Biorefining Magazine - September 2010

INSIDE: USHERING IN THE NEXT GENERATION INAUGURAL ISSUE 2010

Bob Byrne, TRI create

THE FUTURE

For Flambeau River Biofuels Pg 20

PLUS

Finding Markets for Biobased Chemicals Pg 30

AND

Navigating Through the Project Financing Maze Pg 26

WWW.BIOREFININGMAGAZINE.COM

September 13-15, 2011 Hilton Americas - Houston Houston, Texas

For more information: 701-746-8385 service@bbiinternational.com

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CONTENTS |

INAUGURAL ISSUE 2010 VOL. 01 ISSUE 01

20

PROFILE

26

30

FINANCE

MARKETS

Getting Funds Flowing

Building Biobased Chemical Markets

Strategic partnerships, government funding Huge opportunities abound for green and other routes to equity that are working chemicals, but how do startups break into Flambeau River Biofuels President Bob Byrne BY BRYAN SIMS well-established markets? talks about his alliance with ThermoChem

BY ERIN VOEGELE Recovery International, and what it means for the once-shuttered Wisconsin paper mill

BY LUKE GEIVER

Biorefinery Town of Tomorrow

CONTENTS DEPARTMENTS 4 Editor’s Note

The Next Generation

BY RON KOTRBA

6 Advanced Advocacy

The Time is Now, Washington Awaits One Voice

BY MICHAEL McADAMS

7 Industry Events

Upcoming Conferences & Trade Shows

8 Talking Point

Why Society Benefits from Biorefining―When Done Right

BY STEPHEN FITZPATRICK

9 Legal Perspectives

Smart Legal Planning for Biorefining Partnerships

BY GARY D. COLBY

10 Business Briefs

People, Partnerships & Deals

12 Startup

Biorefining News & Trends ON THE COVER: Bob Byrne, president of Flambeau River Biofuels, holds the Fischer Tropsch diesel and wax the Park Falls biorefinery will someday produce.

PHOTO BY DANIEL HOFFMAN

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EDITOR’S NOTE

We here at BBI International, a renewable energy media and conference organizing company, have witnessed,

even helped shape, interesting changes over the past several years in the renewable fuels and biobased products industries and markets. In the early 2000s, corn ethanol and soy biodiesel were on the crest of what most people recognized as a green fuels revolution, and growth in those so-called first-generation industries blossomed—some say too fast. Investors poured money into sound, and not-so-sound, projects. As first-gen production grew, commodity and oil prices hit all-time highs, and then the bubble became unstable. In early 2008, biofuels went from sexy to evil overnight as mainstream media purported that biofuels production jacked up the cost of food. Biofuels projects were starving people in less developed countries, they said. And on top of that, first-gen biofuels took heat for that which they were trying to prevent—environmental degradation. The industry was cutting down rainforests through indirect land use change, they said. On top of it all, in late 2008 the financial markets crashed and project development screeched to a halt. The nation and bioenergy projects are still recovering from that economic downturn nearly two years ago. The food, oil and fringe environmental groups have, at least for now relented somewhat but very important lessons have been learned. BBI still proudly publishes its flagship journals Ethanol Producer Magazine and Biodiesel Magazine, along with Biomass Magazine, which launched in 2007 and is now called Biomass Power & Thermal.

Clearly, much of the first-generation work has laid the foundation for second- and thirdgeneration projects. It’s hard to make biobased chemicals from biomass, for instance, before one attempts producing them from starch or virgin oils. We walk before we run. Typically, a progression of events takes place before an advanced biorefinery using nonfood biomass feedstocks can produce a suite of advanced biofuels and biobased chemicals. BBI’s launch of RON KOTRBA, EDITOR RKOTRBA@BBIINTERNATIONAL.COM Biorefining is a progression of the very same nature, following the development of advanced biorefining concepts, dreams, and more recently, project development, all of which grew out of first-generation feedstocks and conversion technologies. We’re not forgetting how to walk, as evidenced by our continued support of first-generation biofuels, but we’ve also begun to run. We look forward to bringing you the latest information, ideas and perspectives in biorefining.

THE NEXT GENERATION

FOR MORE NEWS, INFORMATION AND PERSPECTIVE, VISIT BIOREFININGMAGAZINE.COM/THEBIOREFININGBLOG

ASSOCIATE EDITORS LUKE GEIVER authored the cover story, “Biorefinery Town of Tomorrow,” profiling a biorefining project in Wisconsin that is integrating gasification, syngas cleanup, and Fischer Tropsch reforming technology into existing pulp and paper mills to make renewable diesel, paraffin wax and power.

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BRYAN SIMS wrote “Getting Funds Flowing,” an investigation of the critical financing and partnership elements found in some successfully funded projects. The story also explores paths available to other emerging startups.

ERIN VOEGELE explores the question, “You can make biochemicals … but can you sell them?” In her feature story, “Barreling into Biobased Chemical Markets,” she probes several companies for their successful strategies and insights into this important and timely topic.

EDITORIAL EDITOR Ron Kotrba rkotrba@bbiinternational.com ASSOCIATE EDITORS Erin Voegele evoegele@bbiinternational.com Luke Geiver lgeiver@bbiinternational.com Bryan Sims bsims@bbiinternational.com COPY EDITOR Jan Tellmann jtellmann@bbiinternational.com

ART ART DIRECTOR Jaci Satterlund jsatterlund@bbiinternational.com GRAPHIC DESIGNER Sam Melquist smelquist@bbiinternational.com

PUBLISHING CHAIRMAN Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com VICE PRESIDENT Tom Bryan tbryan@bbiinternational.com

SALES VICE PRESIDENT, SALES & MARKETING Matthew Spoor mspoor@bbiinternational.com EXECUTIVE ACCOUNT MANAGER Howard Brockhouse hbrockhouse@bbiinternational.com SENIOR ACCOUNT MANAGER Jeremy Hanson jhanson@bbiinternational.com ACCOUNT MANAGERS Chip Shereck cshereck@bbiinternational.com Marty Steen msteen@bbiinternational.com Bob Brown bbrown@bbiinternational.com Gary Shields gshields@bbiinternational.com CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com SUBSCRIBER ACQUISITION MANAGER Jason Smith jsmith@bbiinternational.com ADVERTISING COORDINATOR Marla DeFoe mdefoe@bbiinternational.com

Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com. Subscriptions to Biorefining are $24.95 per year in the U.S; $39.95 in Canada and Mexico; and $49.95 outside North America. Subscriptions can be completed online at www.biorefiningmagazine.com or subscribe over the phone at (701) 746-8385. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at (701) 746-8385 or service@bbiinternational.com. Advertising Biorefining provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Biorefining advertising opportunities, please contact us at (701) 7468385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. Send to Biorefining Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or e-mail to rkotrba@ bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

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ADVANCED ADVOCACY

The Time is Now, Washington Awaits One Voice Biorefiners must work together and embrace differences, opportunities

BY MICHAEL McADAMS

C

ongratulations to BBI International, the publishers of this new magazine, as it educates those interested stakeholders and potential producers involved in the advanced renewable fuels sector. The press has always played a significant role in the development of our nation’s public policy. In today’s world, specialized publications help to focus, refine and drive industries such as the renewable fuels industry. It creates a much broader level of understanding for the industry and public and helps to instill that competitive spirit amongst the industry players.

The timing of the magazine’s launch could not be more perfect, as today’s industry struggles to find a common theme to rally behind. As you know, advanced biofuels is not a singular product, so finding a collective voice for the divergent views of all the technologies and the players is a substantial obstacle for our industry to overcome.

In 2007, Congress passed the Energy Independence and Security Act, setting a goal for the nation to use 36 billion gallons of renewable fuels by 2022. The law mandated four different specific requirements for the obligated parties to achieve, but gave U.S. EPA the ability to waive those requirements based on a range of factors.

This year the regulations, which implement the law, were completed and went into effect. But due to a number of factors, EPA was forced to reduce the cellulosic target.

This was a disappointing result, but sufficient production was simply not in place to meet the mandated gallons.

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At the same time, after a 25-year effort, we see significant production of firstgeneration corn-based ethanol, projected to be around 14 billion gallons of capacity this year. Similarly, we see more than 2 billion gallons of standing production of biodiesel. But the uncertainty of public policy, specifically the expiration of the tax credits for biodiesel and renewable diesel, has significantly reduced the production of mandated biomass-based diesel. As for the use of current tax credits for advanced biofuels, those credits are either scheduled to expire or do not include a wide range of the new technologies.

A snapshot of the public policy playing field in Washington demonstrates a confusing alphabet soup of multiple messages from multiple players in the renewable fuels sector … a dizzying prospect for any member of Congress.

While the algae players would like to be given parity with cellulosic, the cellulosic players would like to extend the cellulosic production tax credit. The corn ethanol players are now debating whether to fight to extend the current ethanol credit or divert those funds to build infrastructure for ethanol distribution and use. And all the advanced biofuels producers would like to be granted the same option as the solar and wind industries, and choose between a refundable investment tax credit and a production tax credit or blenders credit.

What we cannot afford is a missed opportunity. Congress will reconvene in September, and a small business jobs bill and the extension of key biofuels tax credits will be on the agenda once again.

Let’s keep in mind that unlike the

electric automobile industry, we do not need to build and replace an entire fleet of cars for every American to make a significant difference. Unlike the wind and solar industries, we do not need to build an entire grid to bring clean power to market.

But these industries are aligned on a common set of goals—a mandated renewable electricity standard.

We collectively need to work together much closer, and understand and embrace our differences and mutual opportunities. Currently several groups, including the Advanced Biofuels Association, the Biotech Association, the Cellulosic Ethanol Alliance, and the Algal Biomass Organization are seeking to find common ground. Our focus is to find a sound set of principles that help build the plants for the next generation of advanced biofuels.

We need to strive to work across both first-generation fuels and advanced fuels to assure that renewable liquid fuels can make a long-term, sustainable contribution to breaking America’s addiction to foreign oil.

Working together, we can achieve this vision. We will not always agree on the approach or the resourcing, but we have already built, and will continue to grow, an economically viable, job-producing industry that provides multiple benefits to Americans for generations to come. The time is now, the opportunity is ours to take hold of and create the low-cost, lowcarbon fuels of the future.

Author: Michael McAdams President, Advanced Biofuels Association (202) 747-0518 mmcadams@bhfs.com

EVENTS CALENDAR |

Southeast Biomass Conference & Trade Show November 2-4, 2010

Hyatt Regency Atlanta Atlanta, Georgia The Southeast Biomass Conference & Trade Show is one of three distinct regional offshoots of Biorefining and Biomass Power & Thermal’s International Biomass Conference & Expo. The program will include more than 60 speakers within four tracks: electricity generation; industrial heat and power; biorefining; and biomass project development and finance.

(701) 746-8385 www.biomassconference.com/southeast

International Biorefining Conference & Trade Show November 16-18, 2010

Biorefining Industry to Convene in ‘Steel City’ 11/16

Mark your calendar today for the industry’s new premier event― the International Biorefining Conference & Trade Show. The biorefining industry will convene November 16-18, 2010, at the historic Omni William Penn Hotel in downtown Pittsburgh.

Organized by BBI International and produced by Biorefining magazine, this world-class event will feature more than 60 speakers presenting on subjects including the market outlook for advanced biofuels and biobased chemicals; petroleum industry perspectives on biorefining; venture capital engagement in the emergent sector; waste-based biorefining; converting existing industrial assets into next-generation biorefineries; scaling up advanced biofuels; producing biobased aviation and military fuels; forging symbiotic agribusiness alliances; joint venture strategies to accelerate commercialization; and more.

