Birth of a New Molecule at Scale – Avantium’s big milestone for FDCA Flagship Plant and PEF plastic

FDCA – furandicarboxylic acid – is the key building block of the wondrous 100% plant-based, recyclable plastic material PEF, or polyethylene furanoate, clear bottle plastic we all know and love. It’s better than traditional PET with its superior barrier properties and other functional advantages, and now it’s getting a huge push for scaling up with Avantium’s positive Final Investment Decision on the construction of its FDCA Flagship Plant, which will be the world’s first factory to produce FDCA on a commercial scale, with a capacity of 5 kiloton per annum.

You may remember back in November 2019, The Digest reported in Marvel-themed “Avantium Avengers” that Avantium secured a financial milestone of €25 million (about USD $27.5 million) in its mission to fund its FDCA flagship plant. Back then, we said “Thanks to this grant, Avantium are well on the road to make plant-based FDCA (furandicarboxylic acid) and PEF (polyethylene furanoate) commercially available and represents an important financing milestone for Avantium.” Well, look how far they’ve come!

Why is this important for others interested in producing PEF?

First, reaching this milestone marks a defining moment in the evolution of Avantium and will accelerate the commercialization of PEF (polyethylene furanoate) – and not just by Avantium. Sure, Avantium’s FDCA Flagship Plant will be the world’s first factory to produce FDCA (furandicarboxylic acid) on a commercial scale, with a capacity of 5 kiloton per annum, but it certainly won’t be the last or the only one.

Avantium believes that the Flagship Plant, in addition to generating revenues and profits in its own right, will clearly demonstrate the viability of large-scale manufacturing of PEF to consumers, customers and partners. This should pave the way to dramatically expand the applications of PEF, with a potential total end-market of $200 billion per year, which Avantium intends to access by the provision of technology licenses to collaborators worldwide.

Just take a look at this slide from a recent Avantium investor presentation:

Let’s talk money

Speaking of money, this whole Final Investment Decision part is a pivotal milestone for the further development and commercialization of Avantium’s sustainable PEF plastic, with the construction of the Flagship Plant expected to be completed by the end of 2023. News came from The Netherlands, that Avantium N.V. has taken a positive Final Investment Decision on the construction of its FDCA Flagship Plant after the Company fulfilled all three Key Conditions it had defined, which include 1) securing sufficient financing, 2) finalizing the engineering and establishing the supply chain, and 3) obtaining sufficient offtake commitments for the Flagship Plant. With the recent signing of a €90 million committed debt financing term sheet, the final outstanding financing condition has now been met.

The positive Final Investment Decision (FID) concludes an intense phase during which Avantium worked diligently on satisfying the three Key Conditions it had defined as necessary to meet, prior to starting with the construction of its FDCA Flagship Plant: (i) securing sufficient financing; (ii) finalising the engineering and establishing the supply chain; and (iii) obtaining sufficient initial offtake commitments for the Flagship Plant. All three Key Conditions have now been met. To get to this point, Avantium has been actively seeking and building partnerships across the value chain – customers, suppliers, governments and financial partners.

(i) Financing

Avantium has signed a term sheet for a three-year Debt Financing package of €90 million with a consortium of lenders, comprising the four Dutch banks ABN AMRO Bank, ASN Bank, ING Bank and Rabobank, as well as with the government backed Dutch impact investment fund Invest-NL. Each bank has committed €15 million as a bank loan under the Debt Financing. Invest-NL has committed €30 million debt under the Debt Financing. The €90 million Debt Financing is subject to terms and conditions, including the provision of warrants to the lenders.

The total financing package for the construction of the FDCA flagship plant consists of subsidies, third party equity, Avantium equity and bank loans. Avantium agreed to invest an additional €10 million in equity in its subsidiary Avantium Renewable Polymers in order to absorb the additional costs of the delay of one year in reaching Financial Close, bringing the total equity investment by Avantium in its subsidiary to €45 million. Worley and the Groningen Consortium (consisting of Groningen Seaports and regional investment funds NOM, FondsNieuweDoen, Investeringsfonds Groningen and Groeifonds) together will acquire a 22.6% shareholding in Avantium Renewable Polymers, representing a post-money valuation of €132.5 million. Following Financial Close, Avantium will hold 77.4% equity in Avantium Renewable Polymers.

(ii) Engineering and Supply Chain

The front-end-engineering and design (FEED) phase was completed in 2021. For the construction phase, Avantium and Worley signed a reimbursable engineering, procurement and construction contract for the FDCA Flagship Plant, conditional to Financial Close, with a contracted delivery date of Q4 2023. Avantium expects the Flagship Plant to be operational in 2024.

Avantium Renewable Polymers entered into a sub-leasehold agreement with Groningen Seaports for land for the construction and operation of its 5 kta FDCA Flagship Plant. On 1 December 2021, the Groningen Environmental Service (ODG – Omgevingsdienst Groningen) published the draft environmental permit for Avantium’s FDCA Flagship Plant.

