield & Byers, joined Total in the initial tranche of Renmatix’s Series D fundraise, which has a $50 million target and is expected to be complete by Q3 2015. The raise will provide capital for Renmatix’s ongoing operations and is expected to take the company through to cash positive.

The “cash positive date” is understandably fuzzy – as a technology licensor in a new area, Renmatix is dependent on its partners to (additionally) complete supply chain development for feedstock; acquire, build and validate bolt-on downstream technologies to produce fuels or chemicals, and validate the investment decision from the balance sheet or source capital.

The word is that numerous Renmatix potential partners are getting reasonably advanced toward those milestones — as well as in validating Renmatix’ sugars with their proposed applications — some partners on a “we’re willing to be first basis” and others opting for the  “we’re looking to be second” track. Expected to go first are the integrated biorefineries — ratehr than companies who choose to license the technology and set up as purveyors of cellulosic sugar — because having a solution all the way down to a customer with an existing need takes more risk off the table.

More about raising capital in these times

There are two ways to think about a cap raise in the middle of The Trough of disillusionment — when oil prices are low, some technologies are falling by the wayside and policy support is becoming more uncertain. (More about the Trough of Disillusionment and the Garnet Hype Curve, here.)

Door #1, easier to stand out in the crown when the crowd is thinning.

Door #2, tougher to find qualified investors at a time when companies are backing out of the sector after seeing the risks rise.

Certainly there are less entities chasing capital,” Renmatix Chief Strategy Officer and VP Finance Tim Brown told The Digest. “But there are also people pulling back. That’s why we’re so proud that we have investors like Kleiner and BASF re-upping, and brining in a new partner. Some investors out there haven’t done as well on some of the investments they have made, and with oil at 50-60 bucks, it says a lot that ew entities and an oil company step forward and make the investment.”

“It’s back to reality,” added Managing Director, International development Duncan Cross. “Although we don’t generally shout out when we make progress, hit milestones, we’re very conscious of how important these wins are to the company’s progress, and how hitting milestones has made sure that we have street cred.”

“Having a global oil and gas major like Total join our ranks signals the important role cellulosic sugars play in enabling growth of the bioeconomy, and the transformative impact of Plantrose technology. Our licensing business model allows us to work with the pace-setters of the chemical, forestry, and fuels industries – namely BASF, UPM, and now Total,” said Renmatix CEO, Mike Hamilton. “Total’s investment, partnership, and leadership are integral links in helping Renmatix redefine the economics of second generation sugars that will fuel profitable biorefineries.”

Reaction from the partners

“Renmatix’s technology to extract second-generation sugars from biomass has the potential to significantly benefit cellulosic sugars economics and is one more milestone in Total’s efforts to develop sustainable and profitable biomolecules for products of interest to Total,” said Bernard Clement, Senior Vice President, Total New Energies.

The patented Plantrose process uses supercritical water to reduce costs in conversion of biomass to cellulosic sugars, the critical intermediary for second generation biofuels and biochemicals. With faster reactions and no associated consumable-expenses, Renmatix’s supercritical hydrolysis economically enables a multitude of renewable process technologies to address the market needs for ‘high volume, low cost, broadly sourced’ cellulosic sugars that persists today.

More about Renmatix here.

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