With a core focus on the industrial, refining and agribusiness alliances defining the transformative global industry of biorefining, this event―along with its partner magazine, Biorefining―is geared toward industry professionals engaged in producing, developing and deploying advanced biofuels and biobased chemicals. Attendees will include producers, future producers and developers of advanced biofuels and biobased chemicals; investors (venture capital, private equity and institutional investment firms); owners and managers of existing industrial facilities (biofuels plants and pulp and paper mills); petroleum/petrochemical refining executives; agricultural processing leaders; waste management executives; auto manufacturing leaders; aviation industry professionals; government and military officials; municipal decision makers; the research community, and others.

All sessions and receptions will be conveniently located at the Omni, where attendees will enjoy rich and effective learning and networking opportunities.

The trade show will feature more than 30 exhibitors including technology developers, equipment suppliers and industry service providers.

Plan to attend the event that is sure to set a new standard in biorefining conference programming. Explore the preliminary agenda, registration and lodging rates, as well as exhibiting opportunities at www.biorefiningconference.com.

Early bird registration rates are available through October 19.

The Omni William Penn Hotel Pittsburgh, Pennsylvania This forum will allow technology developers to connect with investors and strategic partners, putting them on a path toward deployment.

Organized by BBI International and produced

by Biorefining, this event will include panels on project finance, market development and technology scale-up for advanced biofuels and biobased chemicals production.

(701) 746-8385 www.biorefiningconference.com

Pacific West Biomass Conference & Trade Show January 10-12, 2011

Sheraton Seattle Hotel Seattle, Washington The Pacific West Biomass Conference & Trade Show is one of three distinct regional offshoots of Biorefining and Biomass Power & Thermal’s International Biomass Conference & Expo. The program will focus on the vast potential for biomass utilization in the region with more than 60 speakers within four tracks: electricity generation; industrial heat and power; biorefining; and biomass project development and finance.

(701) 746-8385 www.biomassconference.com/pacificwest

International Biomass Conference & Expo May 2-5, 2011

America’s Center St. Louis, Missouri The International Biomass Conference & Expo is the biomass industry’s largest, fastest-growing event. Plan to join more than 2,500 attendees, 120 speakers and 400-plus exhibitors for the premier international biomass event of the year.

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TALKING POINT

Why Society Benefits from Biorefining— When Done Right Defining a new industry on the backs of existing paradigms BY STEPHEN FITZPATRICK

L

ignocellulose is the most abundant available source of carbon on earth. It’s also the planet’s only significant source of renewable carbon. The U.S. DOE estimates that the quantity of standing biomass on earth exceeds known and projected oil reserves by an order of magnitude—and it’s renewable. Each year biomass produced by photosynthesis exceeds world energy usage by a factor of six.

In view of unstable crude oil supplies and ever-increasing related environmental concerns, the use of abundant renewable lignocellulosic resources for energy, transportation and materials would appear to be an obvious strategy for industry and society to pursue. Provided that efficient means of conversion, sustainable agricultural practices and high-volume markets for derivatives can be developed, use of plant-derived raw materials to fulfill markets presently based on crude oil holds the promise of a highly profitable, sustainable industrial enterprise. The use of renewable resources to displace crude oil has been receiving much attention due to a number of secondary societal benefits.

would consequently eliminate increases in net greenhouse gas emissions due to fossil fuel use.

The increased demand for crops grown specifically to supply energy would provide a renewed profit potential for the farming industry. The recent World Economic Forum report states that biomass production alone will contribute $89 billion to farmers by 2030.

The derivative chemicals from cellulose are for the most part oxygenated and biodegradable. This generally leads to cleaner burning fuels and more environmentally friendly chemicals.

The cellulosic component is the largest fraction of municipal solid waste. It is also the most difficult to recycle due to contamination from other comingled wastes. An efficient cellulose conversion process capable of using nonrecyclable paper and cardboard would be key to improving the economics of recycling.

The use of domestically produced renewable resources will reduce or eliminate the ecological damage caused by drilling, transportation and refining of crude oil.

Societal Benefits

Technique Criteria

The use of domestically produced renewable resources could significantly reduce U.S. and European dependence on crude oil imports from an increasingly uncertain global supply system. Even a partial displacement of imports would have the beneficial effect of buffering the market against increases in crude oil prices.

The use of plant-derived renewable resources is carbon dioxide neutral and

Key to use of biomass is an efficient means of conversion, or “biorefining.” It’s appropriate to take a moment to dwell on the criteria that might be used to assess a proposed technology for efficient refining of lignocellulosic biomass. Parallels might be drawn with crude oil refining or paper manufacturing, but must be tempered by concerns about long-term sustainability and the societal and environmental impacts of a major new industry.

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New biorefining techniques should be fast, allowing the process to be sufficiently compact to minimize capital cost; robust enough to allow the use of a wide range of feedstocks and be relatively insensitive to contaminants or variations in feed composition; capable of utilizing low-grade biomass grown on marginal nonfarm land; environmentally benign, with a significant life-cycle carbon dioxide saving; conserve valuable carbon for use within the process or within the products to the maximum extent; capable of producing a wide range of well-defined chemical products following the oil refinery paradigm; have a present market pull with well-defined short-and long-term markets; sufficiently economical to be profitable at a production volume that can be supported by biomass supply from a distance of no more than 50 miles; able to utilize locally grown biomass and supply a local market; and potential to be profitable even without long-term government subsidies. Short-term government subsidies are helpful in reducing the risks associated with any new technology.

These criteria indicate to my company and I that the biorefining technology most likely to succeed commercially will be based on chemical, not biological, transformations.

The oil refining and paper industries do not use biological conversion techniques to any significant extent. This indicates to me that we should perhaps narrow our focus in assessing prospects for a sustainable, economical and profitable biomass refining industry.

Author: Stephen Fitzpatrick CEO, BioFine Technology LLC steve@biometicsma.com

LEGAL PERSPECTIVE |

Smart Legal Planning for Biorefining Partnerships Partnering companies should ensure agreements remain appropriate despite changes BY GARY D. COLBY

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artnering with an outside entity can offer a company access to materials, processes, capacity and expertise that are otherwise not available, but there is seldom perfect alignment between a company’s goals and its partner’s.

This diversity of interests is compounded when more than two parties collaborate.

Diversity of interests can inhibit partnering unless each company believes that its interests are protected. Most partnering is done under an agreement, whether it is reached orally, memorialized in email messages, or detailed in a formal legal document.

The effort and expense needed to establish a partnering agreement should correspond to the importance of the joint project to the company and the value of company assets that might be imperiled by the project.

Because these values can change, a company should ensure that its partnering agreements are, and remain, appropriate.

Many partnerships increase in scope and complexity as joint work proceeds, often evolving from an exploratory or pilot stage to more intensive stages, and including decision points at which parties may reconsider continuing the collaboration or changing its focus. For this reason, partnering agreements can change over time in terms of complexity, formality and scope.

Initial stages of partnership often involve little more than discussions to explore the feasibility of joint work. As long as there is no risk of serious or irreparable harm to the company, these initial stages can be governed by relatively simple agreements or even performed without an agreement.

However, if the possibility of serious harm or irreparable injury arises from joint work, then a company can find itself without legal redress in the absence of a sufficiently protective agreement.

As collaborations progress, participants commonly revise or replace an agreement that previously governed the project. It is important to recognize that a partnering agreement doesn’t have to address every conceivable issue that may arise—often initial agreements address only a limited number of items, expressly reserving resolution of certain issues for later. However, where unresolved issues are left to be dealt with later, a company should pay attention to ensure that those issues are addressed before they become relevant to the project.

Addressing Important Issues As a general rule, a partnering agreement should address at least two types of issues. First, they should address all of the situations in which serious disputes may foreseeably arise from joint work expected to occur during the agreement, including such basics as specifying the obligations of each party to perform work, provide materials, and make payments at specified dates and places. Where creation of tangible products or intangible property is foreseeable, the agreement should specify which party will own the asset or how ownership will be determined. Confidentiality obligations, procedures and the types of information to which they apply are also among these basic issues. The time or conditions that will end the partnership or permit it to be ended by a

participant should also be determined. Second, partnering agreements should address long-term issues that affect the company’s willingness to participate in the partnership.

“Show stopper” issues don’t need to be resolved in detail in early stage joint project agreements, but should be considered prior to executing the agreement.

Dealing with Change Unlike many legal agreements that resolve specific disputes or address discrete situations, partnering agreements inherently relate to fluid and changing circumstances.

That’s why it is critical that partnering agreements provide flexibility to modify the terms of the agreement, mechanisms for resolving disputes that arise under the agreement, and terms that specify when and how a partner may cease participation in the joint project.

Living with an Agreement No partnering agreement is useful unless it is followed. A party to an agreement should inform its project personnel of the agreement, their individual obligations under it, and those of its partner (i.e., so they can report noncompliance). Review of the terms of the agreement, as well as compliance of all parties with it, should be regularly performed by the party. Crafting and implementing appropriate partnering agreements can enhance the value a company obtains from partnering with others.

Author: Gary D. Colby Patent Attorney, Flaster Greenberg (215) 279-9384 gary.colby@flastergreenberg.com

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BUSINESS BRIEFS

BUSINESS BRIEFS People, Partnerships & Deals

Gevo Inc. recently announced the appointment of Bruce A. Smith, who most recently served as chairman, president and CEO of oil company Tesoro Corp., to its board of directors. The CEO of Gevo, Patrick Gruber, said, “Under Bruce’s leadership, Tesoro emerged as one of the nation’s leading refining companies. His perspective will be valuable as Gevo applies its novel Valuable Perspective approach to isobuGevo’s newest board tanol production in member, Bruce A. Smith, brings an effort to introduce invaluable experience more cost-effective, from oil companies Tesoro and Valero. renewable biobased replacements for petroleum-based fuels and chemicals.”

Before joining Tesoro, Smith served as vice president and treasurer of Valero Energy Co. where he worked closely with the CFO to restructure the company’s bank and debt agreements. A second-phase restructuring created Valero Natural Gas Partners where he served as vice president and treasurer. He has also served on the executive committee of the National Petrochemical and Refiners Association and on the board of directors of Noble Energy Corp. Smith holds an MBA from the University of Kansas and a bachelor’s degree in biology from Westminster College.

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Biobutanol company Cobalt Technologies recently signed an agreement with Fluor Corp., one of the world’s largest publicly owned engineering, procurement, construction, maintenance (EPCM) and project management companies. Under the agreement, Fluor will provide engineering consulting services as Cobalt gears up to commercialize its biobutanol production technology. Additionally, Fluor will offer a broad range of EPCM services for Cobalt’s demonstration and commercialscale butanol production plant. Cobalt’s technology converts nonfood feedstock, such as forest waste and mill residues, into biobutanol. Cobalt’s continuous butanol production system is based on advancements in microbial strain selection, bioreactor design and process engineering.

The company recently demonstrated the conversion of beetle-killed lodgepole pine into a low-carbon, sustainable biofuel and chemical, which is currently being tested in engines by Colorado State University’s renowned Engines and Energy Conversion Laboratory. Cobalt is backed by leading investors in the cleantech sector, including Pinnacle Ventures, Vantage Point Venture Partners, Burrill and Co., Malaysian Life Sciences Capital Fund, Life Science Partners, @Ventures and Harris & Harris Group.

