biorefining magazine - september 2010

INAUGURAL ISSUE 2010

INSIDE: USHERING IN THE NEXT GENERATION

WWW.BIOREFININGMAGAZINE.COM

Bob Byrne, TRI create

THE FUTUREFor Flambeau River BiofuelsPg 20

PLUSFinding Markets for Biobased Chemicals

Pg 30

ANDNavigating Through the Project Financing Maze

Pg 26

September 13-15, 2011

Hilton Americas - HoustonHouston, Texas

Coproduced byFor more information:[email protected]

INAUGURAL ISSUE 2010 | Biorefi ning | 3

INAUGURAL ISSUE 2010 VOL. 01 ISSUE 01

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 Benefi ts from Biorefi ning―When Done Right BY STEPHEN FITZPATRICK

9 Legal Perspectives Smart Legal Planning for Biorefi ning Partnerships BY GARY D. COLBY

10 Business Briefs People, Partnerships & Deals

12 Startup Biorefi ning News & Trends

FINANCE Getting Funds FlowingStrategic partnerships, government funding and other routes to equity that are working BY BRYAN SIMS

PROFILE Biorefi nery Town of TomorrowFlambeau River Biofuels President Bob Byrne talks about his alliance with ThermoChem Recovery International, and what it means for the once-shuttered Wisconsin paper mill BY LUKE GEIVER

MARKETS Building Biobased Chemical MarketsHuge opportunities abound for green chemicals, but how do startups break into well-established markets?BY ERIN VOEGELE

CONTENTS

2620 30

CONTENTS |

ON THE COVER:Bob Byrne, president of Flambeau River Biofuels, holds the Fischer Tropsch diesel and wax the Park Falls biorefi nery will someday produce. PHOTO BY DANIEL HOFFMAN

4 | Biorefi ning | INAUGURAL ISSUE 2010

| 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 fi rst-generation industries blossomed—some say too fast. Investors poured money into sound, and not-so-sound, projects. As fi rst-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, fi rst-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 fi nancial 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 envi-ronmental groups have, at least for now relented somewhat but very important lessons have been learned. BBI still proudly publishes its fl agship 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 fi rst-generation work has laid the foundation for second- and third-generation 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 biorefi nery using nonfood biomass feedstocks can produce a suite of advanced biofuels and biobased chemicals. BBI’s launch of Biorefining is a progression of the very same nature, following the development of advanced biorefi ning concepts, dreams, and more recently, project development, all of which grew out of fi rst-generation feedstocks and conversion technologies. We’re not forgetting how to walk, as evidenced by our continued support of fi rst-generation biofuels, but we’ve also begun to run. We look forward to bringing you the latest information, ideas and perspectives in biore-fi ning.

LUKE GEIVER authored the cover story, “Biorefi nery Town of Tomorrow,” profi ling a biorefi ning project in Wisconsin that is integrating gasifi cation, syngas cleanup, and Fischer Tropsch reforming

technology into existing pulp and paper mills to make renewable diesel, paraffi n wax and power.

BRYAN SIMS wrote “Getting Funds Flow-ing,” an investigation of the critical fi nanc-ing and partnership elements found in some successfully funded projects. The story also explores paths available to oth-er emerging startups.

ERIN VOEGELE explores the question, “You can make bio-chemicals … but can you sell them?” In her feature story, “Bar-reling into Biobased Chemical Markets,” she probes several companies for their

successful strategies and insights into this important and timely topic.

RON KOTRBA, [email protected]

THE NEXT GENERATION

ASSOCIATE EDITORS

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


EDITORIAL

EDITOR Ron Kotrba [email protected]

ASSOCIATE EDITORS

Erin Voegele [email protected]

Luke Geiver [email protected]

Bryan Sims [email protected]

COPY EDITOR

Jan Tellmann [email protected]

ART

ART DIRECTOR

Jaci Satterlund [email protected]

GRAPHIC DESIGNER

Sam Melquist [email protected]

PUBLISHING

CHAIRMAN

Mike Bryan [email protected]

CEO

Joe Bryan [email protected]

VICE PRESIDENT

Tom Bryan [email protected]

SALES

VICE PRESIDENT, SALES & MARKETING

Matthew Spoor [email protected]

EXECUTIVE ACCOUNT MANAGER

Howard Brockhouse [email protected]

SENIOR ACCOUNT MANAGER

Jeremy Hanson [email protected]

ACCOUNT MANAGERS

Chip Shereck [email protected]

Marty Steen [email protected]

Bob Brown [email protected]

Gary Shields [email protected]

CIRCULATION MANAGER

Jessica Beaudry [email protected]

SUBSCRIBER ACQUISITION MANAGER

Jason Smith [email protected]

ADVERTISING COORDINATOR

Marla DeFoe [email protected]

Customer Service Please call 1-866-746-8385 or email us at [email protected]. Subscriptions to Biorefi ning 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.biorefi ningmagazine.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 [email protected]. Advertising Biorefi ning provides a specifi c topic

delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To fi nd out more about Biorefi ning advertising opportunities, please contact us at (701) 746-

8385 or [email protected]. Letters to the Editor We welcome letters to the editor. Send to Biorefi ning 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.

COPYRIGHT © 2010 by BBI International

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| ADVANCED ADVOCACY

Congratulations to BBI International, the publishers of this new magazine, as it educates those interested stakeholders and potential

producers involved in the advanced renew-able fuels sector. The press has always played a signifi cant role in the develop-ment of our nation’s public policy. In today’s world, specialized publications help to focus, refi ne 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 in-dustry struggles to fi nd a common theme to rally behind. As you know, advanced biofuels is not a singular product, so fi nd-ing a collective voice for the divergent views of all the technologies and the play-ers 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 man-dated four different specifi c 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 ef-fect. But due to a number of factors, EPA was forced to reduce the cellulosic target. This was a disappointing result, but suf-fi cient production was simply not in place to meet the mandated gallons.

At the same time, after a 25-year ef-fort, we see signifi cant production of fi rst-generation 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, specifi cally the expiration of the tax credits for biodiesel and renewable diesel, has signifi cantly 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 fi eld 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 fi ght to extend the current ethanol credit or di-vert 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 cred-its 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 fl eet of cars for every American to make a signifi -cant 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 com-mon set of goals—a mandated renewable electricity standard.

