Sapphire Energy: Biofuels Digest’s 2015 5-Minute Guide

February 11, 2015 |

5-Minute-Guide-logoSapphire is a venture capital backed company founded in 2007 for the purpose of growing and processing micro-algae into products that serve very large and diverse markets where the unique attributes of algae provide valuable solutions. Sapphire’s world-leading technology uses sunlight, CO2, non-potable water, non-arable land, nutrients, and novel strains of algae in outdoor ponds to produce algae which we then convert into high-value oils, aquaculture and animal feeds, fuels and other valuable products.

Sapphire has three facilities across California and New Mexico. In 2010, the company began construction of the world’s first commercial demonstration algae-to-energy farm in Columbus, New Mexico, a project backed by a grant from the United States Department of Energy and a loan guarantee from the United States Department of Agriculture. Construction of Phase 1 was completed on-time and on-budget in 2012, and the company paid back the USDA loan guarantee in 2013.

Rankings

Landed #16 in the 50 Hottest Companies in Bioenergy

Biofuels Digest Awards

2012: New Feedstock (Demonstration) Award: Sapphire Energy’s Green Crude Farm, Columbus, NM

2013: Debt Deal of the Year, (USDA); New Partnership of the year (Sapphire, Phillips 66)

Featured in: Sapphire Energy, Institute of Systems Biology partner for algae R&D

Featured in: The Age of Upstream

Featured in : Change the World: Sapphire Energy’s Green Crude Farm, illustrated

The Situation

It’s a different day at Sapphire, as the company has recently followed Solazyme and others from a focus on algae biofuels to a portfolio approach including algal oils for nutraceutical applications, protein and fuel.

But not entirely different, as the company had never definitively annoucned whether it was going to make fuels from lipid oils or from the whole algae biomass — which always left the question of what to do with all that protein.

Last July, Sapphire brought in Jamie Levine as CEO, a former Goldman exec who took the reins at Verenium in 2009 after Carlos Riva’s departure, and immediately cemented a reputation there as a consummate dealmaker.

Levine told the Digest last summer:  “I’m coming in with a supportive investor group, instead of [as with Verenium] long short hedge funds owning more than $100 million of the company’s debt and equity instruments. There’s been a thoughtful process on how to capitalize this company. What the two companies share is that they both have an incredible technology and platform and the question is: how do we get the most value for the company, the employees, the potential partners. I’m an MBA, not a tech guy, and I’m not going to find new places to build technology and new areas to take this platform. What’s the value here today, is the question. The Sinopec partnership is an example of what has to come. You can’t do great things alone, you have to work with others well, and find the right kinds of partnership. It’s about getting the right motivations for a partnership, which starts with recognizing that Sapphire has a lot of solutions to very big problems, and we have to find those partners for who we can solve that problem.

“So, who has a problem for which green crude is the solution? China is one geography of several where that could prove to be the case. It’s not just picking an illustrious name, but finding partners who really are invested.”

Major Investors

Sapphire Energy is supported by a world-class syndicate of investors led by co-founder ARCH Venture Partners; along with The Wellcome Trust; Cascade Investment, LLC; and Venrock. Monsanto has also been investing.

Type of Technology

Sapphire has a cultivation platform capable of delivering low cost, highly valuable algae biomass. This algae biomass is a sustainable, renewable, and scalable source of high value Omega-3 oils, high value aquaculture and animal feed ingredients and renewable fuels.

Feedstocks

Sapphire Energy’s algae have been bred to tolerate high PH conditions and salty water, and require only sunlight, C02 and some nutrients as feedstocks.

Products

Green Crude, an algae-based renewable oil developed as drop-in replacement for petroleum. It can be refined into gasoline, diesel fuel and aviation fuel in existing refineries for use in existing engines.

In addition, Sapphire and Linde will commercialize a new industrial scale conversion technology needed to upgrade algae biomass into crude oil. Together, the companies will refine the hydrothermal treatment process developed and operated today by Sapphire Energy at pilot-scale. In addition, they will jointly license and market the technology into an expanded list of industries, including algae, municipal solid waste, and farm waste, in order to upgrade other biomass sources into energy. The agreement spans a minimum of five years through the development of Sapphire Energy’s first commercial scale, algae-to-energy production facility.