Iowa farmers and Poet LLC recently celebrated the upcoming collection and delivery of 56,000 tons of baled corn cobs and light stover in the first commercial harvest for Project Liberty. Poet CEO Jeff Broin spoke to farmers about the important jobs and economic benefits

that will result from this new revenue crop. Area farmers have already received $100,000 in incentive payments to establish the new harvest system on their farms.

Iowa Gov. Chet Culver attended the event.

Biomass harvested for Project Liberty will come to a new biomass storage facility, which is under construction now in Emmetsburg. The 22-acre site will have capacity to house 23,000 tons of biomass bales. Construction of Project Liberty— the planned 25 MMgy cellulosic ethanol plant—is slated to begin in early 2012 pending approval of a loan guarantee from the U.S. DOE.

PHOTO: GENERA ENERGY

In its positive financial reportings Braskem S.A., based out of Sao Paulo, recently announced that its green ethylene plant in Triunfo, Brazil, is in the commissioning and preoperational phase, with full operations for the global market expected to begin in September. In July, the Rio Grande do Sul State Environmental Protection Foundation granted the plant’s operating license, and Braskem has already finished contracting the ethanol required to guarantee feedstock supplies.

New Genera-tion Genera Energy recently broke ground on an innovative biomass handling park in Vonore, Tenn.

With help from USDA Under Secretary for Rural Development Dallas Tonsager, Genera Energy leadership recently broke ground on Tennessee’s Biomass Innovation Park, a unique campus that will provide harvesting, handling, storage, densification, preprocessing, and transportation for multiple feedstocks including switchgrass. Located on a 21-acre site adjacent to the Genera/DuPont Danisco cellulosic ethanol demonstration-scale biorefinery in Vonore, the campus will serve as a hub for all biomass feedstock used to create biofuels, biochemicals, bioproducts, biomaterials, biopower and

BUSINESS BRIEFS |

bioenergy. The campus is being designed

by Michael Brady Architects of Knoxville, Tenn., and constructed by J&S Construction of Cookeville. Genera has more than 6,000 acres of switchgrass growing in nine counties located within 50 miles of the Vonore biorefinery. Switchgrass is being grown by farmers under contract with Genera to produce the crop for cellulosic ethanol. The park will also be home to a $5 million DOE-funded high-tonnage switchgrass bulk handling system in addition to offering strategic partnership opportunities and serving as a template for regional biomass depots. The first phase of construction is scheduled for completion by the end of this year, in time to store and process switchgrass following the fall harvest.

Steve Hurford has rejoined WestLB as an executive director to lead the newly established Transaction Management department within Global Loan Syndications, BU Structured Finance. He is based in London and reports to New Yorkbased Manish Taneja, managing director and global head of loan syndications.

Transaction Management will be a client’s primary point of contact for post syndication transaction support. The group will help actively manage and coordinate the administrative, reporting and technical aspects of all existing and new WestLB-led deals.WestLB has a long-standing presence in the corporate, structured and project financing sectors.

Virent Energy Systems Inc. named Susan Healy chief financial officer. Healy was senior vice president and CFO at Lands’ End, the international apparel retailer. She also served as CFO of Goldman Sachs’ power asset business, helping to grow its asset portfolio more than six-fold over three years. With more than 18 years

of finance experience, including positions in corporate treasury and investment banking at Goldman Sachs and Lehman Brothers, Healy raised more than $8 billion and Street Smart Virent Energy Systems’ executed $25 billion new CFO, Susan of M&A transactions Healy, executed $25 across a variety of billion in M&A transactions with industries. She earned Goldman Sachs and a bachelor’s degree in Lehman Brothers.

Business Administration from California State Polytechnic University and a law degree from Harvard University. At Virent, Healy will be responsible for its financial, accounting and information technology operations, reporting to Lee Edwards, president and CEO. Virent also added a new board member, David Jacober, who comes from Shell Oil Co., where he leads development and implementation of large, strategic capital projects for process safety, growth and energy conservation across the oil giant’s global downstream manufacturing assets.

Two U.S.-based developers of algal biofuels technology have reached funding milestones, one by filing to go public, and the other by securing more than $50 million in financing. Florida-based algae biofuel developer PetroAlgae Inc. filed a Form S-1 registration statement with the U.S. Securities and Exchange Commission for its initial public offering (IPO) of common stock. The IPO is expected to raise up to $200 million in an offering led by underwriters Goldman Sachs, UBS Investment Bank, Citi, Piper Jaffray, Cowen & Co. and Baird. Meanwhile, San Franciscobased algal biotechnology developer Solazyme Inc. raised $52 million in a Series D financing round. Braemar Energy Ventures and new investor Morgan Stanley led the

round with all major existing investors from previous rounds participating, including Lightspeed Venture Partners, The Roda Group, Harris & Harris Group, VantagePoint Venture Partners and Zygote Ventures. Existing strategic investors CTTV Investments LLC, the venture capital arm of Chevron Technology Ventures LLC and San-Ei Gen, a major Japanese manufacturer and distributor of food ingredients, also reinvested in the company.

Energy crop seed developer Ceres Inc. has formed a Brazilian subsidiary to focus on expanding sweet sorghum as an ethanol feedstock in that region. Ceres Sementes do Brasil Ltda. will be based in Sao Paulo and will be led temporarily by Ceres CFO Paul Kuc. Sweet sorghum is already being grown in that area of Brazil, but at a very small scale and not as a biofuel feedstock, said Ceres corporate communications manager Gary Koppenjan.

Ceres is also conducting sweet sorghum growing trials in the U.S. and has received interest from potential users of the crop in the Gulf Coast region, according to Koppenjan. California-based Amyris Biotechnologies Inc. is collaborating with Ceres to commercialize renewable diesel from sweet sorghum and has targeted potential partners in Hawaii, California, Alabama or Florida.

SHARE YOUR INDUSTRY BRIEFS To be included in Business Briefs, send information (including photos and logos if available) to: Industry Briefs, Biorefining, 308 Second Ave. N., Suite 304, Grand Forks ND 58203. You may also fax information to (701) 7468385, or e-mail it to rkotrba@bbiinternational.com.

Please include your name and telephone number in all correspondence.

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STARTUP

STARTUP Preparing to Produce

Biorefining News & Trends

Starch-Heavy JVs

BP-DuPont biobutanol JV, Butamax, nears completion BY LUKE GEIVER

Major international corporations join forces in the biorefining sector

Given all the bad press BP has received over the Gulf oil spill this summer, the company likely welcomes positive news about its nearly operational, jointly owned biobutanol plant. Butamax Advanced Biofuels LLC, a BP-DuPont collaboration, is set to open in Hull, England. The company has achieved several milestones along its Executive Insight way to biobutanol commercialization, the Butamax CEO Tim Potter says most recent being the upcoming opening Brazil and algae of a demonstration plant, says Tim Potter, feedstock are in the biobutanol Butamax CEO. Butamax-produced fuel will company’s future. enter the U.S. market and be commercially viable by early 2013, according to Potter.

In July, during the height of the Gulf disaster, BP bought out cellulosic ethanol partner Verenium, purchasing the pilotand demonstration-scale cellulosic ethanol facilities in Jennings, La., along with the R&D facilities in San Diego, including all of Verenium’s cellulosic technology. To lend perspective to that purchase, BP spent roughly $98.3 million on the Verenium deal while making $10 billion worth of asset divestments to help pay for clean-up costs in the Gulf.

While some suggest the Verenium purchase came when BP needed a quick shot of positive news to boost its tattered image, Philip New, chief executive of BP Biofuels, says the acquisition demonstrated BP’s intent to be a leader in the cellulosic biofuels industry. Verenium President and CEO Carlos Riva noted that building cellulosic ethanol facilities is capital intensive and that it “resides more properly with a large organization like BP.” Since 2006, BP has invested $1.5 billion in biofuels.

The Verenium acquisition may have turned heads in America, but the Butamax plant opening in England is a more significant achievement for BP and DuPont. Potter also says, “Butamax anticipates entering Brazil on a commercially viable basis in 2013. From 2013, Butamax will move to wheat-based production and will also be further exploring macroalgae as a potential feedstock.”

BP, which started the Hull project well before the Gulf disaster, also has biofuel projects in Florida, Brazil and another project in the UK. The plant opening isn’t all about BP’s steps towards image control, or that the $1.5 billion it has spent in biofuels is now creating a positive and tangible alternative to transportation fuel—but it can’t hurt.

BY BRYAN SIMS

12 | Biorefining | INAUGURAL ISSUE 2010

succinic acid facility in Hensall, Ontario, Canada. The chemical will be used in the production of a novel deicing agent.

GreenField Ethanol will build and operate the plant while DNP GT will hold a significant equity stake. The Canadian firms plan to penetrate key market segments by working with distributors like Basic Solutions, a provider of innovative runway deicing products.

PHOTO: DUPONT TATE & LYLE BIO PRODUCTS

Joint ventures and other collaborations, formed to expand niche products and increase global supplies, are rife within the biobased chemicals and bioproducts space. Companies are exploring different ways to supplement or replace existing starch-based feedstocks with nonfood-based inputs to produce a variety of chemicals and products traditionally derived from petroleum sources.

Expansion Plans DuPont Tate & Lyle Bio Products’ Tennessee plant is expanding 1,3 propanediol production by 35 percent.

One that is increasingly garnering attention is biobased succinic acid.

DNP Green Technology and GreenField Ethanol announced in March a partnership to build a $50 million biobased

The biobased deicer, to be produced from grain-derived glucose, will be applied to airport runways and other highvalue structures such as bridges, according to Mike Hartmann, vice president of corporate af-

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Revenue potential for the biomass value chain by 2030 $30 billion Biomass trading

$89 billion Biomass production

$10 billion Biorefining inputs

$15 billion Agricultural inputs

fairs at DNP GT. He adds the company intends to migrate to cellulosic nonfood-based inputs in the future.

“We understand there are a lot of companies trying to move away from starch-based feedstocks to lignocellulosic inputs, but we have to make sure it’s a clean enough stream and it’s cost-competitive to corn, sugarbeet or sugarcane,” he says. “We’re definitely looking at lignocellulosics, but it’s all a question of price.”

In Europe, Netherlands-based Royal DSM N.V. and French-based starch and starch-derivatives company Roquette Freres signed a joint venture agreement to develop biobased succinic acid. Reverdia, the proposed joint venture name, plans to focus on derivative applications—1,4 butanediol (BDO), polyurethane resins and biopolymers such as polybutylene succinate—for products such as paints, coatings and textiles. Both companies will be marketing biobased succinic acid under the Reverdia name.

Since early 2008, the two companies have worked together to develop fermentative technology using available starch-based feedstocks such as corn starch and sugarcane to produce biobased succinic acid, according to Royal DSM N.V. spokesman Ynte Hoekstra.

“One of the key targets for DSM and Roquette is to constantly strive for more environmentally-friendly production routes, so if there is a feasible second-generation production route, we certainly will consider moving to biomass as a feedstock,” he says. “In the future we aim to use second-generation feedstocks like wheat straw, corn

stover, wood chips or energy crops.

The key factor in moving towards a second-generation feedstock is finding a cost-competitive process for converting biomass into sugars.”

DuPont Tate & Lyle Bio Products LLC, a joint venture between the respective companies, plans to expand production capacity by 35 percent at its 100-million-pound-per-year Loudon, Tenn., facility, which produces the company’s trademarked biobased 1,3 propanediol (Bio-PDO). Operating since 2007 adjacent to Tate & Lyle’s existing 60 MMgy corn-based ethanol plant, construction for expansion of the PDO facility is underway with completion scheduled for the second quarter of 2011.

