Tag Archives: Bunge

Our Take on Recent Headlines about SG Biofuels, CoolPlanet, and Joule Finance Deals

What the media reported about SG Biofuels: SG Biofuels recently completed a $17 million Series B funding round – the first funds raised for the company since a $9.4 million Series A in September 2010*. SG Biofuels said the funding will “advance commercialization efforts,” and that it has customers for 250,000 acres of jatropha.

What we think: SG is developing advanced jatropha to produce oils for biodiesel production. It claims its technology doubles the natural jatropha yield, and is targeting marginal, and otherwise undesirable, land for cultivation. Like other potential energy crops, jatropha has a very limited production capacity and, today, agricultural, municipal, and forestry waste are available in much larger quantities, and thus represent stronger near term options for next generation biofuels (see the report “Biofuels’ and Biomaterials’ Path to Petroleum Parity“*).

Aside from the lack of scale, jatropha faces issues* associated with crushing facility infrastructure, transportation, as well as toxicity. To overcome these key hurdles, SG has several strong partnerships positioned throughout the value chain, including Bunge, Life Technologies, and Flint Hill Resources. The latter two invested in the recent round. Because of these key relationships, SG is in a good position to be a leader in the jatropha-based fuels space, and companies looking to develop oil crops should engage, with the aforementioned key hurdles in mind.

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What the media reported about CoolPlanet BioFuels: Before the new year, CoolPlanet BioFuels raised an undisclosed amount of Series C funding round that included old investors GE, Google Ventures, ConocoPhillips, NRG, and new investor BP. CoolPlanet raised its $20 million Series B in March 2011.

What we think: With this new investment round, CoolPlanet continues its push to amass capital and world-class strategic investors. The company is developing small-scale (1MGY), portable pyrolysis units to convert agricultural waste such as wood chips and corn stover into a gasoline replacement.

The small-scale facilities open up niche markets for the units, while making it easier for the company to raise the necessary capital, collect the biomass, and attain the permits for construction. Though further data is necessary to affirm the efficiencies and economics of CoolPlanet’s small-scale production, the company is uniquely positioned as it is producing ethyl BTX, a gasoline equivalent and drop-in fuel.

For both SG and CoolPlanet, the key investors are also strategic, and such relationships will be essential as both companies scale. As start-ups continue the ongoing hunt for capital, corporate investors are leading the push while institutional investors withdraw from the industry (see the report “Hedging Bets with Flexibility in Alternative Fuels“).

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What the media said about Joule Unlimited: Joule Unlimited recently raised $70 million in private equity investment, bringing in over $110 million over the lifetime of the company, which broke ground at its first production site in 2011.

What we think: Though its fundraising to date has been impressive, we maintain our skeptical view on Joule due to the company’s inability – or unwillingness – to provide details on its lofty claims* In our previous conversation, CEO Bill Sims was unable to answer basic questions* about its Dutch subsidiary and fundamental cost metrics, among other items.

However, the real concern with Joule, underscored by the recent news item, is its lack of commercial partners. The company’s recent funding round, unlike SG’s and CoolPlanet’s recent rounds, did not feature any corporate investors. Though Joule’s ability to raise money in an environment where institutional investors are turning elsewhere does warrant some praise, its lack of commercial partners will hurt the company as it scales up its novel technology and faces a myriad of technical challenges. Companies and investors should approach with caution.

* Client registration required.

Solazyme files for IPO

As we mentioned in an earlier post, Solazyme recently filed for an initial public offering (IPO) targeting $100 million. This wasn’t a surprise: Just as we had seen Amyris form multiple strong partnerships in the months leading up to its IPO (see the July 6, 2010 LRBJ*), Solazyme’s been revving up its own stable of new partnerships. It’s been forging partnerships in fuels and chemicals more intensely in recent months than it has throughout its lifetime. Since September, the company has inked deals with Bunge, Unilever, and Roquette (see the September 14, 2010 LRBJ* and the November 9, 2010 LRBJ*) on top of existing relationships with companies like Chevron, Honeywell, Abengoa, and Virgin (see the August 17, 2010 LRBJ*), and a joint development agreement with Dow announced last week.

Some highlights from the company’s S-1 include the company’s claims that it has already achieved “attractive margins when utilizing partner and contract manufacturing for the nutrition and skin and personal care markets,” and that it believes it can undercut fuels “when we commence production in larger-scale, built-for-purpose commercial manufacturing facilities utilizing sugarcane feedstock,” citing oils at a cost below $1,000 per metric ton, $3.44 per gallon, or $0.91 per liter.

Solazyme also notes that its Roquette JV will fund an approximately 50,000 metric-ton-per-year facility for nutrition products, which would be the first serious challenge to DSM-owned Martek (see the January 13, 2011 LRMCJ*). The company also mentioned a deal with Colombia’s national oil company (NOC), Ecopetrol, and a Brazilian letter of intent to form a JV that would add capacity of 400,000 metric tons of oil per year – nearly a thousandfold increase over the 455 metric tons the company produced in 2010.

But for all its strengths, Solazyme still lost $16 million last year on $39 million in revenue. By comparison, Amyris brought in $65 million in 2009, the year before its IPO.

While there are always reasons to be cautious when a loss-making company files for an IPO, one of the biggest challenges Solazyme will face is the public market’s mistaken association of its technology with older technologies like corn ethanol or dodgy algae developers. Solazyme is indeed an algae company. But it is wholly different from certain competitors, whose reliance on hype rather than commercially viable technologies poison the pond (pun intended) for legitimate players like Solazyme, Phycal, and Algenol (see the November 13, 2010 LRBJ*, the August 17, 2010 LRBJ*, and the March 10, 2009 LRBJ*). Gevo and Amyris represent better comparisons for Solazyme, and both had relatively successful IPOs (see the October 12, 2010 LRBJ* and the February 10, 2011 LRMCJ*). 

* Client registration required.