We collectively need to work together much closer, and understand and embrace our differences and mutual opportuni-ties. Currently several groups, includ-ing the Advanced Biofuels Association, the Biotech Association, the Cellulosic Ethanol Alliance, and the Algal Biomass Organization are seeking to fi nd common ground. Our focus is to fi nd 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 fi rst-generation fuels and advanced fuels to assure that renewable liquid fuels can make a long-term, sustainable contribu-tion 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 benefi ts to Americans for generations to come. The time is now, the opportunity is ours to take hold of and create the low-cost, low-carbon fuels of the future.

Author: Michael McAdams President, Advanced Biofuels Association

(202) [email protected]

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


Biorefi ning Industry to Convene in ‘Steel City’

Mark your calendar today for the industry’s new premier event―the International Biorefi ning Conference & Trade Show. The

biorefi ning industry will convene November 16-18, 2010, at the historic Omni William Penn Hotel in downtown Pittsburgh.

Organized by BBI International and produced by Biorefi ning 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 biorefi ning; venture capital engagement in the emergent sector; waste-based biorefi ning; converting existing industrial assets into next-generation biorefi neries; scaling up advanced biofuels; produc-ing biobased aviation and military fuels; forging symbiotic agribusiness alliances; joint venture strategies to accelerate commercialization; and more.

With a core focus on the industrial, refi ning and agribusiness alliances de-fi ning the transformative global industry of biorefi ning, this event―along with its partner magazine, Biorefi ning―is geared toward industry professionals en-gaged 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 fi rms); owners and managers of existing industrial facilities (biofuels plants and pulp and paper mills); petroleum/petro-chemical refi ning executives; agricultural processing leaders; waste manage-ment executives; auto manufacturing leaders; aviation industry professionals; government and military offi cials; municipal decision makers; the research com-munity, 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 devel-opers, equipment suppliers and industry service providers.

Plan to attend the event that is sure to set a new standard in biorefi ning con-ference programming. Explore the preliminary agenda, registration and lodging rates, as well as exhibiting opportunities at www.biorefi ningconference.com. Early bird registration rates are available through October 19.

EVENTS CALENDAR |

Southeast Biomass Conference & Trade ShowNovember 2-4, 2010 Hyatt Regency AtlantaAtlanta, GeorgiaThe Southeast Biomass Conference & Trade Show is one of three distinct regional offshoots of Biore-fi ning and Biomass Power & Thermal’s Interna-tional Biomass Conference & Expo. The program will include more than 60 speakers within four tracks: electricity generation; industrial heat and power; biorefi ning; and biomass project develop-ment and fi nance.(701) 746-8385www.biomassconference.com/southeast

International Biorefi ning Conference & Trade ShowNovember 16-18, 2010 The Omni William Penn Hotel Pittsburgh, PennsylvaniaThis 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 Biorefi ning, this event will include panels on project fi nance, market development and technol-ogy scale-up for advanced biofuels and biobased chemicals production. (701) 746-8385www.biorefi ningconference.com

Pacifi c West Biomass Conference & Trade ShowJanuary 10-12, 2011 Sheraton Seattle HotelSeattle, WashingtonThe Pacifi c West Biomass Conference & Trade Show is one of three distinct regional offshoots of Biorefi ning 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 genera-tion; industrial heat and power; biorefi ning; and biomass project development and fi nance. (701) 746-8385www.biomassconference.com/pacifi cwest

International Biomass Conference & ExpoMay 2-5, 2011 America’s CenterSt. Louis, MissouriThe 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 pre-mier international biomass event of the year. (701) 746-8385www.biomassconference.com

11/16


| TALKING POINT

Lignocellulose is the most abundant available source of carbon on earth. It’s also the planet’s only signifi cant source of renewable carbon. The U.S.

DOE estimates that the quantity of standing biomass on earth exceeds known and pro-jected oil reserves by an order of magni-tude—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, trans-portation and materials would appear to be an obvious strategy for industry and society to pursue. Provided that effi cient means of conversion, sustainable agricultural practices and high-volume markets for derivatives can be developed, use of plant-derived raw materials to fulfi ll markets presently based on crude oil holds the promise of a highly prof-itable, sustainable industrial enterprise. The use of renewable resources to displace crude oil has been receiving much attention due to a number of secondary societal benefi ts.

Societal Benefi ts

The use of domestically produced re-newable resources could signifi cantly reduce U.S. and European dependence on crude oil imports from an increasingly uncertain glob-al supply system. Even a partial displacement of imports would have the benefi cial effect of buffering the market against increases in crude oil prices.

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

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

The increased demand for crops grown specifi cally to supply energy would provide a renewed profi t potential for the farm-ing industry. The recent World Economic Forum report states that biomass production alone will contribute $89 billion to farmers by 2030.

The derivative chemicals from cel-lulose 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 diffi cult to recycle due to contami-nation from other comingled wastes. An effi cient 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 refi ning of crude oil.

Technique CriteriaKey to use of biomass is an effi cient

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

New biorefi ning techniques should be fast, allowing the process to be suffi ciently 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 composi-tion; capable of utilizing low-grade biomass grown on marginal nonfarm land; environ-mentally benign, with a signifi cant life-cycle carbon dioxide saving; conserve valuable car-bon for use within the process or within the products to the maximum extent; capable of producing a wide range of well-defi ned chemical products following the oil refi nery paradigm; have a present market pull with well-defi ned short-and long-term markets; suffi ciently economical to be profi table 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 profi table 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 biorefi ning technology most likely to succeed commercially will be based on chemical, not biological, transformations. The oil refi ning and paper industries do not use biological conversion techniques to any signifi cant extent. This indicates to me that we should perhaps narrow our focus in as-sessing prospects for a sustainable, economi-cal and profi table biomass refi ning industry.

Author: Stephen FitzpatrickCEO, BioFine Technology LLC

[email protected]

Why Society Benefi ts from Biorefi ning—When Done Right Defining a new industry on the backs of existing paradigms BY STEPHEN FITZPATRICK


LEGAL PERSPECTIVE |

Partnering with an outside entity can offer a company access to materials, processes, capacity and expertise that are otherwise not avail-

able, 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 partner-ing unless each company believes that its interests are protected. Most partnering is done under an agreement, whether it is reached orally, memorialized in email mes-sages, 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 includ-ing decision points at which parties may reconsider continuing the collaboration or changing its focus. For this reason, partner-ing 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 fi nd itself without legal redress in the absence of a suffi ciently 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 resolu-tion 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 agree-ment 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 materi-als, and make payments at specifi ed dates and places. Where creation of tangible prod-ucts or intangible property is foreseeable, the agreement should specify which party will own the asset or how ownership will be determined. Confi dentiality 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. Sec-ond, 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 specifi c disputes or address discrete situations, partnering agreements inherently relate to fl uid and changing circumstances. That’s why it is critical that partnering agree-ments provide fl exibility 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 agree-ment 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 compli-ance of all parties with it, should be regularly performed by the party. Crafting and imple-menting appropriate partnering agreements can enhance the value a company obtains from partnering with others.