Formed in 2004, DuPont Tate & Lyle produces Bio-PDO from corn instead of petroleum-based feedstock using a proprietary fermentation process.

Since 2007, the Bio-PDO production plant has been producing a valuable ingredient used currently in materials for a variety of applications such as cosmetics and personal care formulations to fluids and polymers, most notably DuPont Sorona, a renewably sourced polymer. Bio-PDO is sold under the Zemea and Susterra brands.

“Additional feedstocks like sugarcane are currently being assessed and when the project economics are feasible, the joint venture will begin implementing its development plans for additional feedstocks,” says Joe DeSalvo, marketing director for DuPont Tate & Lyle Bio Products LLC.

$80 billion Biorefining fuels

$65 billion Biomass power and heat $6 billion Bioplastics

Big Money $295 billion in total revenue potential exists in the biomass value chain by 2030.

SOURCE: WORLD ECONOMIC FORUM’S “THE FUTURE OF INDUSTRIAL BIOREFINERIES” REPORT.

Biorefining in the Billions World Economic Forum reports positive biorefining outlook A report issued by the World Economic Forum projects $295 billion in revenue potential for the biomass value chain by 2030 (see chart above).

Specifically, the report found that development of the biorefining sector could create significant economic growth opportunities, leading to job creation, particularly in rural areas. The report also notes significant advances are needed in development and deployment of biobased technologies, along with infrastructure development and more.

To overcome challenges, the report states that multiple stakeholders must play an active role in promoting the industrialization of biorefinery processes. Development of the biobased economy is in an early, high-risk stage, the report states, which means governments must play a key role in providing support to the emerging biobased sector and creating markets for short-term success. The report specifically notes that global policy makers need to create new markets to support biobased products and encourage competition, establish public-private partnerships that can help reduce the delay between product development and commercialization, identify potential growth and impact areas for key industries, provide incentives to achieve specific targets, and inform the public that biobased plastics are a realistic supplement to fossil-based products. —Erin Voegele

INAUGURAL ISSUE 2010 | Biorefining | 13

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Streamlining the Startup A couple of smart college students use their fast pyrolysis technology knowledge to start a bioenergy company that offers a one-of-a-kind bio-oil recovery system. Those same students call on a former energy and agrichemical executive to head the new company and, to top it all off, they test their technology on campus at a state-of-the-art BioCentury Research Farm to avoid the high costs and time spent building and operating a pilot facility.

After Iowa State University graduates Jared Brown, Cody Ellens and Anthony Pollard took the advice of Robert Brown, director of ISU’s Bioeconomy Institute, to put their knowledge to good use, the students formed Avello Bioenergy. Now, with a proven concept and future market relationships already formed, the classroom-concept-turned-energy-company story shows how good grades mixed with the right kind of project development strategy can pay off.

The Avello pyrolysis technology quickly heats biomass such as corn stover in the absence of oxygen. The process creates multiple end products, including bio-oil fractions and biochar. Through a patent-pending fractionation system, Avello can produce fuel, asphalt additives, and biobased chemicals from the bio-oil while the biochar can be used for soil enhancement and sequestration of greenhouse gas emissions. Before Avello’s fractionation process, the bio-oil mixture contains water and other materials “that cause it to be very unstable,” Dennis Banasiak, president of Avello, says.

“We can take apart bio-oils and are left with materials that are much easier to work with.” One of the uses is a replacement for petroleum-based asphalt materials.

As a sign of how much the state of Iowa believes in Avello, Iowa’s transportation department is already putting the company’s bioasphalt chemicals to use. “We made material to be used in a bike path test,” Banasiak says, “and we will be paving a path this summer.” The company, which formed more than a year ago, can attribute its fast growth to more than just the DOT’s interest in the bioasphalt, Banasiak says. It can also be attributed to the students’

PHOTO: BIOCENTURY RESEARCH FARM

ISU graduates leverage university resources to fast-track bio-oil enterprise BY LUKE GEIVER

High-Tech Farm Avello Bioenergy tests its fast-pyrolysis technology at ISU’s BioCentury Research Farm.

robust technology—and the $19 million BioCentury Research Farm where Avello has been testing it.

Adjacent to a 1,000-acre biomass research farm, the facility contains three processing trains: biochemical, thermochemical and bioprocessing. The permitted facility offers industrial partners a location to develop research projects and, “for a startup this makes it much easier,” Banasiak says. “The facility saves us time and money.”

Because Avello didn’t have to seek a location or construct a pilot plant to continue development of its technology, the company is already seeking its first big round of funding to move forward.

Larry Johnson, director of the BioCentury Research Farm, says, “Our agriculture was designed to produce food, feed and fiber, which it does very efficiently, but now we are asking agriculture to produce fuels and industrial chemicals. To be successful we must focus on integrated systems, not individual pieces by themselves.”

With the multiple process trains available at the ISU research farm, Banasiak says the Avello project was able to file patents already. It’s a leg up that Banasiak says will allow Avello to continue paving its own path.

PLA Partnerships Stretch Across the Pond Three Dutch companies collaborate to develop waste-based polylactic acid Lactic acid, a monomer of polylactic acid (PLA) that can be applied in many products, is traditionally being produced from starch-based feedstocks via fermentation by companies all over the world.

Netherlands-based lactic acid producer Purac, in partnership with Dutch paper producer Crown van Gelder N.V. and Bumaga B.V., a development center in the paper and board industry, have formed a three-way partnership to develop a process that will use cellulose-rich wastes derived from the pulp and paper industry. Par14 | Biorefining | INAUGURAL ISSUE 2010

tially funded by the Dutch Ministries of Economic Affairs and Agriculture, Nature and Food Quality, with direction under the Dutch Biorefinery Program, the collaboration is in line with Purac’s overall strategy to use alternative nonfood substrates such as agricultural byproducts for its lactic acid fermentation process instead of sugars, glucose and tapioca starch as substrates.

Purac, a subsidiary of global bakery ingredients supplier CSM, currently has six lactic acid production units operating around the world, including a facility joint-

ly operated with Cargill Inc. in Blair, Neb. At a capacity of 150 million pounds per year, the plant produces lactic acid through a sugar-based fermentation process. It’s a process that was jointly developed and patented by Purac and Cargill, with Cargill off-taking lactic acid for use in its PLAbased polymers. The Nebraska facility has been a joint venture between Purac and Cargill’s North American Corn Milling Division since 1997. —Bryan Sims

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Amber: The Color of Money Biobased succinic acid and higher-value derivatives are poised for strong growth BY BRYAN SIMS Historically known as the “spirit of amber,” succinic acid is a dicarboxylic acid comprised of four carbon atoms.

The name is derived from the Latin word succinum meaning amber, from which the acid may be obtained. It’s only fitting that a company called Bioamber would take on such a moniker as it scales up a process to produce the chemical along with its derivatives in mass quantities.

Bioamber is a joint venture between U.S.-based renewable chemicals company DNP Green Technology and Francebased agri-business firm Agro-Industrie Recherches et Développements (ARD).

In addition, DuPont Applied BioSciences has agreed to a licensing arrangement for Bioamber’s biobased derivatives of succinic acid. Under terms of the agreement announced in July, Bioamber will license DuPont its proprietary technology and DuPont has the right of first refusal to secure off-take agreements from future commercial plants.

Chemical companies are attracted to the high-value derivative products that can be made from succinic acid such as tetra-

Spending Their Way to Growth The upside of downed financials

hydrofuran, butyrolactone and butanediol, as well as various pyrrolidones. Other nitrogen-containing succinic acid derivatives, as well as its esters and salts, have various uses and can be used for further conversions with uses in products such as antifreeze liquids, coolants, solvents, pigments, polyesters, intermediates for the chemical industry and plasticizers, according to Mike Hartmann, vice president of corporate affairs for DNP GT. “Those derivatives are a much more important part of the market than succinic acid is,” Hartmann told Biorefining. “Succinic acid is usually made via a fermentation pathway and the derivatives are produced more from a chemical catalyst route.” Hartmann says he couldn’t disclose specifically which derivatives Bioamber and DuPont would be producing for confidentiality reasons.

Currently, nearly all of the world’s succinic acid is made from maleic anhydride in an expensive, energy intensive process. The use of renewable inputs provides a cheaper and cleaner route that does not rely on this highly toxic input.

Since December 2009, Bioamber has

been producing biobased succinic acid at its commercial facility in Pomacle, France.

With an annual capacity of 2,000 metric tons, the facility uses wheat-derived glucose as feedstock, consuming carbon dioxide in the production process that lowers its carbon footprint.

The potential market for succinic acid is estimated at $3.3 billion, according to DNP GT. World demand for succinic acid is approximately at 40,000 to 45,000 tons per year, according to market research firm Frost & Sullivan. The market is expected to expand six-fold to 180,000 tons by 2015, largely credited to the introduction of biobased succinic acid, according to Frost & Sullivan.

Bioderived succinic acid is currently only a niche product, with 30,000 tons produced a year creating a market worth of approximately $225 million. In the U.S., demand for butanediol is expected to reach 424,000 tons in 2012, up from 392,000 in 2008, according to data compiled by Chemical Industry News & Intelligence.

Asian demand could grow annually by 7 to 9 percent.

Lignol Energy Corp.:

Syntroleum Corp.:

$0

-$3 million

-$6 million

$6.2 million net loss $7.8 million

$7.4 million

$0.6 million net loss For six months ended June 30, 2010

For year ended net loss For an advanced biofuel technology provider, renet loss April 30, 2009 For six months porting a loss can actually be a good thing. Both Lignol For year ended -$9 million ended April 30, 2010 Energy Corp., a cellulosic ethanol company from CanJune 30, 2009 ada, and Syntroleum Corp., a renewable diesel technolGains and Losses Sometimes companies lose money to gain milestones. ogy provider from Tulsa, Okla., have already announced financial losses in 2010, but for both companies, those short-term financial shortfalls have netted big gains. of $7.8 million, $1.6 million more than 2009. The loss, however, Syntroleum reported a second-quarter net income loss of has meant an increase in research and development performed at $1.02 million due to increased staffing. For the money spent on Lignol’s newly integrated biorefinery pilot plant in Burnaby, British additional help, Syntroleum was able to complete the highly anticiColumbia. Add on the costs of operating the plant, and the adpated Geismar, La., 75 MMgy renewable diesel facility and begin ditional loss of $1.6 million in 2010 shows that red numbers are at commissioning the plant. And the second-quarter loss hasn’t meant times a positive sign and reveal significant achievements as Lignol Syntroleum is done spending. In the company’s Securities and Exhas already signed a contract with powerhouse Novozymes, allowchange Commission filings, it says future plans involve investments ing Novozymes to use the plant. For both advanced biofuel compain additional plants. nies, their financial shortfalls now correlate to company growth, and For the year ended April 30, Lignol Energy reported a loss soon, production. —Luke Geiver

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Bioplastics Boom From plastic filler produced with lignocellulosic fiber, to corn cob-based levulinic acid esters and biomass-based plasticizers, companies in the bioplastics sector are quickly moving to commercial production.

Ongoing research and development activities in the bioplastics arena seem to have reached a tipping point, and the long-term market potential looks extremely positive.

What we are seeing right now—and expect to see in the future—is increased interest from venture capitalists in investing in renewable chemical platforms, including bioplastics, says Brent Erickson, executive vice president of the Biotechnology Industry Organization. “I think the long-term prospects for the sector are very good,” he says.