Top Past Milestones 

In July 2014, Sapphire Energy’s and Sinopec’s algae-derived renewable crude oil project was selected for the U.S.-China EcoPartnerships program, and that the announcement is being made overnight US time in Beijing, China, by the U.S. Secretary of State and the People’s Republic of China State Councilor. Sapphire CEO C.J Warner said: “Together, we will demonstrate that crude oil from algae can be produced with favorable economics; that it can be integrated into existing fuels distribution networks; and that it will deliver substantial advantages for the reduction of CO2 emissions in both nations.” Possible project areas range all over China, but it will be China. Possibly to the north, towards Mongolia, where CO2 is more readily available. Also in the south, where the growing conditions offer a longer season. There’s a lot of brackish or saline water available in China — good for Sapphire’s open pond-based Green Crude Farms.

In November 2013, Sapphire Energy and Phillips 66 announced a strategic joint development agreement to work together to collect and analyze data from co-processing of algae and conventional crude oil into fuels, and to complete fuel certifications to ready Sapphire Energy’s renewable crude oil for wide-scale oil refining. In initial testing by Sapphire Energy, Green Crude oil was upgraded into on-spec ASTM 975 diesel fuel, proving its compatibility with the existing network of pipelines, refineries and transport systems.  The company expects to be at commercial demonstration scale in 2015, commercial scale in 2018, and is eventually projected to produce 1 billion gallons per year by 2025.

In July 2013 , Sapphire Energy announced it has paid off the loan guarantee awarded to the company by the U.S. Department of Agriculture.  In Dec. 2009, the company was awarded a $54.5 million loan guarantee through the Biorefinery Assistance Program, administered by the USDA Rural Development-Cooperative Service, to build a fully integrated, algae-to-crude oil commercial demonstration facility in Columbus, New Mexico.

In 2010, Sapphire Energy began construction for our Integrated Algal Bio-Refinery in Southern New Mexico, a project that was awarded more than $100 million in federal grant money from the American Reinvestment and Recovery Act through the U.S. Department of Energy and a loan guarantee from the U.S. Department of Agriculture Bio-refinery Assistance Program.

Completed phase 1 of Green Crude Farm.

Completion and operation of phase 1 2 of the IABR. 2013.

Sapphire Energy, Inc. and Monsanto Company announced an agreement to enter a multi-year collaboration that will leverage Sapphire’s algae based research platform to discover genes that could be applied to agriculture, particularly in the field of yield and stress.

Top Future Milestones 2014-15

Construction and operation of all IABR phases

Expanded partnerships.

Business Model: Owner-operator.

Competitive Edge

Scale to Growing Demand: Sapphire Energy’s algae based green crude can scale to meet our domestic demand for transportation fuels. Today, the debate is not about who can make algae-based fuel, it is about who can scale as the demand grows. This is Sapphire’s strength.

The Only Truly Scalable Option: Sapphire Energy continues to lead the space as the industries’ only pure algae play. All other technology solutions require carbohydrates and sugar in their process, which cannot scale to truly replace petroleum.

Phased Drop-In Replacement: Another of the many beauties of Sapphire’s “green crude” is that it can drop directly in where petroleum currently is used without any changes to the infrastructure in vehicles, aircraft and more.

Value to the Value Chain: Sapphire Energy’s intellectual property position in the space gives the company freedom to operate with over 300 issued or pending patents . It spans the full spectrum of algae fuel and products, providing multiple layers of competitive advantage across the entire value chain from platform technologies, traits and organisms, production systems, refining methods and products.

In September 2013, algae biofuels tested as very close to petroleum in energy efficient-production, according to a University of Virginia study. The study, performed at Sapphire’s demonstration plant in New Mexico, demonstrated that carbon emissions of algae biofuels come in at 50-70% lower than that of petroleum. The study evaluated EROI, Energy Return on Investment, or the amount of energy needed to produce energy in various forms, including petroleum, biofuels, wind, solar and other renewable sources.

Research, or Manufacturing Partnerships or Alliances.

As part of the American Recovery and Reinvestment Act and through the biorefinery assistance program in the 2008 Farm Bill, Sapphire has partnered with both the USDOE and the USDA to build a next-generation algal biorefinery, funded by $104 million in grants and loan guarantees. Sapphire is also collaborating with leading scientists from the Department of Energy’s Joint Genome Institute; University of California, San Diego; The Scripps Research Institute; University of Tulsa; and San Diego Center for Algal Biotechnology. Sapphire Energy has also established partnerships with Linde Corp, to obtain a low cost, long-term supply of C02, and Monsanto, for collaboration in algae research to improve yield.

In August 2013, US Secretary of Energy Ernest Moniz announced $16.5 million in grants to four projects in California, Hawaii and New Mexico aimed at breaking down technical barriers and accelerating the development of sustainable, affordable algae biofuels. Sapphire Energy picked up $5 million to develop a new process to produce algae-based fuel that is compatible with existing refineries. The project will also work on improving algae strains and increasing yield through cultivation improvements.

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