Author: Gary D. Colby Patent Attorney, Flaster Greenberg

(215) 279-9384gary.colby@fl astergreenberg.com

Smart Legal Planning for Biorefi ning

Partnerships Partnering companies should ensure agreements remain appropriate despite changes BY GARY D. COLBY


| BUSINESS BRIEFS

In its positive fi nancial reportings Braskem S.A., based out of Sao Paulo, recently announced that its green ethylene plant in Triunfo, Brazil, is in the commis-sioning 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 fi nished contracting the ethanol required to guarantee feedstock supplies.

Gevo Inc. recently announced the ap-pointment 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 leader-ship, Tesoro emerged as one of the nation’s leading refi ning com-panies. His perspective will be valuable as Gevo applies its novel approach to isobu-tanol production in an effort to introduce more cost-effective, 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 restruc-turing created Valero Natural Gas Partners where he served as vice president and trea-surer. He has also served on the executive committee of the National Petrochemical and Refi ners 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.

Biobutanol company Cobalt Technol-ogies 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 engineer-ing consulting services as Cobalt gears up to commercialize its biobutanol produc-tion technology. Additionally, Fluor will offer a broad range of EPCM services for Cobalt’s demonstration and commercial-scale 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 Ven-ture 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 fi rst com-mercial harvest for Project Liberty. Poet CEO Jeff Broin spoke to farmers about the important jobs and economic benefi ts

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 facil-ity, 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.

With help from USDA Under Secre-tary for Rural Development Dallas Ton-sager, Genera Energy leadership recently broke ground on Tennessee’s Biomass Innovation Park, a unique campus that will provide harvesting, handling, storage, densifi cation, preprocessing, and trans-portation for multiple feedstocks includ-ing switchgrass. Located on a 21-acre site adjacent to the Genera/DuPont Danisco cellulosic ethanol demonstration-scale biorefi nery in Vonore, the campus will serve as a hub for all biomass feedstock used to create biofuels, biochemicals, bioproducts, biomaterials, biopower and

Valuable PerspectiveGevo’s newest board member, Bruce A. Smith, brings invaluable experience from oil companies Tesoro and Valero.

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

BUSINESS BRIEFSPeople, Partnerships & Deals

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BUSINESS BRIEFS |

bioenergy. The campus is being designed by Michael Brady Architects of Knoxville, Tenn., and constructed by J&S Construc-tion of Cookeville. Genera has more than 6,000 acres of switchgrass growing in nine counties located within 50 miles of the Vonore biorefi nery. 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 ad-dition to offering strategic partnership opportunities and serving as a template for regional biomass depots. The fi rst 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 Syndica-tions, BU Structured Finance. He is based in London and reports to New York-based Manish Taneja, managing director and global head of loan syndications. Transaction Management will be a client’s primary point of contact for post syndica-tion 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 fi nancing sectors.

Virent Energy Systems Inc. named Susan Healy chief fi nancial offi cer. Healy was senior vice president and CFO at Lands’ End, the international apparel re-tailer. 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 fi nance experience, including positions in corporate treasury and investment banking at Goldman Sachs and Lehman Broth-ers, Healy raised more than $8 billion and executed $25 billion of M&A transactions across a variety of industries. She earned a bachelor’s degree in Business Administra-tion from California

State Polytechnic University and a law degree from Harvard University. At Virent, Healy will be responsible for its fi nancial, 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 manufactur-ing assets.

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

round with all major existing investors from previous rounds participating, includ-ing Lightspeed Venture Partners, The Roda Group, Harris & Harris Group, Vantage-Point Venture Partners and Zygote Ven-tures. Existing strategic investors CTTV Investments LLC, the venture capital arm of Chevron Technology Ventures LLC and San-Ei Gen, a major Japanese manufac-turer 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 bio-fuel feedstock, said Ceres corporate com-munications 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 Kop-penjan. California-based Amyris Biotech-nologies 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, Biorefi n-ing, 308 Second Ave. N., Suite 304, Grand Forks ND 58203. You may also fax information to (701) 746-8385, or e-mail it to [email protected]. Please include your name and telephone number in all correspondence.

Street Smart Virent Energy Systems’ new CFO, Susan Healy, executed $25 billion in M&A transactions with Goldman Sachs and Lehman Brothers.


| STARTUP

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

One that is increasingly garner-ing attention is biobased suc-cinic acid.

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

succinic acid facility in Hensall, Ontario, Canada. The chemi-cal will be used in the produc-tion of a novel deicing agent. GreenField Ethanol will build and operate the plant while DNP GT will hold a signifi cant equity stake. The Canadian fi rms plan to penetrate key mar-ket segments by working with distributors like Basic Solutions, a provider of innovative runway deicing products.

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

STARTUP Biorefi ning News & Trends

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

Starch-Heavy JVs Major international corporations join forces in the biorefi ning sector BY BRYAN SIMSGiven 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 Bio-fuels LLC, a BP-DuPont collaboration, is set to open in Hull, England. The company has achieved several milestones along its way to biobutanol commercialization, the most recent being the upcoming opening of a demonstration plant, says Tim Potter, Butamax CEO. Butamax-produced fuel will 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 pilot- and 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 signifi cant 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.

Executive Insight Butamax CEO Tim Potter says Brazil and algae feedstock are in the biobutanol company’s future.

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

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

“We understand there are a lot of companies trying to move away from starch-based feedstocks to lignocel-lulosic 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 defi nitely 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 ven-ture 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 market-ing biobased succinic acid under the Reverdia name.

Since early 2008, the two compa-nies have worked together to develop fermentative technology using avail-able 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 pro-duction 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-gener-ation feedstocks like wheat straw, corn

stover, wood chips or energy crops. The key factor in moving towards a second-generation feedstock is fi nding a cost-competitive process for convert-ing biomass into sugars.”

