Solazyme files for IPO

I can’t believe I missed this news! I must have been very busy that week (that or I was in a zombie land) when this news about Solazyme filing for IPO (initial public offering) came out on March 11.

As you’ve probably seen in recent previous posts, Solazyme has been very busy with the launch of its algae-based skin care line Algenist, collaboration with Dow Chemical on algal oil-based dielectric insulating fluids and partnering with Qantas airline for algae-derived jetfuel Solajet.

The SEC prospectus did not indicate how much the company is targeting but sources indicate initial target of up to $100m IPO common stock to be listed on the Nasdaq exchange under the symbol SZYM. 

In its prospectus, the company indicated three target markets for its algae oils: fuels and chemicals, nutrition, skin and personal care. Unlike most other algae companies dealing in biofuels, Solazyme said its technology is based on indirect photosynthesis where it produces oils by feeding microalgae plant with sugars in dark fermentation tanks (photosynthesis usually use carbon dioxide as feedstock instead of sugars). Their sugar feedstock can be dextrose, sucrose or cellulosic-based sugars.

For the company’s nutritional business, Solazyme has access to feedstock through a multi-year supply arrangements with Roquette via their Solazyme Roquette Nutritionals joint venture. The company is currently negotiating with multiple potential feedstock partners in Latin America and the United States to supply their feedstock other than for the JV’s nutrition business.

I really like reading IPO prospectus as it gives me a lot more information to chew on =). Like the cost of Solazyme’s oils which the company said can be below $1,000/tonne ($3.44/gal or 91cents/liter) if produced in a built-for-purpose commercial plant.

Solazyme currently operates a 600-1,000 liter pilot fermenter in San Francisco and a 75,000 liter fermentation equipment via manufacturing partners in Pennsylvania and California although the company said it mostly relies on contract manufacturing to produce its products.

The company also recently acquired a commercial production facility in Peoria, Illinois that has a fermenter capacity of 2m liters/year in order to meet demand through 2012. For its fuels and chemicals business, the company plans to bring online a commercial facility in 2013 and additional capacity in 2014 and 2015 that will be co-located at feedstock mills.

“We are currently negotiating with multiple potential feedstock partners in Latin America and the United States to co-locate oil production at their mills. We believe that our ability to utilize much of the existing mill infrastructure will allow us to build capacity at a much lower cost than green field construction.” – Solazyme

Here are some of Solazyme’s recent activities concerning feedstock sourcing:

  • In December 2010, Solazyme said it has signed a non-binding letter of intent with one of the largest sugarcane processing companies in Brazil to form a joint venture and co-locate oil production at one or more of their sugarcane mills, which will provide up to 8 million metric tons of annual sugarcane crush.
  • Solazyme entered into a non-exclusive and non-binding letter of intent with Hawaiian Commercial & Sugar Company (HC&S), Hawaii’s last active sugarcane mill operator.

  • Solazyme signed a development agreement with Ecopetrol, the largest company in Colombia and one of the four major oil companies in Latin America, to evaluate manufacturing options based on Colombian sugarcane feedstocks.

I also read Solazyme’s intent to enter the oleochemicals market since the company said it can cost-effectively produce individual algal oils with high capric, lauric, myristc, palmitic, oleic fatty acids content. The company said it can tailor the oil profile and modify saturation level of the oil unlike the naturally fixed oil profiles of commonly used oleochemical feedstock such as palm kernel oil (PKO) and coconut oil.

“An oleochemical facility utilizing Solazyme’s PKO+ versus standard PKO could increase its output of the desired components by more than 30% (over 80% desired content in PKO+ versus approximately 60% in conventional PKO). As such, our oil would create a significant increase in value for us and our partners as outlined in the table below.” – Solazyme

Near-term product applications for Solazyme’s oils in this field include bar and liquid soap, detergent feedstock (such as surfactants I’m guessing), lubricants, solvents, and industrial fluids (where Solazyme is already working with Dow Chemical for dielectric fluids).

There are more fascinating information to read on but my blog is getting way too long. I mentioned before that Solazyme will be participating in the ICIS’ 1st World Surfactants Conference in May 12-13 so that might be a good time to pepper Solazyme with questions if permitted since filing for IPO usually requires a quiet period of certain number of days following the filing. 

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