Tag Archives: ADM

What Are the Major Alternative Fuels Interests of Oil Majors?

As the alternative fuels industry diversifies and scales up, financing is always the key to technology commercialization. While several sources of financing drive the whole industry forward, we investigate the trends of corporate financing from oil majors, based on a non-exhaustive database of over 1,000 deals and partnership engagements from 2000 through September 2014. With the focus on financial engagement, we only look into the private placement, equity stake, joint venture (JV), mergers and acquisitions (M&A), other than general partnerships. For example, we counted BP’s bioethanol JV plant with British Sugar, but we didn’t include BP’s research work with the Energy Biosciences Institute. We then drew a graph based on the investment counts (rather than invested companies) of the seven most activate oil majors in our database, namely, Shell, BP, Total, Valero, Chevron, Petrobras and Reliance. Particularly, repeated investment activities on the same company would be counted as multiple. We further sorted the investment by six core technology families – algae, biomass to sugar, catalysis, crop development, fermentation (and enzyme development), and pyrolysis/gasification.

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From our analysis of their activities in the alternative fuels industry, we find that:

  • BP leads the investment frequency in a variety of technology families. Particularly, it has a strong focus on the crop development by transgenics and breeding, with repeated investments made to Chromatin (client registration required) and Mendel Biotechnology (client registration required). It also continues investing on biomass to sugar technology including to handle cellulosic biomass, such as REAC Fuel (client registration required).
  • Shell is not a fan of crop development, but has a wide coverage on other technologies. For example, it invested on multiple rounds and formed a JV with Iogen (client registration required), but terminated the JV in 2012. Then the oil giant formed partnerships and JVs with Codexis (client registration required), Cosan, and Novozymes to continue its interests in cellulosic ethanol. Shell shifted its shares in Codexis to Raizen, its ethanol JV with Cosan and “formed the largest sugar and ethanol company in the world”. It also partnered with Virent (client registration required) on the biomass catalytic conversion to produce renewable gasoline, and Cellana (HR BioPetroleum) on algae biofuel. Moreover, Shell Foundation also funded Husk Power System (client registration required) on gasification development.
  • Total and Chevron are the most active corporate investors in the fermentation domain. Total did the private placement on the IPO of Gevo (client registration required) and formed a JV with Amyris (client registration required) with both focusing on corn and sugar cane feedstocks. Gevo is focusing on isobutanol fermentation and Amyris is doing the bioconversion to produce isoprenoids. On the other hand, Chevron invested in Codexis (client registration required) and LS9 (client registration required) with its concentration on the genetic engineering, while LS9 was acquired by Renewable Energy Group in early 2014 (client registration required). All invested companies by these two giants are diversifying their revenue streams with drop-in fuels, specialty chemicals, and/or drugs in downstream markets.
  • Velero has a strong focus on the drop-in fuel production either by bioconversion or catalysis. Valero owns 10 facilities in the U.S. with over 1,000 MGY corn ethanol capacity. However, it is also interested in cellulosic ethanol with its funding of Qteros, Mascoma Corporation (client registration required), and Enerkem (client registration required). Additionally, the focus on waste feedstock can be reflected by its investments in the ill-fated Terrabon (client registration required), which was focused on wet waste-to-gasoline.
  • Investments of oil majors in developing countries are more constrained by local resources and policy drivers. For example, Reliance is investing the algae technology developers such as Algae.Tec (client registration required), Aurora Algae (client registration required), and Algenol Biofuels. Petrobras is concerned with fuel production from sugar cane or bagasse, such as BTG-BTL (client registration required) and BIOecon, which combine the feedstock advantage and local policy driver. Other oil majors not listed in the graph, such as Chinese oil majors, Sinopec and PetroChina (CNPC), are shifting their focuses from food ethanol to cellulosic ethanol and coal-to-ethanol, which is responding to the call of the Chinese government to discourage the food ethanol industry (see the report “Fueling China’s Vehicle Market with Advanced and Coal-based Ethanol” — client registration required.)
  • Less active oil majors in this space include ExxonMobil and ConocoPhillips. They only made sporadic investments – such as Synthetic Genomics (client registration required) by ExxonMobil and ADM by ConocoPhilips. Additionally, ExxonMobil mobile recently teamed up with Iowa State University to research pyrolysis.

Amyris’s Shake up: A True Housecleaning or Sign It’s Desperate to Partner to Grow Demand?

Just days before its quarterly earnings call this month, Amyris sparked a sell-off of its stock when it announced that President and CEO John Melo would keep his job as three other executives leave: Mario Portela, former President of Global Operations and COO; Tamara Tompkins, former Executive Vice President, General Counsel, and Corporate Secretary; and Neil Renninger, former Chief Technical Officer. We interviewed Neil for Lux’s recent profile of Amyris (Client registration required), just before the announcement of back-peddling on earnings and production targets. Neil will remain a member of Amyris’s Board of Directors, which isn’t a surprise since he was among the original co-founders.

In addition to the departures, several other executives will change positions or join Amyris. Highlights include Peter Boynton, formerly of Tate & Lyle – one of Amyris’s partners – and who’s been with Amyris since late 2009, will now lead business development (See the report, “Solving the Bio-Based Chemicals Partnership Puzzle.” Client registration required.). Paulo Diniz, who has been leading Amyris Brasil, will add strategic partnerships to his responsibilities. Gary Loeb, eleven-year veteran of Genentech before joining Amyris in mid-2011, will take the lead as Amyris General Counsel and Corporate Secretary. Steve Mills brings three decades of experience at ADM to his new role as Chief Financial Officer. Mark Patel shifts from VP of Strategy to Senior VP of Commercial Operations, concerned with products strategy and sales growth. Ramesh Raman was promoted from VP Global Supply Chain Operations to Senior VP of Global Manufacturing, responsible for manufacturing and supply chain.

In light of Amyris’s recent changes in earnings and production guidance, it’s no secret things need to change there. But no evidence of show-stopping technical challenges exists. Given that, a drastic management shake-up is not warranted, if the existing team can accelerate demand growth.

In addition, what’s striking about this “shake-up” is how little it changed things. Minor alterations to titles and “promotions” from VP to Senior VP. The exits of the former COO, CTO, and General Counsel and addition of the ADM veteran CFO reflect housekeeping rather than full house-cleaning on the part of CEO Melo and the Board. Melo retains the Board’s support, taking an approach of scapegoating a few, rather than starting from scratch and reflects no decisive change in strategy – except to focus on growth.

Though Amyris could potentially be the next casualty in the unquestionably harrowing world of bioproduct commercialization, the Board may realize in the face of possible bankruptcy it should allow Melo to focus on growing demand, rather than hiring another management team. Adjusting to more austere times and doing the hard work of increasing demand is the new normal for Amyris, and this may be the best time to invest with an equity stake and partner with Amyris, ever. The question remains, however: Can Amyris build or access sufficient markets to bring in substantial revenue with its farnesene-based platform?