DuPont Tate & Lyle Bio Prod-ucts LLC, a joint venture between the respective companies, plans to expand production capacity by 35 percent at its 100-million-pound-per-year Lou-don, 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 etha-nol 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 in-stead of petroleum-based feedstock us-ing a proprietary fermentation process. Since 2007, the Bio-PDO production plant has been producing a valuable in-gredient used currently in materials for a variety of applications such as cos-metics and personal care formulations to fl uids and polymers, most notably DuPont Sorona, a renewably sourced polymer. Bio-PDO is sold under the Zemea and Susterra brands.

“Additional feedstocks like sug-arcane 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 DeSal-vo, marketing director for DuPont Tate & Lyle Bio Products LLC.

A report issued by the World Economic Fo-rum projects $295 billion in revenue potential for the biomass value chain by 2030 (see chart above). Specifi cally, the report found that development of the biorefi ning sector could create signifi cant economic growth opportunities, leading to job creation, particularly in rural areas. The report also notes signifi cant advances are needed in develop-ment 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 biorefi nery 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 specifi cally 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 specifi c targets, and inform the public that biobased plastics are a realistic supplement to fossil-based products. —Erin Voegele

Biorefi ning in the Billions World Economic Forum reports positive biorefi ning outlook

Revenue potential for the biomass value chain by 2030

$15 billionAgricultural inputs

$89 billionBiomass production

$80 billionBiorefining fuels

$65 billionBiomass power and heat

$6 billionBioplastics

$30 billionBiomass trading

$10 billionBiorefining inputs

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

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


| 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 com-pany 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 petro-leum-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’

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 lo-cation 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 fi rst 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 fi ber, which it does very effi ciently, 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 fi le patents already. It’s a leg up that Banasiak says will allow Avello to continue paving its own path.

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

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

Lactic acid, a monomer of polylactic acid (PLA) that can be applied in many products, is traditionally being produced from starch-based feedstocks via fermen-tation 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. Par-

tially funded by the Dutch Ministries of Economic Affairs and Agriculture, Nature and Food Quality, with direction under the Dutch Biorefi nery Program, the collabora-tion 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 PLA-based polymers. The Nebraska facility has been a joint venture between Purac and Cargill’s North American Corn Milling Division since 1997. —Bryan Sims

PLA Partnerships Stretch Across the Pond Three Dutch companies collaborate to develop waste-based polylactic acid

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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 fi tting that a company called Bioamber would take on such a moniker as it scales up a process to produce the chemical along with its deriva-tives in mass quantities.

Bioamber is a joint venture between U.S.-based renewable chemicals company DNP Green Technology and France-based agri-business fi rm Agro-Industrie Recherches et Développements (ARD). In addition, DuPont Applied BioSciences has agreed to a licensing arrangement for Bioamber’s biobased derivatives of suc-cinic acid. Under terms of the agreement announced in July, Bioamber will license DuPont its proprietary technology and Du-Pont has the right of fi rst refusal to secure off-take agreements from future commer-cial plants.

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

hydrofuran, butyrolactone and butanediol, as well as various pyrrolidones. Other nitrogen-containing succinic acid deriva-tives, 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, accord-ing 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 specifi cally which derivatives Bioamber and DuPont would be producing for confi dentiality reasons.

Currently, nearly all of the world’s suc-cinic 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 fi rm 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.

Amber: The Color of Money Biobased succinic acid and higher-value derivatives are poised for strong growth BY BRYAN SIMS

For an advanced biofuel technology provider, re-porting a loss can actually be a good thing. Both Lignol Energy Corp., a cellulosic ethanol company from Can-ada, and Syntroleum Corp., a renewable diesel technol-ogy provider from Tulsa, Okla., have already announced fi nancial losses in 2010, but for both companies, those short-term fi nancial shortfalls have netted big gains.

Syntroleum reported a second-quarter net income loss of $1.02 million due to increased staffi ng. For the money spent on additional help, Syntroleum was able to complete the highly antici-pated Geismar, La., 75 MMgy renewable diesel facility and begin commissioning the plant. And the second-quarter loss hasn’t meant Syntroleum is done spending. In the company’s Securities and Ex-change Commission fi lings, it says future plans involve investments in additional plants.

For the year ended April 30, Lignol Energy reported a loss

of $7.8 million, $1.6 million more than 2009. The loss, however, has meant an increase in research and development performed at Lignol’s newly integrated biorefi nery pilot plant in Burnaby, British Columbia. Add on the costs of operating the plant, and the ad-ditional loss of $1.6 million in 2010 shows that red numbers are at times a positive sign and reveal signifi cant achievements as Lignol has already signed a contract with powerhouse Novozymes, allow-ing Novozymes to use the plant. For both advanced biofuel compa-nies, their fi nancial shortfalls now correlate to company growth, and soon, production. —Luke Geiver

Spending Their Way to Growth The upside of downed fi nancials

$0

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$6.2 million net loss

For year ended April 30, 2010

For six months ended

June 30, 2009



For six months ended

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Gains and Losses Sometimes companies lose money to gain milestones.


| STARTUP

From plastic fi ller produced with ligno-cellulosic fi ber, 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 activi-ties 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 Indus-try Organization. “I think the long-term prospects for the sector are very good,” he says.

According to Erickson, one factor driv-ing interest in biobased plastics is the volatil-ity 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 envi-ronmentally 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 prohib-itively high for potential customers, Erickson says that is not expected to be a long-term problem. “I really expect to see the price of biobased plastic decrease,” he says. “That premium is going to go away. As companies expand their production and become more effi cient in producing the plastics, the price will go down. We saw that in the early days of petroleum plastics, and we are going to see the same thing with regard to bioplas-tics. Over time the price will go down, and that [cost premium] will be less and less of a factor.” Desai agrees, noting that the current price premium is often a function of scale. Once production is scaled up, the price of bioplastics should come down.

Although the long-term outlook for bioplastics is bright, several factors are impeding short-term growth in the sector, including access to capital and government support. While the U.S. government has been very supportive of biofuels, Desai says there has been a lack of support for other biobased materials. “A biorefi nery by defi nition should involve fuels as well as chemicals and plastics to make the whole

footprint economical,” Desai says. “Yet there is very little support coming from the U.S. government on the biomaterials and bioproducts end of the equation. That is needed because it is going to help drive overall affordability, and help de-risk some of the technology that needs to get to the market.”

Erickson agrees that the U.S. govern-ment isn’t doing enough to build a domestic bioplastics industry. “We are starting to see companies go oversees and build capacity because it’s less expensive,” he says. “I think that is bad for the United States and it is bad for our job situation. I really feel like congress and the administration need to do more in the way of providing incentives for bioplastics.” According to Erickson, BIO has developed a production tax credit proposal for bioplastics that would help incentivize U.S. production.

