Oxygen for High Altitudes: 17 Biofuels ventures raise $434M in equity

April 8, 2013 |

summit-runDespite the sluggish economic recovery and questions over policy stability — biofuels ventures have been busy raising lots of capital.

In the past 6 months, $434 million.

Who got what, where, when and why?

As any mountaineer knows — above 25,000 feet you hit the “death zone” – where oxygen is a must, now or very soon, and without that inrush of supplementary Os, a once-promising expedition can turn into a nightmare of disorientation and failure.

It’s the same with advanced biofuels — though we call them series A, B and C instead of Camp one, two and three — the staging of an assault on the energy infrastructure is no less dangerous and complex than an assault on a dangerous yet tempting peak in the Himalayas — and supplemental oxygen, in the form of equity, is the mother’s milk of success.

So, there are technology triumphs and capital triumphs — and ventures need both. Just as the planting of flags, pitons and ice axes is more glamorous than the planing of caches of oxygen bottles along the summit run — so too are technology milestones more inherently sexy than the laying of the capital runway.

But those who win raise money — and in the past six months, we’ve seen 17 capital events that we’d like to direct your attention to.

The big raises: Solazyme and Beta Renewables

In January, Solazyme announced the pricing of its offering of $115 million aggregate principal amount of Convertible Senior Subordinated Notes due 2018 in a private placement. Solazyme expected that the net proceeds from this offering would be $119.4 million, after buyers fully exercised options to acquire an additional $10 million in notes. The purpose? Project related costs and capital expenditures and for general corporate purposes. The Convertible Notes will bear interest at a fixed rate of 6.00% per year.  The Convertible Notes will mature on February 1, 2018, unless earlier repurchased or converted. Solazyme may not redeem the Convertible Notes prior to maturity. The initial conversion price will be approximately $8.26 per share of common stock and, under certain circumstances, Convertible Note holders will be entitled to additional payments upon conversion.

The capital raise was matched in this period back in October, when Novozymes and Beta Renewables announced an agreement to jointly market, demonstrate and guarantee cellulosic biofuel solutions. As part of the agreement, Novozymes will acquire a 10% share in Beta Renewables, paying approximately $115 million cash for the equity, marketing fees, other intellectual property rights and milestone payments.

Beta Renewables will embed Novozymes’ enzymes in its PROESA technology and guarantee biofuel production costs upon start-up of customers’ cellulosic facilities. The deal is unique in offering a combined solution that reduces the risk in customers’ projects while providing competitive commercial terms.

Waste to Energy

Outside of the Solazyme and Beta Renewables raises, the biggest capital activity was in the waste-to-energy sector, where two companies indicated that they had secured $107.5M in equity commitments.

In December, Fulcrum BioEnergy announced that it has successfully secured commitments and was proceeding toward closing $175 million in financing to fund construction of its first municipal solid waste to low-carbon fuels plant, the Sierra BioFuels Plant and to fund the development of future projects. Fulcrum VP of Administration Rick Barraza confirmed to the Digest “We’re are continuing to move forward with this and I’d expect to see this close during the first half of 2013. The remaining $70 million is also a first half event.”

In January, Enerkem announced that it closed a $37.5 million financing with Waste Management of Canada Corporation, a subsidiary of Waste Management, and EB Investments for Enerkem Alberta Biofuels L.P.

“We’re glad to see Waste Management and EB Investments strengthen their relationship with us by increasing their direct investment in the Edmonton facility”, noted Enerkem CEO Vincent Chornet. “This is further validation of Enerkem’s business model and leadership position in the market for waste-to-fuels and chemicals.”

Over in the EU

Two small-ish but significant capital raises took place in the EU during the past six months — one for a hydrogen player and one based on proprietary extremophilic anaerobic bacteria.

In France, the Ecotechnologies fund made its second investment in the hydrogen company McPhy Energy. This €5M equity investment aims at supporting the commercial development of the company following the acquisition of an electrolysis equipments production unit. This investment is part of a 10M€ capital increase completed by the company’s historical investors: Emertec Gestion, Sofinnova Partners, Gimv, Arevadelfi and Clipperton Finance.

In Germany, Direvo Industrial Biotechnology announced the successful closure of a financing round of three and a $4.5 million to fund the sustainable growth of the company. All current major investors participated in this third financing round since the founding of Direvo, a spin-off from Direvo Biotech AG, in the year 2008. The capital will be used to get the platform technologies BluCon and BluZy ready for the market.

The Brazil connection

There were three major capital events in this period that had “Brazil” written all over them — a raise by Amyris, one by Ensyn, and one by Eco-Energy.

In October, Ensyn Corporation and Fibria Celulose announced the creation of a strategic alliance between the two companies. This alliance includes the establishment of an equally-owned joint venture for the production of cellulosic liquid fuels and chemicals in Brazil, as well as a US$ 20 million equity investment in Ensyn Corporation by Fibria.

The $20 million equity investment by FIBRIA in Ensyn capital provides FIBRIA with ownership of approximately 6% of Ensyn voting shares and the right to nominate one member to Ensyn’s Board of Directors. It also provides FIBRIA certain rights which, if exercised, would allow FIBRIA to invest an additional $10 million and increase its holdings to as much as 9% of Ensyn’s equity capital.

In January, Eco-Energy raised $25m through an equity offering after Copersucar agreed in November to acquire a majority stake in the company. Eco-Energy is currently focusing on infrastructure expansion as Copersucar attempts to increase its ethanol exports to Europe. This announcement came after the company recently announced a long-term deal between Corn Plus Ethanols and its Winnebago plant.

