RIP, Aurora Algae: Algae and the Never-Never

July 22, 2015 |

aurora-algaeWhere did the once VC-heralded algae venture go off the tracks?’

They’re selling off the Aurora Algae lab equipment in California’s East Bay — specifically hgpauction.com is, and a good source reports that the company sold off the Texas-based land upon which  their first commercial project was aiming to build.

Here is a link to sale info

Here is a link to the 600 items for sale

Yes, Aurora Algae is gone as a Bay Area-based algae entity — though aspects of its technology — or even some of its shake flasks and tubing — may live on elsewhere.

When it was founded it was Aurora Biofuels, then it was Aurora Algae and aimed at the protein/nutraceutical markets, and had aimed to raise $300 million back in 2011-12 for a first commercial project in Karratha, Australia.

There, in the heart of what Australians call “The Never-Never,” the management team said that abundant resources of salt water, sunlight, and a year-round temperature suitable to operating open ponds for lengthy stretches of the year, made it the perfect place to do a first-commercial, open-pond algae project.

After opening a demo plant in mid 2011, they abandoned the Karratha project by 2013, noting the labor costs and heat, then left Geraldton, closer to Perth, where they had put up a test site in partnership with the Durack Institute of Technology, in hopes of locating there. More about that here.

After VC money dried up, they found some heft government support for a Western Australia project, and Reliance Industries stepped in with a $20 million investment. More about the Reliance investment here, and the end of it here.

In 2014, Aurora Algae CEO Greg Bafalis told The Digest: “Western Australia would work, but I felt we were leaving margin on the table. So we looked farther south in Australia where there was less fly-in fly-out type of expense. Then,  we came across this viable site in South Texas, 30 miles north of Brownsville.” The company needed to raise $130 million for a 200-acre commercial project, More about that here. But never got there.

The product set? Aurora’s corporate affairs chief Paul Brunato told us last year, “So far, the market for algae has primarily been in DHA, which shows up in infant formula. Martek has dominated. But there’s a tremendous opportunity in another omega-3, EPA, which is more used in cardio and for anti-inflammatory.”

Another project abandoned Karratha: Muradel, which has remained focused on fuels, and has made impressive progress in a new location in South Australia. In heading southeast, they noted that Karratha’s weather, in the end, was troublesome as well. Primarily, the wind gave open ponds a lot of trouble from dust. More about that here. 

It’s not yet clear where Aurora’s IP will land — especially their work in training up a high-productivity, salt-water algae strain with some ability to accumulate oils with attractive health and energy properties. But we suspect it will end up somewhere in the Reliance Industries portfolio, which has made a $20 million investment in the technology but had declined to reinvest in 2014. More about that here.

Bidder X and Aurora’s 40 tons of nannochloropsis

In the world of people, when someone passes from existence before full maturity, who touched lots of lives, who showed great promise, who received a lot of love along the way — even if some of youth may have been misspent and there were signs of real confusion about direction in life, we have a dignified funeral and memorial service, and we are very sad for the family and we express ourselves in all manners of regret. But in the world of algae venturing, we have the Auction of the Stuff.

And that is what we’ll have as the final memory of Aurora. A sometimes-busy, always sad sale of the carcass, that was dominated in so many ways by the sale of the gym equipment because there were some 60 items and they came up first, and it is a weird thing. Then, a whole bunch of lab equipment, which went for around 5 cents on the dollar, more or less.

But one item caught our attention. 40 tons of nannochloropsis — kinda old, possibly degraded. Which one person connected with the sale mentioned “was added at the last second so that Aurora didn’t have to haul it away.”

Bids started from a low of $500, without any takers for over 24 hours.  So they lowered the asking price to $250, and only just an hour before closing this morning, did a trickle of bids start, that grew into frenzy of 21 bids over a nine-minute back-and-forth that would have done eBay proud.

Aurora-auction

The bidding for the Nannochloropsis, about halfway through

But all bidders kept running into a pre-set maximum bid from Buyer X, which ultimately raised the price to cost to $8,000 (with auction commission), or $200 a ton of biomass.

The 40 tons of nannochlorosis, the last remains of a once-noble venture that ultimately went off the tracks

The 40 tons of nannochlorosis, the last remains of a once-noble venture that ultimately went off the tracks

According to the auctioneers, it had a 25% lipid content, which means there was 10 tons of oil in there, and there’s probably quite a few algae biofuels business plans that modeled their financials around a blended $200 per ton algae price with a 25% oil content.

The thinking went something like this: if you could get 25 grams per square meter per day of algae biomass with a 25% lipid content, why that was around $7300 per acre per year.

That’s 10X of what you get raising 170 bushels of $4 corn! they surmised, and look at how corn is doing as a biofuels feedstock.

Well, they didn’t quite get there on the cost side. All in, it took about $100 million to get that 40 tons of nannochloropsis (plus whatever they gave away in samples or simply didn’t harvest for whatever reason).

We note that the nannochloropsis in question had a 15% ash content, and hopefully Buyer X will be able to scatter the ash somewhere that is appropriate. Maybe, in the heart of the Never-Never where Aurora’s brightest hopes once shone under the Aussie sun.

So, if you see a little pile of ash somewhere near Karratha, starting to break-up and blow around in the strong offshore winds of northwest Australia, mixing with the dust that used to settle into the ponds — well “ashes to ashes, dust to dust” goeth the saying, and “the judgments of the LORD are true and righteous.”

Then, stand still a moment and remember what was once a noble venture. That once crowed with adolescent pride. Sometimes the phone would ring and you’d hear it from the guys in charge. We’ve got the secret sauce. No one else is going to make this work, or at least like we will. Karratha’s the place, matey.

Then, later, Texas was the place. Now, no place is the place.

Sometimes, the comments came laced with a slam at some other algae venture, like a teenage Aussie cricketer “sledging” the other team. But lots of teenagers say things they probably shouldn’t, in the moment of feeling immortal and all-powerful, in the springtime of their days.

We’ll worry upon that no more, and we’ll remember, instead, the admonition from T.S. Eliot’s The Waste Land:

IV. DEATH BY WATER

Phlebas the Phoenician, a fortnight dead,

Forgot the cry of gulls, and the deep seas swell

And the profit and loss…

 

O you who turn the wheel and look to windward,

Consider Phlebas, who was once handsome and tall as you.

And listen — just a  moment, and you might hear, singing in the wind, a tune you heard for many years but perhaps you can’t quite place. It might be the tune of the Algae Naysayers’ song, which sounded a little like “Waltzing Matilda” and went like this:

The Algae Naysayer’s Song

It won’t happen until the 2020s if ever. 

It will use too much land, or inputs, forever.

The CO2? Too costly, The ponds will crash. 

No VCs will put up enough of the cash.

There will never be enough available lipids,

You’ll never get product out of all that liquid

You’ll never make it cheaply enough, 

you’ll never affordably extract the stuff,

It costs too much to move the water,

You couldn’t do this with Harry Potter.

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