Innovators Segetis Inc. is developing chemical and plastic product lines that are derived from monomers built from levulinic acid manufactured from cellulosic biomass.

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

Brazil is well-known for its volu-minous ethanol production and usage, however, state-owned oil major Petro-bras is working to put advanced biofuels and biobased chemicals on the map. To make this possible, Petrobras teamed with Netherlands-based advanced biofuels and

biochemicals technology company BIO-eCON 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 cel-lulosic biomass waste streams to produce high-cetane biodiesel and other diesel addi-tives, including chemical base components for plastics and polymers.

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

Partnering Up to Break it Down Brazil’s Petrobras teams up with Dutch fi rm BIOeCON to deconstruct cellulose and build an industry BY BRYAN SIMS


STARTUP |

Many early advanced biofuel technology com-panies are employing novel pathways and strategies they hope yield saleable, competitive bioproducts. To increase its odds of backing a frontrunner, Khosla Ventures has made at least nine investments in this emerging market. According to an amended Securi-ties and Exchange Commission fi ling in July, KiOR Inc. received $110 million in investment funds from 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 Khosla Ventures and Netherlands-based biofuel start-up BIO-eCON, KiOR uses a thermochemical technology platform—what the company calls a “biomass catalytic cracking process”—with the help of a furtive catalyst that can break down any feedstock, including nonfood cellulosic biomass into a biocrude oil that has a 92 percent lower carbon emission profi le than fossil crude. KiOR claims the technology can tap into the existing fuel-refi ning and transportation infrastructure by acting as a drop-in replacement

for petroleum-based fuels. The company produces approximately 15 barrels of biocrude per day at its demo plant in Houston, ac-cording to its website. In addition to KiOR, Khosla Ventures also holds signifi cant investments in other promising advanced biofuel and biochemical companies, including Amyris Biotechnologies, LS9 Inc., Mascoma Corp., Coskata Inc., Gevo Inc., LanzaTech NZ Ltd., Range Fuels Inc. and HCL CleanTech Ltd. —Bryan Sims

Big-Money Backer Khosla Ventures holds investment stake in nine biorefi ning companies, inlcuding KiOR

SOURCE: CLEANTECH GROUP

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20071Q06 2Q066 3Q06 4Q06

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Money Trail Despite the poor economy, biofuel investments are on the rise.

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 fi ts in the picture.”

Developed by top class scientists from Delft University of Technology in Neth-erlands 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 con-verting all the carbon available in cellulose and hemicellulose to various end products with minimal energy use. This combina-tion of biomass dissolution and the use of a hydrogenation step in the process allows

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 fi brous 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 inten-sive 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.

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 develop-ment of BIOeCON’s proprietary Biomass Catalytic Cracking process, a bio-crude oil production technology. Petrobras’ CENPES has been studying biomass pro-cessing to generate bio-oil from sugarcane straw residues since 2006. Bench tests are complete and the fi rst semi-industrial unit tests are underway.


| STARTUP

Gevo Inc. recently announced it has suc-cessfully produced biobased isobutanol from fermentable sugars derived from cellulosic biomass on the laboratory scale. The com-pany, which recently began the process to go public, also successfully converted the result-ing isobutanol into isobutylene and paraffi nic 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 & Devel-opment Initiative. The grant was awarded to

support the ongoing development of a propri-etary 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 pro-cess. Gevo’s integrated fermentation technol-ogy (GIFT) has been designed for retrofi t with existing ethanol production facilities. Gevo’s announcement demonstrates the company’s progress in making its biocatalyst viable for use in cellulosic biorefi neries, says Gevo CEO Pat-rick Gruber. “As the cellulosic ethanol industry becomes operational, companies could have the option to produce isobutanol instead of ethanol.” —Erin Voegele

The GIFT that Keeps on GivingGevo’s integrated fermentation technology introduces cellulosic isobutanol option

Jean-Paul Lange and partners from Shell Global Solutions say they’ve created a new class of cellulosic bio-fuel. First, start with ligno-celluloses. Run it through an acid hydrolysis process to get levulinic acid (an additive in plastic and textile industry). Then hydrogenate the levu-linic acid in a process created and tested by Netherlands-based 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 pro-duce cellulosic ethanol and biodiesel, or simply mix the valerate biofuel with pre-existing fuels. Lange already completed a round of testing of 10 cars on a 15 percent blend. He wrote, “The pres-ence of [valerate biofuel] in gasoline showed no measur-able impact on engine wear, oil degradation, vehicle durability, engine deposits or regulated tailpipe emis-sions.” Lange notes a slight loss in fuel economy but im-proved octane levels. He and his team also say the valeric platform can be used in high blends of both gasoline and diesel.

―Luke Geiver

Stepping into Valeric-Based BiofuelShell Global Solutions produces new fuel

Asia’s robust manufacturing sector is luring Western biorefi nery 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 expect-ed to grow 8 to 9 percent per year, while U.S. demand for the product is expected to remain relatively fl at. And that’s just a small part of the story.

Houston-based Glycos Biotechnologies Inc. is developing a biorefi nery project in Malaysia that will convert renewable feed-stock, 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 mar-kets,” Silento says. “There is a large commod-ity 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 fi rst commercial biorefi nery in Ma-laysia. 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 refi ning 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 welcom-ing. “It’s really easy to do business there,” he says. “The biggest challenge, honestly, is the

Western Innovation, Eastern Markets Asian markets offer vast potential for many emerging biobased chemicals BY ERIN VOEGELE

Fuel Energy Density Air-Fuel Ratio Specific Energy Heat of Vaporization

Gasoline 32.0 MJ/L 14.6 2.9 MJ/kg air 0.36 MJ/kgButanol 29.2 MJ/L 11.2 3.2MJ/kg air 0.43 MJ/kgEthanol 19.6 MJ/L 9 3.2 MJ/kg air 0.92 MJ/kgMethanol 16.0 MJ/L 6.5 3.1 MJ/kg air 1.20 MJ/kg

SOURCE: GEVO INC.

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


STARTUP |

Grouping big name companies Wal-Mart, Dell and Disney sounds like a global plot to sell Mickey Mouse computer moni-tors to the masses. But add the bioinnova-tion 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 in-stitutions, governments and NGO’s as part of the Sustainability Consortium. Now, the

consortium will have the ability to analyze the life-cycle assessment of everything from keypads to color crayons.