In March, Amyris received confirmation Total will provide $30 million of funding to Amyris by July 2013, as anticipated in the revised collaboration agreement announced last year.

In addition, as a result of the continued success of Amyris’s existing technology collaboration with Total, the two parties intend to form a joint venture company by mid-2013 to market renewable diesel, jet fuel, and other specialty products derived from Biofene, Amyris’s renewable brand of farnesene.

Amyris has met the technical milestones at its production plant in Brazil to satisfy the conditions for a follow-on common stock investment of $5 million from its existing investor, Biolding Investment SA. The $5 million Amyris received last week represented the final tranche of Biolding’s preexisting contractual obligation to fund $15 million upon satisfaction of certain performance conditions at Amyris’s Biofene plant.

AustralAsian flavors

Two capital events shifted our attention away from the US, Brail and the EU and over to Australasia, as two key projects focused on algae biofuels and drop-in fuels from wood biomass and residues took major steps forward.

The Minister for Resources and Energy, the Hon. Martin Ferguson, announced $5.5 million for Licella to assess the feasibility of constructing its first pre-commercial biofuel plant; and $4.5 million for Muradel to demonstrate its algal biofuel technology. Both projects are expected to be completed by the end of 2014. The funds came through the Australian Renewable Energy Agency’s (ARENA) Advanced Biofuels Investment Readiness Program.

Dollars for Downstream

Usually, we see advances in midstream processing technologies — or occasionally, in the upstream area of feedstock developments, bringing in the big bucks. But then, there are the downstream technologies by which advanced fuels are actually transported and dispensed — and these are critical technologies, given the volume of infrastructure incompatible fuels on the market.

In December, Propel Fuels closed on the initial phase of its Series D round of funding with $11 million in equity capital from existing investors Nth Power, Craton Equity Partners, and @Ventures as well as a new investor, Gentry Venture Partners. In addition, the company has secured $10 million in debt financing. With the new funding, Propel will be able to accelerate the build out of its network of stations that offer drivers the cleanest, most sustainable, domestically produced fuels on the market today. As part of the investment by Gentry, Thomas B. Raterman, a Partner, has joined Propel’s Board of Directors.

North by Northwest

Though ZeaChem came up short on a bridge loan effort earlier this year and was forced into temporary layoffs at its Boardman facility, the company has been raising equity — and last October, the company raised an additional $5.1 million in a previously unheralded extension of its Series C financing round, that closed at the end of August with $15M in the bank. The financing was detailed here in an SEC filing.

Canadian progress

In Canada, Alter NRG Corp. announced that its raised US$11 million after shareholders approved the private placement of 34,153,845 common shares of the company to four investors at a price of $0.325 per common share. Upon receiving final Toronto Stock Exchange (TSX) approval, the company expects to complete its financing in 2013. Alter NRG’s seeks to further commercialize its Westinghouse Plasma Gasification Technology using a variety of feedstocks to provide renewable energy solutions as well as produce ethanol, biodiesel, electricity, and syngas.

Three new Series A investments

In California, Blume Distillation has closed a Series A financing round with $2.2m from angel and impact investor backing. The funds will accelerate the assembly of the company’s bioethanol production system. Blume’s commercial systems are designed to produce from 20,000 to 500,000 gallons of fuel a year, which it said make it suited to powering applications such as transportation, clean indoor cooking, electricity generation and refrigeration.

Last week, ZeaKal announced that it had raised $3.8 million in its Series A financing. A successful Series A is always a good indication that, while it is early days for a technology, there is a good idea being worked on that has acquired some level of validation in the lab.

ZeaKal is focused on plant science — specifically focused on raising the production of biomass in specific crop targets including soybeans and rice. It’s HME technology has shown crop yield and oil content increases of up to 50% and 34%, respectively. Interestingly, this is a technology that is focused on increasing the efficiency of how oilseed plants, for example, handle their current levels of inputs rather than increasing input levels.

Also in California, Algenetix, closed $2.0M in Series A-1 funding to further commercialize its PhotoSeed platform.

The groundbreaking technology vastly improves oil productivity in microbes by accelerating oil accumulation and subsequently preventing its degradation in the cell. The company’s funding is led by Two Oceans and local San Diego investors, and supported by Algenetix’s Executive Chairman, Dr. Jerry Caulder.

With this funding, Algenetix will further advance its PhotoSeed program and develop renewable oils that can sustainably replace petroleum for fuels and chemicals without compromising land and food production resources. Algenetix will be conducting the development in partnership with the laboratories of Dr. Janet Donaldson at Mississippi State University.

The Curious Case of Cobalt

Cobalt’s been on the move, capital-wise, raising nearly $7.9M since last October. It’s curious because we don’t know much about who’s investing what. In all, the company raised $1.87M in March, $4.97M in December of last year, and $0.97M last October – in each case from 14 undisclosed investors. We do know that last October, Bunge’s innovation arm committed to invest an undisclosed amount in the Series E funding round for California-based Cobalt and anticipates introducing the biobutanol technology in its sugarcane mills. The companies are working Rhodia to produce n-butanol from bagasse at a pilot facility in Campinas.

Perhaps one of the reasons for the quiet surrounding the investments? The December 2012 and October rounds were undersubscribed, according to the SEC filings. The October offering originally totaled $3.75M and the December round aimed for $20M.

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