According to Erickson, one factor driving interest in biobased plastics is the volatility in the oil and gas markets. “The volatility presents a real problem for the chemical industry,” he says. “They are starting to look for new feedstocks, something the chemical industry is really starting to move towards to get some price stability.”

Increased consumer demand for environmentally friendly products is also driving bioplastics’ market-share growth. There is greater awareness among brand owners regarding the opportunity that bioplastics can provide in differentiating their products from those of competitors, says Snehal Desai, business vice president at Segetis Inc., a Minnesota-based company that is developing biobased plasticizers. According to Desai, many brand owners are also work-

ing to reach sustainability targets, and realize that biobased plastics can assist in achieving those goals.

While the current price of some bioplastic materials may be prohibitively high for potential customers, Erickson says that is not expected to be a long-term problem. Innovators Segetis Inc. is developing chemical and plastic product lines that are “I really expect to see the derived from monomers built from levulinic acid manufactured from cellulosic price of biobased plastic biomass. decrease,” he says. “That footprint economical,” Desai says. “Yet premium is going to go away. As companies there is very little support coming from expand their production and become more the U.S. government on the biomaterials efficient in producing the plastics, the price and bioproducts end of the equation. That will go down. We saw that in the early days is needed because it is going to help drive of petroleum plastics, and we are going to overall affordability, and help de-risk some see the same thing with regard to bioplasof the technology that needs to get to the tics. Over time the price will go down, and market.” that [cost premium] will be less and less of a Erickson agrees that the U.S. governfactor.” Desai agrees, noting that the current ment isn’t doing enough to build a domestic price premium is often a function of scale. bioplastics industry. “We are starting to see Once production is scaled up, the price of companies go oversees and build capacity bioplastics should come down. because it’s less expensive,” he says. “I think Although the long-term outlook for that is bad for the United States and it is bioplastics is bright, several factors are bad for our job situation. I really feel like impeding short-term growth in the sector, congress and the administration need to including access to capital and government do more in the way of providing incentives support. While the U.S. government has for bioplastics.” According to Erickson, been very supportive of biofuels, Desai BIO has developed a production tax credit says there has been a lack of support for proposal for bioplastics that would help other biobased materials. “A biorefinery by incentivize U.S. production. definition should involve fuels as well as chemicals and plastics to make the whole

Partnering Up to Break it Down Brazil’s Petrobras teams up with Dutch firm BIOeCON to deconstruct cellulose and build an industry BY BRYAN SIMS Brazil is well-known for its voluminous ethanol production and usage, however, state-owned oil major Petrobras is working to put advanced biofuels and biobased chemicals on the map. To make this possible, Petrobras teamed with Netherlands-based advanced biofuels and 16 | Biorefining | INAUGURAL ISSUE 2010

biochemicals technology company BIOeCON to jointly develop a novel process for producing advanced biofuels and green chemicals from agricultural wastes such as sugarcane bagasse. The joint venture intends to utilize BIOeCON’s proprietary BiCHEM process—short for biomass

chemical conversion—to break down cellulosic biomass waste streams to produce high-cetane biodiesel and other diesel additives, including chemical base components for plastics and polymers.

“Brazil produces a lot of ethanol, being mainly a gasoline component,” says

PHOTO: SEGETIS INC.

Oil price volatility, sustainability targets drive investment, production BY ERIN VOEGELE

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maximum conversion and high selectivity without undesired side products.

“One of the key technical problems in the conversion of cellulosic biomass is how to open up the inaccessible solid fibrous woody material so that it can be effectively transformed,” O’Connor says.

“Most of the existing processes to unlock those structures are quite costly and intensive of energy or chemicals.”

Petrobras and BIOeCON intend to further develop the BiCHEM technology and establish proof-of-concept on pilot and demonstration scales, with the pilot stage in Netherlands and the demo plant planned for Brazil. A joint venture will be established to license the technology once it matures.

According to O’Connor, collaborative efforts between the two organizations are rooted deeper than the current partnership.

Big-Money Backer

$600

25

$500

Total Amount (Millions USD)

Khosla Ventures holds investment stake in nine biorefining companies, inlcuding KiOR

BIOeCON has worked with Petrobras’ research and development arm CENPES on similar endeavors. “BIOeCON has had good contacts at Petrobras since the start,” he says. “There is a lot of mutual respect between [us].”

In 2008, Petrobras’ CENPES signed a cooperative agreement with KiOR Inc., a joint venture between BIOeCON and Khosla Ventures, to accelerate the development of BIOeCON’s proprietary Biomass Catalytic Cracking process, a bio-crude oil production technology. Petrobras’ CENPES has been studying biomass processing to generate bio-oil from sugarcane straw residues since 2006. Bench tests are complete and the first semi-industrial unit tests are underway.

20

$400 15 $300

Number of Deals

Paul O’Connor, founder and president of BIOeCON. “There was a need to produce [biobased diesel additives for] the growing diesel market and that’s where BiCHEM fits in the picture.”

Developed by top class scientists from Delft University of Technology in Netherlands and the Universidad Politecnica of Valencia in Spain, the technology uses a recyclable and inexpensive solvent to dissolve molecular sugars found in waste biomass feedstocks, which can be further hydrogenated and converted into biobased chemicals and advanced biofuels of choice.

The approach allows the company to use the entire biomass input stream by converting all the carbon available in cellulose and hemicellulose to various end products with minimal energy use. This combination of biomass dissolution and the use of a hydrogenation step in the process allows

10 Many early advanced biofuel technology com$200 panies are employing novel pathways and strategies 5 they hope yield saleable, competitive bioproducts. To $100 increase its odds of backing a frontrunner, Khosla $0 Ventures has made at least nine investments in this 0 emerging market. According to an amended Securi2006 2007 2008 2009 2010 ties and Exchange Commission filing in July, KiOR Money Trail Despite the poor economy, biofuel investments are on the rise.

Inc. received $110 million in investment funds from SOURCE: CLEANTECH GROUP 13 investors with the largest share from Khosla Ventures.

In May, KiOR secured $40 million of its initial offering toward an original goal of $95 million. Formed in 2007 between for petroleum-based fuels. The company produces approximately Khosla Ventures and Netherlands-based biofuel start-up BIOeCON, KiOR uses a thermochemical technology platform—what 15 barrels of biocrude per day at its demo plant in Houston, according to its website. In addition to KiOR, Khosla Ventures also the company calls a “biomass catalytic cracking process”—with holds significant investments in other promising advanced biofuel the help of a furtive catalyst that can break down any feedstock, including nonfood cellulosic biomass into a biocrude oil that has a and biochemical companies, including Amyris Biotechnologies, LS9 Inc., Mascoma Corp., Coskata Inc., Gevo Inc., LanzaTech 92 percent lower carbon emission profile than fossil crude. KiOR NZ Ltd., Range Fuels Inc. and HCL CleanTech Ltd. —Bryan Sims claims the technology can tap into the existing fuel-refining and transportation infrastructure by acting as a drop-in replacement 1Q06

2Q066

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Stepping into ValericBased Biofuel Shell Global Solutions produces new fuel Jean-Paul Lange and partners from Shell Global Solutions say they’ve created a new class of cellulosic biofuel. First, start with lignocelluloses. Run it through an acid hydrolysis process to get levulinic acid (an additive in plastic and textile industry).

Then hydrogenate the levulinic acid in a process created and tested by Netherlandsbased Global Shell Solutions to make valeric acid. Finally, esterify the valeric acid to achieve the new biofuel, Lange says. When combined with other alcohols to form valerate esters, Lange and partners were able to produce cellulosic ethanol and biodiesel, or simply mix the valerate biofuel with preexisting fuels. Lange already completed a round of testing of 10 cars on a 15 percent blend. He wrote, “The presence of [valerate biofuel] in gasoline showed no measurable impact on engine wear, oil degradation, vehicle durability, engine deposits or regulated tailpipe emissions.” Lange notes a slight loss in fuel economy but improved octane levels. He and his team also say the valeric platform can be used in high blends of both gasoline and diesel. ―Luke Geiver 18 | Biorefining | INAUGURAL ISSUE 2010

Fuel

Energy Density

Air-Fuel Ratio

Specific Energy

Heat of Vaporization

Gasoline Butanol Ethanol Methanol

32.0 MJ/L 29.2 MJ/L 19.6 MJ/L 16.0 MJ/L

14.6 11.2 9 6.5

2.9 MJ/kg air 3.2MJ/kg air 3.2 MJ/kg air 3.1 MJ/kg air

0.36 MJ/kg 0.43 MJ/kg 0.92 MJ/kg 1.20 MJ/kg

Behind the Numbers Butanol carries far better energy density figures than ethanol and methanol.

SOURCE: GEVO INC.

The GIFT that Keeps on Giving Gevo’s integrated fermentation technology introduces cellulosic isobutanol option Gevo Inc. recently announced it has successfully produced biobased isobutanol from fermentable sugars derived from cellulosic biomass on the laboratory scale. The company, which recently began the process to go public, also successfully converted the resulting isobutanol into isobutylene and paraffinic kerosene. According to a Gevo spokeswoman, the biomass hydrolysate used in the process was secured from companies with expertise in biomass conversion. The development is the result of a $1.8 million grant that was awarded to Gevo in November 2009 through the U.S. DOE and USDA’s Biomass Research & Development Initiative. The grant was awarded to

support the ongoing development of a proprietary cellulosic yeast strain that Gevo licensed from Cargill in February 2009. Under the license agreement, Gevo has exclusive rights to integrate Cargill’s microorganisms into its process. Gevo’s integrated fermentation technology (GIFT) has been designed for retrofit with existing ethanol production facilities. Gevo’s announcement demonstrates the company’s progress in making its biocatalyst viable for use in cellulosic biorefineries, says Gevo CEO Patrick Gruber. “As the cellulosic ethanol industry becomes operational, companies could have the option to produce isobutanol instead of ethanol.” —Erin Voegele

Western Innovation, Eastern Markets Asian markets offer vast potential for many emerging biobased chemicals BY ERIN VOEGELE Asia’s robust manufacturing sector is luring Western biorefinery developers to the East, where myriad green chemicals are in high demand due to the growth of industry— and lack of red tape—in the region. Asian demand for acetic acid, for example, is expected to grow 8 to 9 percent per year, while U.S. demand for the product is expected to remain relatively flat. And that’s just a small part of the story.

Houston-based Glycos Biotechnologies Inc. is developing a biorefinery project in Malaysia that will convert renewable feedstock, such as crude glycerin from biodiesel production, into biobased fuels and chemicals.

According to GlycosBio Chairman and CEO Rich Silento, the facility will be located near ports in Malaysia and Singapore, which will make it easy for the company to sell its green chemical products into Asian markets. “A lot of chemical industries are doing much more

business activity over in China and that part of the world to get near the emerging markets,” Silento says. “There is a large commodity market there, and given the small volumes we are going to be producing, we can easily sell into those markets without any product or commodity risk.”

However, access to emerging markets isn’t the only reason GlycosBio has chosen to site its first commercial biorefinery in Malaysia. According to Silento, the region also produces unique feedstocks that match well with GlycosBio’s technology, primarily the waste products that result from the local palm oil refining industry. “Glycerin is one, and free fatty acids is another,” he says. “There is also sugar in the marketplace as well, if need be.”

According to Silento, the business environment in Malaysia is also very welcoming. “It’s really easy to do business there,” he says. “The biggest challenge, honestly, is the

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13-hour time difference, that presents a bit of a challenge, but the business community is very welcoming and the government agencies you have to deal with are very helpful.” While it can take several years to finance and permit a biorefinery project in the U.S., Silento says GlycosBio will break ground on its facility after only 18 months of work. “That is a very short timeframe,” he says. “You can move very quickly in that part of world. If you have willing participants and you want to move aggressively from a schedule perspective, you certainly can.”