“Novozymes brings a long experi-ence and well-developed understanding of life cycle assessment, a tool for measuring a product’s environmental impact,” says Adam Monroe, Novozymes North Ameri-can president. “This tool is central for the

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 mea-suring and reporting the environmental and social impacts of consumer prod-ucts to retailers and institutional buyers,”

according to Lisa Firestone, operations director. “Society must fi nd 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 any-time soon may be slim, Monroe says it was a natural extension to

join a group of stakeholders with “similar ambitions” and “the resources to create a substantial impact.” To create a worldwide standard, Firestone says the consortium will act as “a research body that examines consumer product sustainability from the perspectives of information systems, mea-surement science, consumer science and systems science.”

Monroe says Novozymes also brings an in-depth understanding of biotechnol-ogy’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 differ-ent 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 busi-nesses.

The consortium states that “we are bombarded with companies who say their conscience is green.” Novozymes’ involve-ment 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 infl uencing a product’s sustainability. Fortunately, the consortium seeks to answer one of its self-imposed questions, “What is real and what is eco-babble?”

Sifting Through the Ecobabble Novozymes joins consortium of big-name corporations spearheading product sustainability BY LUKE GEIVER

Consumer Conscience More and more consumers demand green products, and the Sustainability Consortium helps retailers provide more environmentally responsible goods.

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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 fi nance and permit a biorefi nery 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 commercial-scale biorefi nery 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 diffi cult 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.


| PROFILE

Coming Soon Bob Byrne, president of Flambeau River Biofuels, stands at the future site of the Park Falls biorefi nery. PHOTO: DANIEL HOFFMAN


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 fu-ture. 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 biorefi nery, capable of producing 9.5 MMgy of renewable diesel, 7.6 MMgy of paraffi n, 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, how-ever, Flambeau River Biofuels planned to inte-grate a cellulosic ethanol plant into the facility, a project that has been shelved in favor of TRI’s technology application.

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

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PROFILE |

Town of Tomorrow


Johnson purchased the mill out of bank-ruptcy. Johnson’s vision was to create a more energy-effi cient, revitalized facility, but his purchase wasn’t just about paper mill profi tability or implementing TRI tech-nology. Park Falls Mayor Thomas Ratzlaff, who worked at the mill for more than 32 years, described the period of shutdown as “devastating,” with more than 300 jobs lost. But the period after Johnson purchased the mill, Ratzlaff says, “was nothing short of amazing.” To start, Ratzlaff, Johnson, Byrne and others took a road trip to the capital city with a message for the governor, and Ratzlaff says, the governor was all ears.

“We have an owner that listens to its employees,” Ratzlaff says of Johnson, add-ing, “I don’t know of any company whose employees don’t want to see that company do well or prosper.” Maybe for Johnson it was the sound of the mill pumping out profi ts again, or the hopeful talk around town of the mill's return but either way, Ratzlaff said those 300 jobs are once again fi lled, and more biorefi nery positions are coming in the future.

Eric Connor, senior vice president for

TRI has his own thoughts on the rebirth. “A thermochemical biorefi nery gives off ener-gy, so if you can integrate at a host site that needs energy the performance improves dramatically,” he says. The biofuels project will use TRI’s gasifi cation technology to complement the paper mill. “It makes a lot of sense at the pulp and paper mills,” Connor says. “They have the infrastructure to support a biorefi nery, plus, they are endothermic, needing energy to make paper. A biorefi nery is exothermic, producing energy to make fuel and coproducts.”

Byrne, who visits the lo-cal community once a month to provide updates on the progress of the revamped facility, says everyone is excited about the project—and why not? Accord-ing to Byrne, construction of the biomass facility will provide 160 two-year positions. Once the project is fully completed, 40 di-rect, full-time jobs will be fi lled at the plant, and in the biomass-handling portion, a combined 125 jobs will be provided in the

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

Along with the built-in stimulus the project is creating, Byrne says there is ex-citement about TRI itself. “TRI’s technol-ogy is proven,” he says. “You can get drop-in fuels today.”

TRI’s biorefi nery concept—“to use di-verse feedstocks for a wide range of prod-ucts, integrated with an energy host for maximum effi ciency, and a phased approach for solid biomass and black liquor”—isn’t just for saving small towns. Project Inde-pendence in Wisconsin Rapids, Wis., anoth-er TRI-led biorefi nery project, will use TRI technology to replace natural gas use with 500 dry tons per day (dtpd) of waste wood biomass, while producing 5.5 to 8.5 MMgy of renewable diesel, and sending 92 MMB-tu an hour of tail gas to a lime kiln along with steam and hot water to an existing pa-per mill. “The Wisconsin Rapids location is already a world class mill that has been op-erating for a long time,” Connor says.

The DOE seems to agree. “The ap-proach is cost-effective, scalable and trans-ferable to hundreds of other locations in

the U.S.,” the department said in a statement.

TRI also has a pilot-scale fa-cility running in Durham, N.C., that Connor says can produce drop-in Fischer Tropsch liquids from syngas every day. The Dur-ham location has a capacity to process 4 dtpd of biomass, and processes both solid and liquid biomass (black liquor) to any downstream catalytic process. The plans for the Durham include test-ing energy crops such as switch-grass and sorghum because the

gasifi cation system used at every facility is feedstock fl exible. Applications proven suc-cessful in Durham will be translated on a larger scale at the Park Falls location.

TRI’s version of the biorefi nery, Con-nor says, is made up of major processes,

| PROFILE

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.

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Speaking of Recovery Eric Connor, senior vice president of TRI, is already in talks with new project developers on a familiar subject: thermochemical recovery processes.


including biomass preparation, biomass gasifi cation, primary synthesis gas cleanup, compression and secondary syngas cleanup, and gas to liquids. In the biomass prepara-tion stage, the feedstock is sized and dried. The gasifi cation 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 genera-tor, venture scrubber, gas cooler, tars col-lection system and a sulfur scrubber are all used. These processes clean the gas to the parts-per-million level. A compressor, am-monia scrubber and packed beds are incor-porated into the secondary syngas cleanup.

