Toyota: Let’s Go Places with Anellotech, Bio-places that is

July 17, 2016 | Jim Lane

BD TS 071816 Anellotech sm In New York, Toyota Tsusho was identified this week as a multinational strategic equity investor in Anellotech and corporate partner in the renewable aromatic chemicals supply chain. Toyota Tsusho is a member of the Toyota Group and is one of the major value chain partners (along with Suntory) in the Anellotech alliance.

Now, the corporate slogan that most people know for Toyota comes from the (separate) automotive group, and that’s “Let’s Go Places”. Tells you something about the methodical nature of Toyota that they worked with six different research and advertising agencies to develop a three word slogan. Measure twice, cut once, as they saying goes. Or measure six times, by all means.

So, let’s look at this “place they’re going”. It’s Pearl River, New York, in the short term — that’s Anellotech’s home, just west of the Hudson River. There’s no Pearl River in Pearl River, for reasons no one is quite sure of; if you want water, you’ll find plain old Muddy Brook. But that’s the only “cosmetic upgrade” you’ll find in this particular company. You have CEO David Sudolsky’s word on that.

“We’re not going to shortcut something, leapfrog a step,” Sudolsky told The Digest, “in order to make an announcement or gain time, and then fail. it’s not like Gallo wine, you have to take the time to get it right. There are no shortcuts, really, and partners are engaging with us because what we are doing make sense.”

The background on the investment

Toyota Tsusho’s investment has been used to fund development of Anellotech’s Bio-TCat technology, including the installation and commissioning of Anellotech’s new, fully-integrated development and testing facility (“TCat-8”).

Toyota Tsusho’s interest in Anellotech’s technology is aligned with their goal of promoting sustainable bio-materials, including bio-based polyethylene terephthalate, or PET).

Bio-sourced, drop-in BTX made from the Bio-TCat process is also useful in the manufacture of other derivative plastics including polyurethane, polycarbonate, polystyrene and nylon. These petro-identical, but now bio-sourced, derivatives have applications across a broad range of large global markets including polymer packaging & textiles, automotive, construction, adhesives, paints, coatings, appliances and detergents.

As first commercials that you rarely get a do-over on, consider the wedding

Sudolsky compares the process of rick analysis and mitigation to is arguably, each summer, to that most critical, “you get one shot” of events: the wedding. You’re the planner. Your strategic investor is Bridezilla. It’s an outdoor event. What about the rain?

“It’s about understanding the severity and the likelihood of any negative event. In the case of an outdoor wedding, say you have a 50% chance of fair weather, so what happens if you don’t get it? What are the mitigation steps. You have a tent ready.”

“It’s not so different, at a high level, in any process. Say you have biomass coming in from Brazil and your negative event is that it fouls the catalyst. So you design experiments to test that, and from those experiments you see the severity of the problem and the likelihood of it happening, and you score the risk, and that’s what you focus on, That’s what we do, and our partners do, and that’s what all the good companies do.”

The Strategic View

So why take the risk at all? Many companies in the supply chain simply don’t. They figure that their customer is buying from them already, and isn’t going to pay a penny more as a reward for shifting over to bio. So, why change?

Perhaps, that’s why we see consumer-facing companies, such as Suntory (with Anellotech) and Coca-Cola (with Avantium, Gevo and Virent) stepping forward. “They are the ones who frankly see the value,” noted Sudolsky.

The technology developer vs the owner/operator

So, fastest, simplest route of course is for the technology developer to become the owner/operator, right? Less time invested in building a supply chain, and more added-value generated for investors, down the line. Right? Right?

For Anellotech, wrong, says Sudolsky.

“Could we build plants, sure,” he told The Digest. “But our core expertise is developing. Operating a chemical plant is not a trivial skill set. Look at all the private equity acquiring and operating chemical plants; those deals make money, because there is real value in that skill set.”

In fact, Anellotech is partnering even at small scale, using partner resources for its development program in SIlsbee, Texas.

“At Silsbee, it wouldn’t be a huge deal for a big company — hiring 12 people for our project. But for us, there’s hiring, setting up the shifts, training, building a culture, and there’s safety. Safety is an absolutely huge deal for any company. So it makes sense for us to work with our partner for that.”

Progress on the technology

Anellotech_Suntory_PressRelease_2016.01.13 This 25 meter-tall unit’s purpose is to confirm the viability and suitability of the Bio-TCat process for scale-up, and generate the data needed to design commercial plants using Bio-TCat technology. The TCat-8 unit was jointly designed by Anellotech and its R&D partner IFPEN, and will use a novel catalyst under joint development by Anellotech and Johnson Matthey. After verification of the continuous operation of TCat-8, Anellotech Alliance partner Suntory plans to move ahead with studies to consider the development of the first commercial-scale Bio-TCat plant.

The TCat-8 unit has been installed at host South Hampton Resources’ Silsbee, Texas location. Remaining construction activities required to bring the unit online are scheduled to be completed shortly, followed by commissioning and startup of this first-of-its-kind development and testing facility later this year. Toyota Tsusho management recently visited the TCat-8 unit at Silsbee, and, noting the advanced stage of development, elected to make public their involvement in the program.

Anellotech CEO David Sudolsky noted, “Consumer brand owners are looking to replace petroleum inputs in their products with bio-sourced alternatives as a key component of their corporate sustainability programs. Anellotech looks forward to continuing our progress and commercial deployment of the Bio-TCat process to further enable the sustainability performance of consumer brands around the globe.”

Who’s Toyota Tsusho. in the Toyota Universe?

Toyota Tsusho is the Toyota Group’s general trading company that develops diversified businesses through more than 990 consolidated companies in Japan and overseas and with customers around the world, via a global network covering Japan and more than 90 countries worldwide.

Could there be another investor lurking?

Based on Digest sources, we believe that there is at least one more active strategic investor in Anellotech, which we are not yet ready to definitively name. Anellotech, alas, remains silent as the grave on the topic.