Bioamber, a joint venture between U.S.-based DNP Green Technology and France-based Agro-industrie Recherches et Développements (ARD), also intends to build a commercialscale biorefinery in Asia in the future. In the short, term how-

ever, the company has taken a different approach to penetrating the Asian market. Bioamber (see page 15) recently signed an agreement with Mitsui & Co. Ltd. granting the global trading company exclusive Asian distribution rights for its biobased succinic acid. While the Asian market offers the biggest growth opportunity for biobased chemicals, DNP Green Technology President Jean-Francois Huc says it can be a difficult market for Western companies to penetrate.

Vice president of NDP Green Technology Mike Hartmann says being a small, private U.S. company can make it challenging to meet with the large chemical companies in Asia. “Mitsui & Co. has been instrumental in opening doors. It gives us a lot of credibility,” he says.

Sifting Through the Ecobabble Novozymes joins consortium of big-name corporations spearheading product sustainability BY LUKE GEIVER Grouping big name companies WalMart, Dell and Disney sounds like a global plot to sell Mickey Mouse computer monitors to the masses. But add the bioinnovation company Novozymes Inc. to the mix and the partnership takes on a completely different tone. In August, Novozymes joined several giant companies (Wal-Mart, BASF, and others) along with academic institutions, governments and NGO’s as part of the Sustainability Consortium. Now, the

PHOTO: SUSTAINABILITY CONSORTIUM

work of the consortium because it is one of the primary methods for comparing the environmental sustainability of products and processes for improving them.”

The Sustainability Consortium, part of the Global Institute of Sustainability at Arizona State University, is working “to create globally accepted standards for measuring and reporting the environmental and social impacts of consumer products to retailers and institutional buyers,” according to Lisa Firestone, operations director. “Society must find new ways to meet the needs of a growing population while reducing our impact on the environment,” says Claus Stig Pedersen, Novozymes head of sustainability. “In short, we must produce more with less.”

While the chances that any of the consortium’s participants start the move to downsize anyConsumer Conscience More and more consumers demand green products, and the Sustainability Consortium helps retailers provide more time soon may be slim, Monroe environmentally responsible goods. says it was a natural extension to consortium will have the ability to analyze join a group of stakeholders with “similar the life-cycle assessment of everything ambitions” and “the resources to create a from keypads to color crayons. substantial impact.” To create a worldwide “Novozymes brings a long experistandard, Firestone says the consortium ence and well-developed understanding of will act as “a research body that examines life cycle assessment, a tool for measuring consumer product sustainability from the a product’s environmental impact,” says perspectives of information systems, meaAdam Monroe, Novozymes North Ameri- surement science, consumer science and can president. “This tool is central for the systems science.”

Monroe says Novozymes also brings an in-depth understanding of biotechnology’s role in making consumer products and supply chains more sustainable with an experience in industries ranging from detergents to textiles. Firestone says to join Monroe and the other members of the consortium, which also includes 3M, Best Buy and Monsanto, to name a few, a prospective company or organization must supply an annual membership fee and commit to the consortium for three years. “There are two tiers of membership allowing various levels of involvement,” Firestone says. “These tiers are different for small versus large companies, and different government entities. There is an application process, but no fee for NGOs.” Membership for a Tier One large company is $100,000 per year, $50,000 for Tier Two and $25,000 and $10,000 for small businesses.

The consortium states that “we are bombarded with companies who say their conscience is green.” Novozymes’ involvement looks like an important addition to meet the goals of the organization as those in the biofuels sector know, LCA is an ever-present factor influencing a product’s sustainability. Fortunately, the consortium seeks to answer one of its self-imposed questions, “What is real and what is ecobabble?”

INAUGURAL ISSUE 2010 | Biorefining | 19

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PROFILE

Coming Soon Bob Byrne, president of Flambeau River Biofuels, stands at the future site of the Park Falls biorefinery.

PHOTO: DANIEL HOFFMAN

20 | Biorefining | INAUGURAL ISSUE 2010

PROFILE |

Biorefinery

Town of Tomorrow The work of ThermoChem Recovery International has already changed the future for one small Wisconsin community BY LUKE GEIVER

A small town in the woods of Wisconsin, fresh off the bankruptcy and closing of its century-old paper mill, might be the last place to find the biorefinery blueprint of the future. But don’t tell the people of Park Falls,

Wis., that. And the biomass-to-energy company from Baltimore helping to transform Park Falls from a struggling town into the future home of a biorefinery, capable of producing 9.5 MMgy of renewable diesel, 7.6 MMgy of paraffin, 5.3 megawatts of green electricity and cutting the adjacent paper mill’s steam cost by $1 million per year—don’t tell it that either.

ThermoChem Recovery International Inc. started working with the once shuttered Park Falls mill four years ago, and now its Flambeau River Biofuels Project is creating a successful model for building a facility to produce biofuels, biochemicals and renewable power. Before the paper mill and TRI signed any agreements, however, Flambeau River Biofuels planned to integrate a cellulosic ethanol plant into the facility, a project that has been shelved in favor of TRI’s technology application.

Formed in 1996, TRI first started working with Bob Byrne, Flambeau River Biofuels president, and William “Butch” Johnson, owner of the paper mill, after a TRI presentation on its biomass-to-syngas process in 2006, years after

INAUGURAL ISSUE 2010 | Biorefining | 21

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PROFILE

PHOTO: DANIEL HOFFMAN

woods and in transport. Ratzlaff and the city have already reconstructed a bridge for the Flambeau River Mill, and the city is already looking into a warehouse property for the biorefinery’s use in the future. “The city is committed to helping the mill in whatever way we can to accomplish this goal of the biorefinery,” Ratzlaff says.

Along with the built-in stimulus the project is creating, Byrne says there is excitement about TRI itself. “TRI’s technology is proven,” he says. “You can get dropin fuels today.”

TRI’s biorefinery concept—“to use diverse feedstocks for a wide range of products, integrated with an energy host for maximum efficiency, and a phased approach for solid biomass and black liquor”—isn’t just for saving small towns. Project Independence in Wisconsin Rapids, Wis., another TRI-led biorefinery project, will use TRI technology to replace natural gas use with Steamy Solution To power the paper mill, a No. 6 boiler powered by processed wood pellets creates high-pressure steam for generating electricity to be sent throughout the mill.

500 dry tons per day (dtpd) of waste wood biomass, while producing 5.5 to 8.5 MMgy of renewable diesel, and sending 92 MMBtu an hour of tail gas to a lime kiln along with steam and hot water to an existing paJohnson purchased the mill out of bank- TRI has his own thoughts on the rebirth. “A per mill. “The Wisconsin Rapids location is ruptcy. Johnson’s vision was to create a thermochemical biorefinery gives off ener- already a world class mill that has been opmore energy-efficient, revitalized facility, gy, so if you can integrate at a host site that erating for a long time,” Connor says.

The DOE seems to agree. “The apbut his purchase wasn’t just about paper needs energy the performance improves mill profitability or implementing TRI tech- dramatically,” he says. The biofuels project proach is cost-effective, scalable and transnology. Park Falls Mayor Thomas Ratzlaff, will use TRI’s gasification technology to ferable to hundreds of other locations in the U.S.,” the department said in who worked at the mill for more than 32 complement the paper mill. “It a statement. years, described the period of shutdown as makes a lot of sense at the pulp TRI also has a pilot-scale fa“devastating,” with more than 300 jobs lost. and paper mills,” Connor says. cility running in Durham, N.C., But the period after Johnson purchased the “They have the infrastructure to that Connor says can produce mill, Ratzlaff says, “was nothing short of support a biorefinery, plus, they drop-in Fischer Tropsch liquids amazing.” To start, Ratzlaff, Johnson, Byrne are endothermic, needing energy from syngas every day. The Durand others took a road trip to the capital to make paper. A biorefinery is ham location has a capacity to city with a message for the governor, and exothermic, producing energy to Speaking of process 4 dtpd of biomass, and Ratzlaff says, the governor was all ears. make fuel and coproducts.”

Recovery processes both solid and liquid “We have an owner that listens to its Byrne, who visits the lo- Eric Connor, senior biomass (black liquor) to any employees,” Ratzlaff says of Johnson, add- cal community once a month to vice president of TRI, is already in talks with ing, “I don’t know of any company whose provide updates on the progress new project developers downstream catalytic process. The plans for the Durham include testemployees don’t want to see that company of the revamped facility, says on a familiar subject: thermochemical ing energy crops such as switchdo well or prosper.” Maybe for Johnson everyone is excited about the recovery processes. grass and sorghum because the it was the sound of the mill pumping out project—and why not? Accordprofits again, or the hopeful talk around ing to Byrne, construction of the biomass gasification system used at every facility is town of the mill's return but either way, facility will provide 160 two-year positions. feedstock flexible. Applications proven sucRatzlaff said those 300 jobs are once again Once the project is fully completed, 40 di- cessful in Durham will be translated on a filled, and more biorefinery positions are rect, full-time jobs will be filled at the plant, larger scale at the Park Falls location.

TRI’s version of the biorefinery, Concoming in the future. and in the biomass-handling portion, a Eric Connor, senior vice president for combined 125 jobs will be provided in the nor says, is made up of major processes, 22 | Biorefining | INAUGURAL ISSUE 2010

PROFILE |

PHOTO: DANIEL HOFFMAN

including biomass preparation, biomass gasification, primary synthesis gas cleanup, compression and secondary syngas cleanup, and gas to liquids. In the biomass preparation stage, the feedstock is sized and dried.

The gasification process, including the steam reformer and the carbon trim cell, creates a high quality syngas with the correct H2/CO ratio for the plants. For the syngas cleanup, Connor says, a heat recovery steam generator, venture scrubber, gas cooler, tars collection system and a sulfur scrubber are all used. These processes clean the gas to the parts-per-million level. A compressor, ammonia scrubber and packed beds are incorporated into the secondary syngas cleanup.

“These subprocesses increase the syngas pressure and clean the syngas to the parts-per-billion level required for the gas to liquid process,” Connor says. The process produces Fischer Tropsch diesel and waxes and is proven fixed-bed technology using a proprietary cobalt catalyst.

Chipping Away Some wood processing operations will serve double duty at the biorefinery, creating both mill products and energy.

The TRI Blueprint

PHOTO: DANIEL HOFFMAN

With a finished pilot plant and two projects using proven technology underway, Connor says there are five factors needed to make a biorefinery work. The first, he says, is securing feedstock for the facility. “You have to have biomass and you need to tie it down,” Connor says. “In the case of Flam-

All Systems Go Byrne has begun staffing the biorefinery, and Dave Wagner (orange vest) will be the plant operations manager.

beau, they know the forest industry.” Project Independence, like the Park Falls biorefinery, also benefits from industry knowledge of available biomass sources. How important is “tying down” the feedstock? “What drives the economics of a project is the price of your biomass against the cost of your off-take agreements,” he says.

Secondly, following feedstock sourcing, a plant will have a better chance of success if the project has an owner at the beginning of its development, Connor says.

Ratzlaff agrees. Although there may only be few communities that could rival the unique ride to resurgence that Park Falls has been through, he says others interested in retrofitting an existing facility or developing a project to the magnitude of Park Falls can still learn from the path to his town’s future biorefinery. Like Connor, he also says “finding an owner or someone willing” to take that long journey is necessary for success.

