General Relativity, and the remaking of Sweetwater Energy

November 8, 2015 |

Black_Hole_MilkywayMinnesota Awards $26 Million to Fund Sweetwater’s Biochemical Facility

In Minnesota, Sweetwater Energy has received commitment for $26 million in long-term loans from the state of Minnesota to construct a biochemical production facility near Mountain Iron in northeastern Minnesota. The $53M facility will use local timber to produce high-value industrial alcohol and activated carbon.

The site has been selected and construction is planned to begin in spring 2016, with completion and operation anticipated for summer 2017. The facility will ultimately provide more than 100 jobs in the region as it is built out over four years.

The facility will use Sweetwater’s patented biomass processing technology, which splits Minnesota’s local timber and waste wood into valuable sugar and lignin. The sugar is used to create industrial alcohol—a key ingredient of many products, such as cosmetics and detergents—while the lignin is processed into activated carbon, used to purify municipal drinking water and power plant air emissions.

Wasn’t Sweetwater going to supply clean lignin and cellulosic sugars — what happened?

In a nutshell, the cellulosic sugars demand has not materialized as fast as expected, and companies focused on selling intermediates are in a time-bind. “With oil prices where they are and corn prices,” Chesonis said, “it’s tough on intermediates.”

Consequently, the company has vertically integrated more than originally expected and, in this first commercial project, will be making pure grade chemicals, industrial alcohols, possibly even detergents.

The Theory of General relativity and the advanced bioeconomy

As most survivors of high-school physics recall, as an object approaches super massive black hole (for example, a fast-developing renewables company traveling in the warp-speeding USS Venture Capital, approaching the Black Hole of Strategic Investment), time slows down. As we saw in the motion picture Interstellar, what takes 30 minutes for the crew on the USS Venture Capital chews up 20 years back on Earth.

As Elevance chairperson K’Lynne Johnson observed at ABLC Next last week in reviewing lessons learned, she noted that “timelines that for your partner mean they are working faster than they ever has as a corporation can bring death to the small, emerging company.”

We got from lab to market in less than five years! crows the Strategic Partner. It took 5 years! wails the technology developer.

The Project details

Sweetwater CEO Arunas Chesonis, in a Digest interview, confirmed that the company is embarking on an equity raise that will fund the project, repay an existing bridge loan, and provide two years of working capital for the company. The overall capital raise target is $52 million.

The project itself will have a 20-25% equity component, or in the $11-$13M range, and the company will also secure an additional $13-$15M in project debt.

Project capacity

Right now, the facility is expected to handle 150 tons per day of locally-sourced wood, and ultimately the site could support a project of between 450-600 tons per day, Chesonis told The Digest.

Wasn’t Segetis going to launch its first commercial in this region — what happened?

In a lot of ways, this is similar to the Segetis deal, which went away when renewable chemicals developer Segetis did, as falling oil prices pushed out project timelines for first commercials in the renewable chemicals space.

Reaction from stakeholders

“We can’t say enough about how thrilled we are to work with the great people in Minnesota,” says Arunas Chesonis, Chairman and CEO of Sweetwater. “Right from the start they’ve been welcoming and energetic, and we’re looking forward to offering solid employment in the region and expanding there as we grow.”

“This project places northeastern Minnesota into the leading edge of the growing green biotechnology industry,” said Mark Phillips, Minnesota’s Iron Range Resources and Rehabilitation Board Commissioner. “It’s an innovative process that makes use of our region’s natural resources, creates new well-paying jobs, and helps diversify the region’s economy.”

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