Algenol CEO exits; staff cut by 25%, investors re-up for two years, new direction tipped

October 25, 2015 |
Former Algenol CEO Paul Woods at a Florida ribbon-cutting in happier days

Former Algenol CEO Paul Woods at a Florida ribbon-cutting in happier days

Sudden re-focusing and trimming of Algenol by its lead investors leads CEO Paul Woods to resign; new direction focused on carbon capture, fresh water production until oil prices recover.

In Florida, the hammer dropped swiftly and without warning in Ft. Myers as Algenol lost its CEO, changed its near-term strategy, chopped 45 staff members from its payroll, and saw its two lead investors re-commit to an additional two years of funding for the company, in the space of a morning.

The drama is not unheard of in staff reductions — employees told “all is OK” until, for them, it is entirely “not OK”. But in the case of Algenol, the dramatic shift in the company’s direction included a divergence from an all-fuels strategy to a “water treatment and carbon capture now, and maybe fuels later” focus, without much warning, if any, to its stakeholders.

Outgoing CEO, Paul Woods made no official comment in the terse three sentence release that came from Algenol HQ on Friday morning, and said:

Algenol Biotech LLC (“Algenol”) announced today that its Board of Directors has accepted the resignation of CEO, Paul Woods. Paul is resigning for personal reasons, his decision is voluntary and he will remain on the board of the company for continuity purposes and to assist the company on its road to commercialization.

Mr. Gonzalez, who is Chairman of the Board and represents the interests of the Gonzalez Group, a significant investor group, commented:  “We thank Paul for the huge contribution he has made to Algenol and for helping us to get to this point in the company’s development. We are grateful that he has chosen to remain associated with Algenol. His experience, insight and knowledge will help us to achieve our goals. We, the Gonzalez Group, and our co-investor, Reliance Group, remain committed to commercializing Algenol’s DIRECT TO ETHANOL® technology.”

“Many governments, companies, institutions and people talk a good game about helping our planet, but none of them are willing to put in a dime to back that up.”

There was no mention of the change in strategy, or reductions in force, in the initial release. But later, Woods added in a note, which he was careful to characterize as “not speaking for Algenol, Ed can do that now, these are just my personal thoughts.”

But here they were.

Algenol is headed in a new direction, and that won’t include me.

I am very proud of the huge accomplishments to date at Algenol over the last 9 ½ years. I believe I brought enthusiasm and passion for developing truly the most advanced low carbon fuel system on the planet.  I am very proud of the work I did, and even more proud of my co-workers.

Truth is I was never able to convince people outside of Algenol that carbon reduction was needed.

Many governments, companies, institutions and people talk a good game about helping our planet, but none of them are willing to put in a dime to back that up.  Hopefully, starting with Paris in December, the next 2 years will change rhetoric into action.  Are we going to do something about climate change or not? I hope the world catches up with Algenol in seeing the need for carbon mitigation is now, not 10 years from now.  Fancy accounting doesn’t remove carbon from the atmosphere we all share.

Alex Gonzalez should be applauded for being the original visionary who has back Algenol year after year.  He has a strong commitment to helping our planet and climate change mitigation and he backs that commitment with real money.  He has committed even more support for Algenol ensuring at least 2 or more years of funding guaranteed, so the amazing work i started will continue and be seen through.

I continue to want Algenol to succeed, and my co-founder Ed Legere has been elevated to COO, so I know Algenol is in good hands along with Dr. Paul Roessler and Dr. Ron Chance.

Algenol will continue to push Carbon Capture and Utilization (CCU), using its current and very successful Direct to Ethanol platform to help companies lower their carbon footprint, while producing new sources of fresh water for countries and regions in such desperate need for fresh water.

A new focused CCU Algenol will work diligently over the next 2 years to finalize and further develop its system adapted primarily for carbon capture and fresh water creation.  Low cost fuels cannot continue to be the sole focus of Algenol, we live in a new reality of low oil prices, low demand and abundant supply.

The reductions in force

Later in the day, the hammer dropped on the expenses side. The investors made a two-year funding commitment. In return, the company, it was reported by local media, made a commitment to cut expenses by $18 million. Leading a reduction in headcount of 45, out of a current staff of between 170 and 208. and the afore-mentioned re-focusing on carbon capture and water treatment. It was the headcount reduction, Woods told a local reporter, that triggered his resignation.

“If the board wants to go in a new direction, it has a right to do so,” Woods told WINK News, adding that “When you decide to go forward with a reduced budget, then you have to make hard choices.”

Dropping the Florida project

Although no more news was coming out of Algenol headquarters, Woods told local media that he expected that the proposed central Florida algae project will be scrapped. The re-focus on water treatment and “new sources of fresh water for countries and regions in such desperate need for fresh water,” tips a focus on the developing world, possibly India, where key investor Reliance Industries is based.

Reliance partner Aquatech for example, mentions that “Reliance Industries Limited’s Jamnagar Refinery Works is the biggest grassroot refinery in the World. The refinery’s main source of water is the product water produced from sea water by thermal desalination units. This makes water very precious in the facility, and Reliance has a major focus on recycle and reuse of various effluents produced in the refinery.”

We may well see that Algenol technology, once re-focused, aims to compete with thermal desalination, which usually has capex in the $5-$10 per gallon of capacity and produces water at an operating cost of $0.003 per gallon — by using and cleaning brackish water. It’s early days — we’ll wait for more clarity from Algenol HQ on the specifics of the new direction.

Looking at Algenol’s future

One thing is clear, Algenol’s cyanobacteria produce ethanol even as they remove nutrients from water and clean it up — so it is not a question of exiting the business of fuel production, even in a new direction. However, expect that capturing carbon may produce a focus on secondary products that more permanently sequester CO2.

What do we think? We’re thinking ethylene. Polymerized into polyethylene, you know it as Glad Wrap or under some other brand name. It’s a valuable commodity, more permanently secures carbon (e.g. in plastic materials). And you make ethylene from ethanol by dehydrating it — literally, removing fresh water. It’s one product that fits the scope of the new strategy. The only think we can’t figure, exactly is — why make ethylene from algae when natural gas is at all-time low prices and generally refineries are making boatloads of cheap ethylene from methane?

In this case, we might be looking at the carbon sequestration problem — and also, we might take into account that, outside of the US, natural gas prices have remained quite high.

For example, landed LNG prices are $7.20 per MMBTU in India, compared to $2.41 in Lake Charles, Louisiana — as of October 2015 as reported by FERC. That’s compared to roughly $8.27 per million BTUs for oil. So, gas is cheaper, but not as strikingly low as elsewhere. Putting up a natural gas cracker to make low-cost ethylene is not as attractive in India as it is in the US, or the Middle East.

The Bottom Line

It’s the money, honest. Or lack thereof, in the form of project commitments and partners. And as a result, one of the most outspoken and visionary voices in the industry, former CEO Paul Woods, is out.

Low oil prices and general lethargy on paying the premiums to accelerate low-carbon fuel technologies — they have claimed another victim in the algae fuels game. Leaving Cellana and Joule as the only two companies standing with an overt focus on fuels from algae or cyanobacteria — and in Cellana’s case, even that is as part of a multi-product strategy where fuels provide the volume for scale while nutrients provide the high margin products that drive the economics.

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