In the case of the NewPage pulp and paper mill, the host of Project Liberty, “they are using their own finances,” making the project much easier, Connor says. Without the ability to define a project developer,

navigating through the financing process creates a difficult situation for all parties involved, because as Connor says, you don’t know who is going to pay for the project.

Both NewPage and the Flambeau River Project sought out help from the DOE, state funding and private investments, as well, and Connor says “in many cases, significant public support is not necessary to achieve attractive returns and financing.”

While federal funding is necessary, TRI looks for projects that can also stand alone, according to Connor. And, that is the third factor for a biorefinery’s success.

“You need money, you need financing or equity,” he said. Flambeau River Biofuels received a $30 million DOE grant, and Byrne says it also applied for a USDA loan guarantee to fund the bulk of what the plant will need to borrow to complete the project. “The state department of commerce has given us loans, and had funds available for situations like this,” he says. With a fairly significant equity raised already, Byrne says they also hired an investment banker to seek out and raise funding. TRI, however, began consultation on the Flambeau River Project

INAUGURAL ISSUE 2010 | Biorefining | 23

PROFILE

PHOTO: DANIEL HOFFMAN

|

New Colors Papermaker Tom Mindel and Byrne will have to get used to the sights and sounds of the new biorefinery, something Byrne says is a welcome thought.

PHOTO: DANIEL HOFFMAN

before the DOE loans came, according to Connor.

Apart from financing and feedstock security, Connor says a plant needs to find the right technology for the proposed processes. For thermochemical-based biorefineries, the TRI system makes a high-quality gas

Not Your Average Town While the quiet streets of Park Falls may look like Anywhere, U.S.A., the biorefinery will put the small Wisconsin town on the map.

24 | Biorefining | INAUGURAL ISSUE 2010

that can be customized for any downstream application. While providing its own energy, it’s also scalable. “It can go from 500 to 2,000 tons of biomass per day,” he says. For the Park Falls plant, the gasifier will provide steam savings of $1 million per year, and Byrne says the plant will also take advantage of the mill’s wastewater treatment facilities when the biorefinery is up and running.

Finally, Connor says a plant needs to work for off-take agreements before the facility is completed. The Park Falls location has already secured an off-take agreement for the paraffin wax. While agreements range from product marketing to product off-take, Byrne says Flambeau Rivers prefers the marketing option. “We get the upside,” he says, due to the rise in price he envisions for his bioproducts in the future. But Byrne adds that it can be difficult to establish agreements with “green” products, as the value may not yet be determined. Since the renewable diesel the plant will produce has yet to secure a strong place in the market, he priced his renewable diesel the same as regular diesel to secure an agreement. The off-take agreement for supplying the mill

with steam has already been set for the next 15 years.

While TRI’s involvement in three biorefinery projects outlines several factors needed to turn biomass feedstock into biorefinery gains, the Durham plant ultimately reveals hurdles that may slow progress. For more than a year, the Durham team has been pushing to meet DOE requirements, working a nonstop 24/7 schedule that the team says required many nights and weekends spent on the project. The Flambeau project testing in Durham “has run as expected, when it has run,” Byrne says, but, “the testing has been a lot slower than anticipated.” There was a significant amount of rework on a number of operating and mechanical issues, but “that is just the nature of a pilot plant.” The extra time spent fine-tuning the process has been worth the outcome for Byrne, and having a proven technology provider helping along the way makes facing operational delays much easier.

Both of the Wisconsin biorefinery projects are set for completion in 2012, with work at the Durham facility continu-

PROFILE |

Bold Design Based on the innovative biorefinery pilot plant in Durham, N.C., the Park Falls facility will sit adjacent to the existing paper mill.

SOURCE: TRI

ing. With completion dates set for the near future for all projects, Connor says his team at TRI is already working on new projects.

flexible system capable of fueling the necessary processes for biofuels, biochemicals and biobased power, is already giving an emerging industry a glimpse at a biorefinery town of the future, the people from Park Falls may not agree with Connor’s statement about the origination of the syngas.

“By far,” Ratzlaff says of the future biorefinery, “it’s one of the biggest things we look to for the future of the city. Almost losing the mill has shown us how important sustainable growth is for the future of all our families.” A quick drive through Park Falls reveals a town similar to many, thriving and secure, with bowling alleys, boutiques and bars. Soon, a state-of-the-art biorefinery will be part of that picture. As the work at the old mill shows, the development being done today by TRI and people like Byrne and Johnson reveals a town that has fought for what it has—especially that syngas. Connor and the TRI team would likely agree.

Ultimately Connor says, “The downstream process doesn’t care where the syngas comes from.” While TRI’s technology, a feedstock

Author: Luke Geiver Associate Editor, Biorefining (701) 738-4944 lgeiver@bbiinternational.com

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FINANCE

Gauging Confidence Shawn McMahon of Virent Energy Systems monitors feedstock holding tanks at the company’s 10,000-gallon-per-year demonstration facility in Madison, Wis. PHOTO: VIRENT ENERGY SYSTEMS

26 | Biorefining | INAUGURAL ISSUE 2010

FINANCE |

Getting Funds

FLOWING Strategic partnerships, government funding and other routes to equity that are working BY BRYAN SIMS

Unquestionably, the financial meltdown of 2008 redefined how biorefining projects will be financed in the future. Traditional avenues of finance––

whether private equity drives, bank loans or debt financing––are now virtually nonexistent. Banks are hesitant to loan money to even the most promising projects ready for commercialization.

With a limited initial public offering (IPO) market remaining stagnant, the once-potential small investor now sits on money instead of leveraging it in fear of tough times getting tougher.

“The market has come back, but as it has come back it has put a real premium on quality,” says Sam Bemiss, partner at Richmond, Va.-based Ewing Bemiss & Co., an investment banking firm actively engaged in the renewable energy markets. “As investors come back they’ve become much more demanding about the fundamental elements of a complete renewable energy project, to include great technology,

great management and so forth. In other words, a locked-in spread between the cost of the raw material and the value of the finished product.”

Startup technology developers, eager to showcase their processes and products but typically in need of seed capital during the predevelopment stage, can get caught in the “Valley of Death”—the point at which a company is ready for commercialization but is unable to obtain funding. Meanwhile, availability of capital for high risk projects remains historically low as investors are hesitant to dish out large amounts of long-term capital unsure of return on investment.

“We’ve seen a lot of C round or late fourthor fifth-round deals for really promising biofuel and biochemical companies where all of the venture investors are prepared to reinvest in another round, but only on the condition that a major strategic industrial partner validate the technology by investing alongside them,” Bemiss observes.

INAUGURAL ISSUE 2010 | Biorefining | 27

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FINANCE

Thinking Big Ewing Bemiss & Co. partner Sam Bemiss says investors want to see major strategic partners prior to reinvesting in projects.

Low Profile Elevance CFO Patrick Kelly says companies must stay capital light when looking for investor funding.

Stand Out Virent CEO Lee Edwards believes his company is successful because of all the product outputs it offers.

Granted Myriant Technologies executive Samuel McConnell says applying for federal and state grants are viable funding options.

There are several available financing options tailored to specific business plans.

One such effective route emerging in the industry is the formation of strategic partnerships and joint ventures.

The Power of Partnering Madison, Wis.-based Virent Energy Systems Inc. began as a start-up research and technology company in 2002 and focused on the production of hydrogen gas for hydrogen fuel cells. The company has since refocused its business strategy on biofuels and biobased chemicals production, attracting significant funding in the form of government grants and equity investments.

In June, Virent closed on a $46.4 million Series C equity round led by major shareholders Cargill Inc. and Honda Motor Co., along with strategic partner Royal Dutch Shell. The funding will advance Virent’s patented BioForming catalytic process that can produce biogasoline, diesel fuel, jet fuel, and green chemicals and plastics using both food-based and nonfood-based feed28 | Biorefining | INAUGURAL ISSUE 2010

stocks such as glucose and sucrose, glycerol, starches, polymers of glucose contained in cellulose, and C5 and C6 sugars. The financing followed a milestone in which Virent announced the successful startup of its 10,000-gallon per year biogasoline production plant in Madison. The investment agreement deepened Virent’s existing R&D collaboration with Shell for the production of biogasoline and diesel fuel. With its new equity stake, Shell also has a seat on Virent’s board.

According to Virent’s President and CEO Lee Edwards, the breadth of application from its BioForming technology platform—which includes a multitude of products—is what gave his company a significant advantage.

“In this day and age with the uncertainty within existing financial markets over the past several years, we have a very strong set of collaboration partnerships that help the company leverage not just investment in terms of cash but also capabilities that those partners have so that we can really effectively go out and accelerate the deployment, validate the products that we’re manufacturing and also give prospective new investors confidence that they’re in good company,” Edwards tells Biorefining.

“There’s a commitment across all of our investor base to see the company proceed to commercialization and have multiple plants built in the next 10 years, to successfully show what the BioForming platform can actually do,” Edwards says.

Since 2002, the company has raised a total of $124 million. “All along we’ve successfully been able to access grant money as the company’s technology platform matures and evolves over time,” Edwards adds.

Having a strong intellectual property portfolio for its process technology is an added benefit for Virent’s continued success.

Illinois-based Elevance Renewable Sciences Inc. formed a joint venture with one of the largest agribusiness companies in the world, Wilmar International Ltd., to build a 50 MMgy integrated biorefinery in Surabaya, Indonesia. The project will use Elevance’s proprietary metathesis process technology to produce high-value performance chemicals such as 9-decenoic acid and esters, C18 dicarboxylic acids and esters, as well as ad-

vanced biofuels and oleochemicals using a variety of natural oils, including palm, soy, jatropha, algae, animal fats and other waste oils. To be located within Wilmar’s integrated manufacturing complex, now under construction, the commercial-scale manufacturing facility is expected to come online early next year.

According to CFO Patrick Kelly, Elevance’s low capital profile when entering ventures such as these is what makes the company an attractive partner. “The overall cost of our biorefineries is quite low and so that makes the financing hurdle easier to get over,” Kelly says. “That’s really a key theme in our fundraising and financing efforts.”

Another key component that makes Elevance an attractive partner is the large existing markets that it sells into, along with the suite of outputs its technology platform creates. “We’re an active participant in all of our ventures and we expect to have multiple biorefineries around the globe in the coming years, and creativity around financing those opportunities is a key theme for us,” he says, adding that Elevance is exploring other partnership opportunities globally to co-locate with existing biorefineries.

Government Funding Federal guaranteed loans offer some of the best funding opportunities in today’s biorefining market. The USDA has created a Biorefinery Assistance Program, and a number of programs are available through the farm bill, the energy bill and the recovery act.

Myriant Technologies LLC, a Massachusetts-based company that specializes in the production of biobased succinic acid, drew from its $50 million grant awarded by the DOE in December 2009 to build a commercial-scale biobased succinic acid facility in Lake Providence, La. The Lake Providence Port Commission and the Louisiana Department of Transportation kicked in an additional $10 million. With a capacity of 30 million pounds per year, the facility is expected to be operational by late next year using local sorghum and carbon dioxide, according to Senior Vice President of Corporate Development Sam McConnell.

“We face the same capital issues as other early to late-stage technology com-

FINANCE |

panies, and that is finding the significant capital required to build the first greenfield plant, which serves as the basis for attracting additional investment,” McConnell says.

“We were fortunate enough to have been awarded $60 million in grants for doing just that.”