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

The TRI Blueprint With a fi nished pilot plant and two

projects using proven technology underway, Connor says there are fi ve factors needed to make a biorefi nery work. The fi rst, 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-

beau, they know the forest industry.” Project Independence, like the Park Falls biorefi n-ery, also benefi ts from industry knowledge of available biomass sources. How impor-tant 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 sourc-ing, 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 retro-fi tting an existing facility or developing a project to the magnitude of Park Falls can still learn from the path to his town’s future biorefi nery. Like Connor, he also says “fi nd-ing 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 fi nances,” making the project much easier, Connor says. With-out the ability to defi ne a project developer,

navigating through the fi nancing process creates a diffi cult situation for all parties in-volved, 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, sig-nifi cant public support is not necessary to achieve attractive returns and fi nancing.”

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 biorefi nery’s success.

“You need money, you need fi nancing or equity,” he said. Flambeau River Biofu-els 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 proj-ect. “The state department of commerce has given us loans, and had funds available for situations like this,” he says. With a fairly signifi cant 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

PROFILE |

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

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All Systems Go Byrne has begun staffi ng the biorefi nery, and Dave Wagner (orange vest) will be the plant operations manager.

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before the DOE loans came, according to Connor.

Apart from fi nancing and feedstock se-curity, Connor says a plant needs to fi nd the right technology for the proposed process-es. For thermochemical-based biorefi neries, the TRI system makes a high-quality gas

that can be customized for any downstream application. While providing its own ener-gy, 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 gasifi er 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 biorefi nery is up and running.

Finally, Connor says a plant needs to work for off-take agreements before the fa-cility is completed. The Park Falls location has already secured an off-take agreement for the paraffi n 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 diffi cult 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 biorefi nery projects outlines several fac-tors needed to turn biomass feedstock into biorefi nery 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 re-quirements, working a nonstop 24/7 sched-ule 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 signifi cant amount of rework on a number of oper-ating and mechanical issues, but “that is just the nature of a pilot plant.” The extra time spent fi ne-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 biorefi nery projects are set for completion in 2012, with work at the Durham facility continu-

| PROFILE

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

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

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

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

fl exible system capable of fueling the nec-essary processes for biofuels, biochemicals and biobased power, is already giving an emerging industry a glimpse at a biorefi nery town of the future, the people from Park Falls may not agree with Connor’s state-ment about the origination of the syngas.

“By far,” Ratzlaff says of the future biorefi nery, “it’s one of the biggest things we look to for the future of the city. Al-most losing the mill has shown us how im-portant 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 biorefi nery will be part of that picture. As the work at the old mill shows, the develop-ment 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.

Author: Luke GeiverAssociate Editor, Biorefi ning

(701) [email protected]

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PROFILE |

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


| FINANCE

Gauging Confi dence 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


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

Unquestionably, the financial melt-down of 2008 redefined how biore-fining projects will be financed in the future. Traditional avenues of fi nance––whether private equity drives, bank loans or debt fi nancing––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) mar-ket remaining stagnant, the once-potential small investor now sits on money instead of leverag-ing 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 qual-ity,” says Sam Bemiss, partner at Richmond, Va.-based Ewing Bemiss & Co., an investment banking fi rm actively engaged in the renew-able energy markets. “As investors come back they’ve become much more demanding about the fundamental elements of a complete renew-able 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 fi nished product.”

Startup technology developers, eager to showcase their processes and products but typically in need of seed capital during the pre-development stage, can get caught in the “Val-ley 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 invest-ment.

“We’ve seen a lot of C round or late fourth-or fi fth-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,” Be-miss observes.

Getting Funds FLOWING

FINANCE |


There are several available fi nancing options tailored to specifi c business plans. One such effective route emerging in the industry is the formation of strategic part-nerships and joint ventures.

The Power of PartneringMadison, Wis.-based Virent Energy

Systems Inc. began as a start-up research and technology company in 2002 and fo-cused on the production of hydrogen gas for hydrogen fuel cells. The company has since refocused its business strategy on bio-fuels and biobased chemicals production, attracting signifi cant 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 share-holders 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 feed-

stocks such as glucose and sucrose, glycerol, starches, polymers of glucose contained in cellulose, and C5 and C6 sugars. The fi -nancing followed a milestone in which Virent announced the successful startup of its 10,000-gallon per year biogasoline pro-duction 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 appli-cation from its BioForming technology platform—which includes a multitude of products—is what gave his company a sig-nifi cant advantage.

“In this day and age with the uncer-tainty within existing fi nancial 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 de-ployment, validate the products that we’re manufacturing and also give prospective new investors confi dence that they’re in good company,” Edwards tells Biorefining. “There’s a commitment across all of our in-vestor 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 suc-cessfully been able to access grant money as the company’s technology platform ma-tures and evolves over time,” Edwards adds. Having a strong intellectual property port-folio for its process technology is an added benefi t for Virent’s continued success.

Illinois-based Elevance Renewable Sci-ences Inc. formed a joint venture with one of the largest agribusiness companies in the world, Wilmar International Ltd., to build a 50 MMgy integrated biorefi nery in Surabaya, Indonesia. The project will use Elevance’s proprietary metathesis process technology to produce high-value performance chemi-cals 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 inte-grated manufacturing complex, now under construction, the commercial-scale manu-facturing facility is expected to come online early next year.

According to CFO Patrick Kelly, El-evance’s low capital profi le when entering ventures such as these is what makes the company an attractive partner. “The overall cost of our biorefi neries is quite low and so that makes the fi nancing hurdle easier to get over,” Kelly says. “That’s really a key theme in our fundraising and fi nancing 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 biorefi neries around the globe in the com-ing years, and creativity around fi nancing those opportunities is a key theme for us,” he says, adding that Elevance is exploring other partnership opportunities globally to co-locate with existing biorefi neries.

Government FundingFederal guaranteed loans offer some

of the best funding opportunities in today’s biorefi ning market. The USDA has created a Biorefi nery Assistance Program, and a number of programs are available through the farm bill, the energy bill and the recov-ery act.

Myriant Technologies LLC, a Massa-chusetts-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 Loui-siana 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, ac-cording to Senior Vice President of Corpo-rate Development Sam McConnell.

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

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

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

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

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

| FINANCE

panies, and that is fi nding the signifi cant capital required to build the fi rst greenfi eld plant, which serves as the basis for attract-ing 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 tech-nology developer as it employs a build/own/operate business model. Since it spe-cializes 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 indus-trial or biofuel production facilities looking to add another output product for down-stream separations.

