Sao Martinho to Amyris: “We’re out”; Amyris to Sao Martinho: “Whoa, Nelly”

July 1, 2015 |

AmyrisIn a Brazilian securities filing, with respect to the Joint Venture between São Martinho and Amyris, Sao Martinho reports “the non-achievement of certain contractual targets by Amyris, impacting the viability of the project. Thus, Sao Martinho decides not to approve the continuation of the Joint Venture Plant construction with the US company Amyris Inc. and its Brazilian subsidiary Amyris Brazil Ltda.”

The company did not elaborate as to which contractural targets were not achieved by Amyris. In the filing, Sao Martinho added:

“Amyris may provide new information regarding the project feasibility in order to discuss a new deal potential. However, the Joint Venture and other contracts between the parties will be automatically terminated on August 31, 2015, if such date is not entered into a new agreement at the discretion of São Martinho.”

“Sao Martinho clarifies that the company did not make investments in the joint venture, which were scheduled to take place only after the start of plant operation.”

Amyris fired off a “clarification” shortly afterwards “regarding its inactive manufacturing joint venture with Usina Sao Martinho”, stating:

“[The] existing Brotas facility is exceeding targets and provides adequate capacity to meet its near and mid-term business needs. Amyris has been in discussions with Sao Martinho and is considering how the joint venture could best benefit Amyris’s future production capacity and achieve investment returns comparable to or better than Amyris’s best-in-class fermentation plant in Brotas. Based on these discussions, Amyris and Sao Martinho have agreed to explore, over the next 60 days, the best options for the joint venture.”

“We are excited about the continued strong performance and our ability to exceed our production and cost targets at Brotas,” said Amyris CEO John Melo. “Current production capacity at our Brotas facility meets our near- and mid-term growth plans and we have better economic options than our agreement with Sao Martinho initially contemplated. We are engaged in working towards a mutually beneficial agreement with Sao Martinho over the next 60 days. We continue to enjoy a strong presence and relationships in Brazil, including our more than 150 employees, our collaboration with Cosan, and our growing sales in personal care and industrial products for the Brazilian market.”

Amyris noted that the flexibility at the Brotas plant and space available potentially allows the company to double the capacity of this plant when required. In addition, the company is evaluating with Sao Martinho the best investment options available to determine which scenario would provide the best returns and balanced economics for both parties.

The Sao Martinho project

The joint venture dates some ways back, predating Amyris’ April 2010 IPO filing. in which the company stated:

“We plan to commence commercialization of our products starting in 2011 using contract manufacturers, and to have our first capital light production facility, our joint venture with Usina São Martinho, operational in the second quarter of 2012. As we commence commercial production of our initial molecule, farnesene, we expect to target specialty chemical markets.”

The company’s stock was upgraded to a $31 target by Raymond James in April 2011, citing amongst other factors the “company’s first large-scale production plant in Brazil – the joint venture with Grupo São Martinho – which should drive positive companywide EBITDA upon start-up in 2Q12.”

By Q1 2012, Amyris had reciognized “the operational challenges of translating yields in the lab to commercial-scale production,” and said that “following completion of the 50 million liter facility at Paraiso, it would focus on completing its 100M liter San Martinho project.” In lat 2012, Cowen & Company was modeling “$146MM additional debt to fund losses and Sao Martinho capex in 2013-15.”

Meanwhile, Sao Martinho has downshifted its own emphasis this year on fuels. Last week, the company reported that “it will turn its attention to sugar production. It’s crushing ratio will be 52% for sugar and 48% for ethanol of 19.5 million metric tons of sugarcane, compared to 49% for sugar and 51% for ethanol during 2014/15.”

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Category: Producer News

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