Myriant is unique compared to a technology developer as it employs a build/ own/operate business model. Since it specializes in producing succinic acid and other biobased derivatives, and aims to sell into a $250 million U.S. market, McConnell says the company is actively exploring ways to capitalize on idled or underutilized industrial or biofuel production facilities looking to add another output product for downstream separations.

“For those of us with a build/own/operate mentality, it doesn’t leave you a lot of choices,” McConnell says. “It requires being able to demonstrate a competitive advantage to attract private funding and really a requirement to be as lean on the capital expenditure side as possible.” Although it may provide short-term flexibility, McConnell

stresses that one must not exclusively rely on state or federal government funding.

Solid Projects Still Get Funded Applying for community and government grants and use of tax-exempt bonds are just a few of the many ways to fill the financial gap. Although prominent in the early to mid 2000s, venture capital has tapered off as a preferred method of financing. According to a report released in June by Lux Research, titled “Navigating Through Scale to Successful Exits: A Compass for Biofuel and Biomaterial Investors,” venture capitalists invested $877 million across 51 deals in 2009 for biobased fuels and materials production, a level of funding representing a 26 percent drop from 2008.

Despite the current short-term challenges, the future of financing biorefining projects remains promising globally. According to a report released in June, titled “The Future of Industrial Biorefineries” authored by the World Economic Forum, the respective sale of end products is estimated at $80 billion for biofuels, $10 billion

to $15 billion for biobased bulk chemicals and bioplastics and $65 billion for power and heat by 2030.

Ultimately, however, it comes down to what the financial sector considers a viable technology and/or business model that can compete profitably in the world of conventional fuels and chemicals, which are also subsidized in the market.

“If you’re looking for the ‘Holy Grail,’ it’s somebody who either can lock in a raw material cost over a long period of time at a low level or is more or less agnostic to his feedstock source, and then can produce a range of end products so that he can’t get caught in a bind either, on the input end or the output end,” Bemiss says. “Flexibility on the input end and the output end is a huge selling point, along with a proprietary process around which you can build some sort of IP wall.”

Author: Bryan Sims Associate Editor, Biorefining (701) 738-4974 bsims@bbiinternational.com.

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MARKETS

30 | Biorefining | INAUGURAL ISSUE 2010

MARKETS |

BARRELING INTO BIOBASED CHEMICAL MARKETS

Why biobased chemicals must meet or exceed the performance, functionality and price of petrochemicals BY ERIN VOEGELE The opportunity to brand goods as environmentally friendly and sustainable has driven some demand for biobased chemicals. But it's far from the only motivator. Economic fac-

tors, regulatory requirements and new functionality needs are also expanding market opportunities for green chemistry.

“At a very high level, I think there are fundamental drivers for the petrochemical industry to change to alternative feedstocks,” says Andy Shafer, vice president of sales and market development at Elevance Renewable Sciences Inc., a Bolingbrook, Ill.-based company working to commercialize a Nobel Prize winning chemical catalyst technology that can produce novel

specialty and existing chemicals. One of these drivers, says Shafer, is the expectation that oil prices will continue to be volatile in the shortterm, while trending significantly higher over time. “The chemical industry is looking for alternatives that it can use to provide more stability and security of supply,” he says. “I think that’s one major, overarching factor that is driving [new production] technologies. I think there is a strong drive for innovation and enhanced performance. If you are going to invest in new, innovative products, you might as well invest in developing them from chemistries, products and technologies” that aren’t dependent on fossilbased inputs, he says.

Regulatory factors are also increasing interest in biobased chemical inputs. One example INAUGURAL ISSUE 2010 | Biorefining | 31

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MARKETS

Proving Performance and Functionality

PHOTO: MYRIANT TECHNOLOGIES LLC

offered by Shafer is in the lubricants industry. On the federal level, he says that there has been a push for greater fuel mileage, and more efficient lubricants can help achieve that. In addition, Shafer says there are also regulatory factors related to waste disposal that encourage the use of lubricants that have higher drain intervals, which means the lubricants have to perform over a longer timeframe. “Those kinds of factors are changing the chemistries people are using in the market,” he says, adding that as manufacturers and lubricant marketers look for that new functionality to achieve those performance metrics, they are looking at biobased materials.

Bayou Build Construction on Myriant Technologies, Lake Providence, La., facility is expected to break ground in late 2010, with commercial production of biobased succinic acid beginning fourth quarter 2011.

Biobased attributes of a chemical intermediary is only one entry on a long list been actively supplying product samples to of factors that potential customers consider potential customers for use in testing and when evaluating possible manufacturing in- evaluation activities. “Those samples have puts. Perhaps most importantly, biobased been the primary basis for the commitchemicals must meet performance and ments that have been made for the output functionality standards. While these charac- of the plant so far,” he says.

While Myriant intends to sell its teristics are fairly straight forward to prove biobased succinic acid as a direct when producing a biochemical substitute for fossil-based sucthat is an exact molecule-forcinic acid and butanediol (BDO), molecule replacement for a fossilthe company has also identified based counterpart, the process to a significant market opportunity prove the functionality of an infor the product to serve as an direct replacement often requires indirect replacement for adipic more extensive evaluation. acid. Because the molecules of Supplying product samples succinic acid and adipic acid difto potential customers is one of Big Moves Shafer is a vice fer, McConnell says more robust the best ways a biobased chemi- Andy president at Elevance cal producer can build market Renewable Sciences, evaluation and testing had to be completed to prove the viability demand for its products and which has partnered with Wilmar of its biobased succinic acid as pursue the establishment of off- International to build an adipic acid replacement. Aptake agreements. This strategy a biobased chemical facility in Asia. plications testing has to be done has been successfully employed

by Myriant Technologies LLC, a Quincy, to determine if a polymer manufactured Mass.-based company that is expected to using succinic acid will yield the same qualibegin construction on a demonstration- ties as a polymer made using adipic acid, he scale biobased succinic acid plant later this adds. “That work is underway, and so far is extremely promising.” In fact, he notes that year in Louisiana.

Myriant has already established off- one off-take agreement established for the take agreements for the entire output of the Louisiana facility is with a company that will Louisiana facility, and anticipates that simi- be using biobased succinic acid as a replacelar agreements will be established for future ment for adipic acid.

“The sampling program is designed capacity as well. According to Samuel McConnell, Myriant’s senior vice president of to overcome any reluctance in the marketcorporate development, his company has place,” McConnell says. “There is always 32 | Biorefining | INAUGURAL ISSUE 2010

some resistance in trying something new, but the ability to put free samples out there has really been effective in addressing those [concerns] to date.”

Randal Goodfellow, senior vice president of Ensyn Technologies Inc., notes that it is also imperative for green chemical producers to engage the right people in the evaluation process.

Ensyn is a biochemical and fuel manufacturing company that was established in 1984. The company utilizes what’s called Rapid Thermal Processing, which is a pyrolysis technology that involves the flash heating of biomass in the absence of oxygen. The process results in a liquid that contains short- and long-chain molecules.

While the pyrolysis liquid can be used as a fuel for stationary engines, it is also possible to harvest molecules from the mixture for sale as specialty chemicals. Ensyn currently harvests molecules from its pyrolysis oil that are sold as specialty chemicals into the food flavorings and construction materials sectors.

When building a market for biobased chemicals, Goodfellow says it’s important to engage a company’s equipment operators, not just upper-level management.

He says this is because the people on the manufacturing floor are the ones who have to work with the new biobased inputs. It is imperative that a biochemical producer works closely with these employees to help

Marketable Myriant Technologies' biobased succinic acid will be sold in the market as a direct replacement for fossil-based succinic acid and butanediol (BDO), and as an indirect replacement for adipic acid.

overcome any concerns and reluctance they might have. “You must work with them to familiarize them with the product, so they understand the new product and its attributes,” he says. “They have to test it, they have to use it.” Anytime a change is introduced into the manufacturing process, there is concern that it may lead to technical obstacles. “You have to be patient working with people when you are introducing something new,” Goodfellow continues.

“You need to ensure they become comfortable with the new product, its performance, and prove to them that it won’t introduce any snags in the production process.”

Forging Partnerships Although the formation of off-take agreements is commonplace in the chemical sector, the unique feedstock procurement needs of biobased chemical producers might make more cohesive partnerships an attractive option. One example of this may be a co-location model where a production facility is established adjacent to a feedstock supplier, which may in turn utilize the green chemical facility’s outputs.

Cheyenne, Wyo.-based NDC Power is exploring one such co-location model.

NDC Power is currently working to develop a fuel cell technology that produces com-

modity chemicals and electric power from alcohol-based feedstock. “We utilize any primary alcohol as a fuel and electrochemically convert that alcohol to the corresponding carboxylic acid,” says Jessica Mitchell, NDC Power’s general manager. On the chemical side, the technology ultimately produces formic acid and acetic acid.

One business model being pursued by the company would involve the placement of its fuel cell reactors at existing corn ethanol facilities. In this configuration, renewable ethanol feedstock could fuel the process, resulting in electricity that the ethanol facility could use to reduce its reliance on the grid. The high-value commodity chemicals produced by the fuel cell could be sold into the market as a way to diversify the ethanol plant’s revenue stream.

A new facility under development by Ensyn also features a co-location arrangement, and includes a supply agreement for both woody biomass feedstock inputs and an off-take agreement for energy and chemical outputs. According to Goodfellow, Ensyn’s planned pyrolysis facility in Alberta, Canada, will be located adjacent to an existing saw mill. Ensyn will utilize the mill’s waste wood as feedstock. In turn, the saw mill will employ Ensyn’s pyrolysis oil as a fuel to produce heat and electricity. The pyrolysis facility will also produce a biobased phenol replacement, which will be used by the mill to manufacture wood products.

The Role of Price If performance and functionality are the most important factors considered by potential customers in the biobased chemical sector, price is a close second. Shafer, Goodfellow and McConnell agree that biobased chemicals have to be priced at or below their fossil-based counterparts to remain competitive. In the case of the phenol formaldehyde replacement made by Ensyn, Goodfellow says it performs as well or better than its fossil-based counterpart. “It’s green, and it can be manufactured competitively—or even less expensively.”

Those in the supply chain that have shown interest in utilizing biobased chemicals have certain expectations that must be met, Shafer says. Most importantly, the biobased products have to perform well,

PHOTO: NDC POWER

PHOTO: MYRIANT TECHNOLOGIES LLC

MARKETS |

Electrifying NDC Power’s fuel cells convert alcohol feedstock into electric power, formic acid and acetic acid.

meet the required specifications, and be functional. The second expectation is price.

Potential customers want to know that a biobased chemical will be competitively priced to its fossil-based counterpart. “The fact that a chemical is biobased, in my experience, is a nice tie breaker,” Shafer says.

“But, generally it’s not the driving force for most customers.”

“Obviously there is environmental momentum to have a renewable input with a lower carbon footprint, but regardless of that, our philosophy is that our product has to compete on price with the oil-based equivalent—and we do that,” McConnell says. “Our cost structure is such that our price will be competitive with the oil-based equivalent down to $30 a barrel and below, and we do that without subsidy and without any expectation of a green premium.

So, we’re effectively offering the customer a renewable version of the same product, with equal or better characteristics, and better pricing. If you’re not price competitive, we don’t think you have a business model.

As strong as the interest is in renewable, sustainable products, we haven’t seen any customers willing to step up and pay a significant premium to date. That may come in the future, but we’re not counting on it.”

Author: Erin Voegele Associate Editor, Biorefining (701) 850-2551 evoegele@bbiinternational.com

INAUGURAL ISSUE 2010 | Biorefining | 33

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