Here’s a look at the rendering of the FDCA Flagship Plant:

On the supply chain, Avantium agreed on a multi-year commercial FDCA polymerisation contract (conditional to Financial Close) with global specialty polyester supplier Selenis. Avantium has also signed a strategic supply agreement (conditional to Financial Close) with agricultural cooperative Tereos Cooperative group, whereby Avantium Renewable Polymers will purchase high fructose syrup as the feedstock for the FDCA Flagship Plant in Delfzijl. The multi-year agreement secures 100% bio-based and local feedstock for the Flagship Plant. “This strategic partnership combines Tereos’ proven track record in cereal processing and green chemistry with the long-standing expertise of Avantium in the promising field of biobased polymers. It is also a strong sign of our shared commitment to develop renewable solutions made from plant-based technologies and locally produced raw material” comments Christophe Lescroart, CEO of Global Starch & Sweeteners at Tereos.

“We are delighted of having secured Tereos as our partner of choice for our PEF production lines of our flagship Delfzijl plant, in the Groningen province in the north of the Netherlands. This agreement is an important milestone in bringing a high-quality raw material produced by a recognized leader of the starch business into our production process” says Bas Blom, managing director of Avantium Renewable Polymers.

“This strategic partnership combines Tereos’ proven track record in cereal processing and green chemistry with the long-standing expertise of Avantium in the promising field of bio-based polymers. It is also a strong sign of our shared commitment to develop renewable solutions made from plant-based technologies and locally produced raw material” adds Christophe Lescroart, CEO of Global Starch & Sweeteners at Tereos.

(iii) Offtake Commitments

Avantium has secured five offtake commitments representing over 50% of the total Flagship Plant capacity. Contracts were signed with specialty chemical company Toyobo (Japan), specialty polyester film producer Terphane (US), beverage bottling company Refresco (Netherlands), international rigid packaging supplier Resilux (Belgium), and an undisclosed major global food & beverage brand owner. Avantium continues to pursue negotiations with multiple potential international partners to secure additional offtake commitments.

Financial Close is expected in the first quarter of 2022.

Reactions from the stakeholders

Tom van Aken, Chief Executive Officer of Avantium, comments on the significance of this milestone: “We highly appreciate the trust our partners, and in particular a strong consortium of Dutch banks, place in our innovative technology to produce FDCA and PEF. By meeting the Key Conditions concerning the construction of our FDCA Flagship Plant, we have reached a pivotal point in our journey to commercialise the next-generation plant-based plastic PEF. Bringing a new plastic to the market is a remarkable feat. With the backing of all our stakeholders, our perseverance, efforts and drive are about to bear fruit. We are excited to be playing an important role in accelerating the transition to the circular economy while building value for our shareholders.”

Wouter Bos, CEO of Invest-NL, is excited about the investment: “Invest-NL is proud to financially support Avantium, together with four Dutch banks. This first-of-a-kind investment by this group of Dutch financial institutions illustrates how we can jointly shape the capital needs of innovative and sustainable companies. It truly proves that investments in green, disruptive technologies are possible. With this investment, Invest-NL commits itself to the ambitious mission of Avantium to bring the innovative, sustainable plastic material PEF to market, significantly contributing to the future of our planet.”

Andrew Bester, Head of ING Wholesale Banking, comments on behalf of the Dutch banks: “With this multidimensional financing solution for Avantium for the world’s first FDCA Flagship Plant, the involved Dutch banks confirm their commitment to make a substantial contribution to the circular economy in the Netherlands. The Dutch banks joined forces with Invest-NL to realise this transaction. We wish the company and its shareholders success with the development of this Flagship Plant for the production of the sustainable plastic PEF.”

Cas König, CEO of Groningen Seaports, is pleased to collaborate with Avantium to making the FDCA Flagship Plant a reality: “We are excited that Avantium has reached this important milestone for its FDCA Flagship Plant. Avantium’s commercial facility will significantly contribute to the development of sustainable and circular industrial cluster in the Northern region of the Netherlands, that is no longer dependent on fossil resources such as natural gas. This fits perfectly within our Chemport Europe ecosystem where we work together towards a shared ambition: changing the nature of chemistry.” Dina Boonstra, director of regional investment funds NOM (Investment and Development Agency for the Northern Netherlands), Investeringsfonds Groningen and Groeifonds, adds: “The Investment Funds of the Groningen Consortium are excited to support Avantium, enabling Avantium to scale up and commercialise its innovative, breakthrough technology to produce the plant-based plastic material PEF. The production of biobased plastics fits well in the focus and strategy of the Northern Netherlands and we are therefore pleased to welcome Avantium in our region.”

Bottom Line

This Avantium news is big for 2 reasons: 1) It demonstrates the feasibility, viability, and reality of FDCA being produced at commercial scale and thus the real market implementation of PEF and 2) It means others can do it too and the possible end of PET fossil fuel based clear bottle plastics as we know it. While Avantium will start with this world’s first FDCA commercial scale production plant, we wouldn’t be surprised if they eventually expand and build other facilities around the world, which means other companies may want to join in the fun too and we can imagine a world with 100% plant-based, recyclable PEF plastic in our lifetime.