Algae’s Secret Investor trims the sails: Reliance re-ups Algenol, Algae.Tec, drops Aurora Algae

August 3, 2014 |

RelianceRe-ups investment in Algenol and Algae.Tec, while dropping Aurora Algae, say sources — resulting in shake-ups at Aurora.

When it comes to algae, Reliance Industries has been anything but loud in touting its interest in and investments in algae energy R&D.

Back in early 2010, a lot of data began to accumulate suggesting that Reliance Industries Limited, the petroleum, chemicals, telecom and manufacturing conglomerate, was going to make a bet on algae in the fuels and chemicals space.

Reliance — for those less familiar with India’s corporate landscape — is a South Asian behemoth. It’s the country’s largest private-sector company in terms of revenue and earnings, and ranked in the Global Fortune 100 last year.

It wasn’t until October 2012 that the Digest was able to unlock the story and reveal that Reliance had invested a total of $116 million (Rs6.2 billion). $93.5 million (Rs5.0 billion) in Algenol and 22.5 million (Rs1.2 billion) in Aurora Algae.

Since then, Reliance has said little, but we reported in January that Algae.Tec Limited received an initial investment of AU$1.5 million from Reliance Industrial Investments and Holdings Limited, with additional investments of AU$1.2 million expected “over the next 2 years”.  The relationship also featured pilot project agreements for building a 2 barrel per day biofuels facility in India utilizing  Algae. Tec’s technology funded by RIIHL affiliates.

By February, the relationship between Reliance and Algae.Tec expanded, with a Reliance affiliate placing a $2.4M order for technology and technical expertise over the next nine months, aimed at developing a first commercial project in India that would be funded by RIIHL.

So, that was the state of play as of the end of Q2. Reliance had the three investments — in Algenol, Aurora Algae and Algae.Tec.

Dropping Aurora Algae, re-upping with Algenol and Algae.Tec

Though neither Reliance, Algenol nor Aurora Algae have agreed to go on the record and comment on the state of relations, we can now report that the Digest has learned that, according to sources, Reliance has continued with its investment in Algenol and Algae.Tec, but discontinued with Aurora Algae.

Continuation with Algae.Tec is easiest to discern, since the Australian development-stage algae company is a public company, and reealed in a note on July 22nd that “Reliance Group has confirmed the conversion of the first tranche of options following the positive progress achieved on the joint algae plant project with Algae.Tec Ltd. 1,833,740 options have been converted at an exercise price of 16.36 cents per share. Reliance hold a further 28,728,607 options following this conversion.”

At the time, Algae.Tec also related that “The engineering of the plant is progressing well, fabrication of the module and other critical equipment is underway and construction is scheduled to begin within the next few months.”

At the same time, sources at Algenol have confirmed that Reliance renewed its investment in the Florida-based company — though the timing and extent of support was not clear.

Turning to Aurora Algae, there is less happy news to report. Our understanding, based on interviews with multiple sources familiar with the companies, is that Aurora Algae has not retained the support of Reliance for follow-on investments, and that relatively severe layoffs have been the result, both at its Texas project and at HQ in Hayward, California. CEO Greg Bafalis is reported to have left the company.

Aurora Algae media relations declined to comment on the story, referring the Digest to Sr. VP James Astwood for further information, who also declined to comment. At this stage, we can’t report that the company has confirmed all the particulars, but we can say that they have not taken up opportunities to deny or clarify the storyline.

Aurora Algae’s management, in an extended interview with the Digest in June, pointed towards a first commercial products hitting the market in “late 2015” and outlined that it aimed to raise $130 million for a 200-acre algae project near Brownsville,

In explaining the company’s move to Texas, Bafalis told the Digest that “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.”

You can read the entire interview in “Lone Star: Aurora Algae finds a whole new kind of oil for Texas” here.

The Bottom Line

As Algae Biomass Organization executive director Matt Carr told the Digest, “individual technologies companies will come and go based on market needs, but the story is about algae as a technology getting stronger and stronger. You see that with noted strategics like Reliance — bigger companies are getting more and more serious about algae.”

So, Reliance appears to have sharpened its portfolio. Shell did that a few years ago, jettisoning Codexis and Cellana while retaining Virent and Iogen.

What happened there?

Although painful for Codexis investors, the company got unhooked from an unhealthy dependence on Shell and lately landed a major deal with GlaxoSmithKline as part of its renaissance in a pharma-based strategy. Meanwhile, Cellana changed its product strategy from “fuels only” to an “all of the barrel” mix of nutraceuticals, proteins, speciality chemicals and fuels and landed a strong offtake partner in Neste and some welcome grant funding from USDA and DOE.

So, it is not the case that the exit of a strategic is a necessary death-blow to a company — and we’ll await news from Aurora about their plans. And news from Algae.Tec and Algenol regarding their progress towards first commercial projects.

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