Grants, VCs, angels, project debt, loan guarantees, strategics: The money slides from ABLC 2015

March 19, 2015 |

ABLC-1At ABLC 2015, the focus on innovation included much on “how do you fund it?”

Here’s what the top agencies, VCs and financiers had to say about the Valley of Death and standing up a new industry and new technologies.

ABLC 2015 ended last Friday, and from the annual bioeconomy leadership conference in Washington DC, we have selected slides presented by the USDA, DOE’s Bioenergy Technologies Office, the DOE Loan Programs Office, Kilpatrick Townsend, Stern Brothers,  Kreig DeVault, Asia West, the Algae Biomass Organization, Bergeson Campbell, and the Malaysian Life Sciences Fund — on the subject of policies, programs and finance.

Which policies and programs are enablers? Which are a drag on innovation? What financing structures work for new technologies to cross the Valley of Death and reach industrial scale? Who is investing, in what, where and why?

Here are selections from 10 of the hottest slides presented at ABLC.

USDA: 10 programs in the 2014 Farm Bill’s Energy Title

The Farm Bill passed last year — and in it, a slew of programs, some with not much funding, some with a lot, some broad across the rural economy, some laser-focused on biofuels and biobased chemicals. In this slide, the USDA’s Energy Policy Director, Harry Baumes, gave the overview of the landscape. Exploring opportunities in this mandatory funded bill is a logical first step for any company in the sector.

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DOE’s Bioenergy Technologies Office: De-risking is the challenge, across the value chain

The DOE’s Jonathan Male was crystal clear on the DOE’s bioenergy mission — to derisk the introduction of disruptive technologies, and especially to focus on demonstration scale where intergrated processes must be proven to work together in an intergrated design. The challenges are all across the value chain, Male said — not just in products (separation, upgrading and recycling loops), but in conversion, pretreatment and all the way up the value chain to the reliable supply, consistent quality and affordable delivery of biomass.

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DOE Loan Programs Office: $40B available, drop-ins a focus

The Loan Projects Office’s Valri Lightner highlighted that the DOE has $40B remaining in its loan guarantee authorization and expects to increase support of biofuels and chemicals — with a focus on “drop in biofuels” from “new biorefineries or biocrude refining processes”, and “modifications to existing ethanol facilities to produce drop-in molecules”.

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Kilpatrick Townsend: 11 different flavors of financing, corporate and project

Kilpatrick Twonsend’s Mark Riedy checked in with more than 100 slides, but here was the overview of 11 different types of financing actively available to emerging companies and projects in the space — and which goes into projects, which goes in to companies.

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Stern Brothers: A project structure that works

Stern Brothers’ John May detailed a workable project structure, based around establishing a Development Company between the parent company and the project. The DevCo raises debt and equity with parent for non‐recourse project capital or infrastructure fund capital with back‐end leverage. “It’s less dilutive than corporate level investment, with no ownership in intellectual property” but particopates in the EBITDA from the project and provides a liquidty event via a Master Limited Partnership,” May says.

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Kreig DeVault: Biomass Supply Insurance as a de-risking mechanism

Insurance may well be the road to de-risking technology and biomass, says Kreig DeVault’s John Kirkwood. If loan guarantees are helping with technology risk, what’s helping with biomass supply? The solution could be an insurance policy designed for biomass projects, backed by A to AA rated insurance syndicates.

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Asia West: A Success Story, MBA Polymers

Richard McCombs described a success story with MBA Polymers in negotiating the Valley of Death, in this case a JV with a Chinese company not involved with the plastics industry but well connected in government circles. The deal he outlined provided majority equity and full management control for MBA, 70% debt provided by the partner and involved a royalty free license to the technology, in exchange for cash. Think of it as conversion of license fees to upfront capital, but taking the form of debt.

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Malaysian Life Sciences Capital Fund: Susuatinable AgTech is hot

“If we were raising money for biofuels we wouldn’t be here,” MLSCF’s Roger Wyse drily noted, but the Fund’s recent $150M first close is expected to unleash financing in the area of sustainable agtech, which is white hot at the moment. “We will invest in companies with technologies that can contribute to integrated solutinos for agriculture“ Wyse noted.  Improved genetics, robotics, automation, biologicals, nutrients, yield enhancers and IT may all play into the investment picture.

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Algae Biomass Organization: Carbon Capture and Use is Key

“Carbon recycling works”, says ABO executive director Matt Carr, and “carbon utilization in action” will provide substantial benefits to the econpmy, but commenting and action with the EPA is going to be required — and that’s why the ABO is behind RecycleCarbon.org. Think that Carbon Capture & Srorage is a) expensive and b) involves long-term liability exposure that no company will undertake? Carbon recycling into technologies like algae-based fuels, chemicals, food, feed, and nuratceuticals might be just your flavor.

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Bergeson Campbell: Reforming TSCA will unleash innovation

When it comes to new renewable oils, notes Bergenson Campbell’s Richard Engler, under the Toxic Substances Control Act, “ach oil is listed separately; new oils require notification; each downstream product is listed separately; new products require notification.” This may “throttle the market for non-food oils as customers shy away from feedstocks requiring notification, or May lead to dozens, or hundreds, of notifications for nearly identical substances as new organismal sources are brought to market.” The remedy is TSCA reform, which may have the added benefit of harmonizing regulations with the EU and empowering the EPA to make single decisions in the case of substantively equivalent products.

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