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

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

Solid Projects Still Get FundedApplying for community and govern-

ment grants and use of tax-exempt bonds are just a few of the many ways to fi ll the fi -nancial gap. Although prominent in the ear-ly to mid 2000s, venture capital has tapered off as a preferred method of fi nancing. Ac-cording to a report released in June by Lux Research, titled “Navigating Through Scale to Successful Exits: A Compass for Biofuel and Biomaterial Investors,” venture capital-ists invested $877 million across 51 deals in 2009 for biobased fuels and materials pro-duction, a level of funding representing a 26 percent drop from 2008.

Despite the current short-term chal-lenges, the future of fi nancing biorefi ning projects remains promising globally. Ac-cording to a report released in June, titled “The Future of Industrial Biorefi neries” authored by the World Economic Forum, the respective sale of end products is esti-mated 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 fi nancial sector considers a viable technology and/or business model that can compete profi tably in the world of conven-tional 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 SimsAssociate Editor, Biorefi ning

(701) 738-4974 [email protected].

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FINANCE |


| MARKETS


The opportunity to brand goods as environmentally friendly and sus-tainable has driven some demand for biobased chemicals. But it's far from the only motivator. Economic fac-tors, regulatory requirements and new function-ality needs are also expanding market opportuni-ties for green chemistry.

“At a very high level, I think there are fun-damental drivers for the petrochemical industry to change to alternative feedstocks,” says Andy Shafer, vice president of sales and market de-velopment at Elevance Renewable Sciences Inc., a Bolingbrook, Ill.-based company working to commercialize a Nobel Prize winning chemi-cal 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 short-term, while trending signifi cantly higher over time. “The chemical industry is looking for al-ternatives that it can use to provide more sta-bility and security of supply,” he says. “I think that’s one major, overarching factor that is driv-ing [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 fossil-based inputs, he says.

Regulatory factors are also increasing inter-est in biobased chemical inputs. One example

Why biobased chemicals must meet or exceed the performance, functionality and price of petrochemicals BY ERIN VOEGELE

MARKETS |

BARRELING INTO BIOBASED CHEMICAL MARKETS


offered by Shafer is in the lubricants in-dustry. On the federal level, he says that there has been a push for greater fuel mile-age, and more effi cient lubricants can help achieve that. In addition, Shafer says there are also regulatory factors related to waste disposal that encourage the use of lubri-cants that have higher drain intervals, which means the lubricants have to perform over a longer timeframe. “Those kinds of fac-tors 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.

Proving Performance and Functionality

Biobased attributes of a chemical in-termediary is only one entry on a long list of factors that potential customers consider when evaluating possible manufacturing in-puts. Perhaps most importantly, biobased chemicals must meet performance and functionality standards. While these charac-teristics are fairly straight forward to prove when producing a biochemical that is an exact molecule-for-molecule replacement for a fossil-based counterpart, the process to prove the functionality of an in-direct replacement often requires more extensive evaluation.

Supplying product samples to potential customers is one of the best ways a biobased chemi-cal producer can build market demand for its products and pursue the establishment of off-take agreements. This strategy has been successfully employed by Myriant Technologies LLC, a Quincy, Mass.-based company that is expected to begin construction on a demonstration-scale biobased succinic acid plant later this year in Louisiana.

Myriant has already established off-take agreements for the entire output of the Louisiana facility, and anticipates that simi-lar agreements will be established for future capacity as well. According to Samuel Mc-Connell, Myriant’s senior vice president of corporate development, his company has

been actively supplying product samples to potential customers for use in testing and evaluation activities. “Those samples have been the primary basis for the commit-ments that have been made for the output of the plant so far,” he says.

While Myriant intends to sell its biobased succinic acid as a direct substitute for fossil-based suc-cinic acid and butanediol (BDO), the company has also identifi ed a signifi cant market opportunity for the product to serve as an indirect replacement for adipic acid. Because the molecules of succinic acid and adipic acid dif-fer, McConnell says more robust evaluation and testing had to be completed to prove the viability of its biobased succinic acid as an adipic acid replacement. Ap-plications testing has to be done

to determine if a polymer manufactured using succinic acid will yield the same quali-ties as a polymer made using adipic acid, he adds. “That work is underway, and so far is extremely promising.” In fact, he notes that one off-take agreement established for the Louisiana facility is with a company that will be using biobased succinic acid as a replace-ment for adipic acid.

“The sampling program is designed to overcome any reluctance in the market-place,” McConnell says. “There is always

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 presi-dent 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 manu-facturing company that was established in 1984. The company utilizes what’s called Rapid Thermal Processing, which is a py-rolysis technology that involves the fl ash heating of biomass in the absence of oxy-gen. 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 fl avorings and construction materials sectors.

When building a market for biobased chemicals, Goodfellow says it’s important to engage a company’s equipment op-erators, not just upper-level management. He says this is because the people on the manufacturing fl oor 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

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.

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Big MovesAndy Shafer is a vice president at Elevance Renewable Sciences, which has partnered with Wilmar International to build a biobased chemical facility in Asia.


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 techni-cal obstacles. “You have to be patient work-ing with people when you are introducing something new,” Goodfellow continues. “You need to ensure they become comfort-able with the new product, its performance, and prove to them that it won’t introduce any snags in the production process.”

Forging PartnershipsAlthough the formation of off-take

agreements is commonplace in the chemi-cal sector, the unique feedstock procure-ment 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 pri-mary 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 etha-nol facilities. In this confi guration, renew-able ethanol feedstock could fuel the pro-cess, resulting in electricity that the ethanol facility could use to reduce its reliance on the grid. The high-value commodity chemi-cals 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 arrange-ment, and includes a supply agreement for both woody biomass feedstock inputs and an off-take agreement for energy and chemical outputs. According to Goodfel-low, Ensyn’s planned pyrolysis facility in Al-berta, 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 py-rolysis facility will also produce a biobased phenol replacement, which will be used by the mill to manufacture wood products.

The Role of PriceIf performance and functionality are

the most important factors considered by potential customers in the biobased chemi-cal 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 re-main competitive. In the case of the phenol formaldehyde replacement made by Ensyn, Goodfellow says it performs as well or bet-ter than its fossil-based counterpart. “It’s green, and it can be manufactured competi-tively—or even less expensively.”

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

meet the required specifi cations, 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 ex-perience, is a nice tie breaker,” Shafer says. “But, generally it’s not the driving force for most customers.”

“Obviously there is environmental mo-mentum 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 with-out 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 bet-ter 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 sig-nifi cant premium to date. That may come in the future, but we’re not counting on it.”

Author: Erin Voegele Associate Editor, Biorefi ning

(701) 850-2551 [email protected]

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.

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

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