Sorry this post was late. I had to deal with the magazine deadline and a headache-inducing exam. The good news is that this news about BioAmber's IPO filing came in just in time for my editor-in-chief to include it in his upcoming article covering the financing environment within the renewable chemicals space. This article is going to be published on ICIS Chemical Business' November 21 Green Chemicals issue.
So let's analyze some of the S-1 information that BioAmber registered on the US Securities and Exchange Commission (SEC). First of all, BioAmber hopes to raise $150m from this stock offering. We've covered enough of BioAmber and succinic acid developments on the blog that I will enumerate some of the "new information" that stood out in my view:
- BioAmber's 350,000 liter fermenter in Pomacle, France, which started operating on January 2010, has now produced 487,000 pounds (221 tonnes) of bio-succinic acid. The company has supply agreements for the sale of over 84,000 tonnes of bio-succinic acid and derivatives over the next five years, of course, coming from its planned 17,000 tonne/year (expanding to 35,000 TPY) succinic acid facility in Sarnia, Canada, that will start in 2013, and 65,000 TPY succinic acid Thailand plant that will start in 2014. It's bio-BDO production capacity in Canada will be 23,000 TPY and 50,000 TPY in Thailand.
- Aside from biobased succinic acid and derivatives, 1,4 butanediol (BDO), BioAmber plans to also develop biobased adipic acid and caprolactam.
- The company estimates its succinic acid will be cost-competitive with oil price as low as $35/bbl and corn price at $6.50/bushel. Oil price as of this post is $100/bbl and corn price $6.54/bushel.
- Partnered with Mitsubishi Chemical and Cargill to develop organisms (yeast-based) that will have higher yields and less contamination risk than E.coli. Partnered with DuPont for catalysts and methods for converting succinic acid into BDO. Partnered with Celexion for a procedure to make C6 compounds, such as adipic acid.
- Partnered with Lanxess and Solvay to develop and market succinic acid-based bioplasticizers.
- BioAmber has partnered with Mitsui for the construction and operation of the Sarnia plant through its Bluewater Biochemicals subsidiary (Mitsui now owns 30% of the company). Mitsui has also partnered with BioAmber on the Thailand plant and another future plant with the same scale that will be located either in the US or Brazil.
- BioAmber and Mitsui are negotiating the terms for the third US or Brazil facility and could collaborate with local equity partner that could secure feedstock either glucose from corn starch or sucrose from sugarcane.
- BioAmber has entered a non-binding deal with Tereos Syral S.A., a European producer of starch-based products, for joint construction of two plants that would be located in France and Brazil.The facilities will produce crystalline bio-succinic acid and/or BDO. Tereos is expected to provide long-term feedstock supply, utilities, available infrastructure and shared services
- Like most renewable chemical startups out there (BioAmber started in 2008), the company does not have much revenue and no profits. For the first six months of 2011, BioAmber lost $10.8m and had accumulated a deficit of $22.6m over that period.
- The company expects to begin recording revenue from commercial sales of bio-succinic acid in the first quarter of 2012. Since its inception, BioAmber raised an aggregate $76.1m from private placements of equity securities and convertible notes.
- The company expects to spend around $200m per plant on construction and start-up operating costs for facilities in Canada and Thailand. BioAmber already secured funding commitments for the initial construction phase of the Sarnia plant, which will cost around $74m.
Perspective on succinic acid from the S-1 report:
"To produce $1bn worth of bio-succinic acid and $1bn worth of bio-BDO at current prices, we would require around 1.2m MT of sugar. Assuming we split production equally between North America, Thailand and Brazil, we would need to source 400,000 MT of sugar in each geography.
In North America, 400,000 MT of sugar represents 2% of existing corn wet milling capacity, which is currently under pressure from dropping U.S. demand for high fructose corn syrup. In Thailand, 400,000 MT of sugar represents 3.6% of Thai sugar production (sugar available from both cane and tapioca starch). In Brazil, 400,000 MT of sugar represents 1% of Brazilian sugar production (excluding sugar dedicated to the production of ethanol).
Even if the entire $2bn worth of bio-succinic acid and bio-BDO were produced in North America, it would require only 6% of the sugar produced in existing corn wet mills."
Historically, the high cost of producing succinic acid from petroleum feedstock limited its use to a narrow range of applications such as pharmaceuticals and food ingredients. As a result, the current market for petroleum-based succinic acid is only approximately 40,000 MTY, representing a market size of $300 million.
Recent industry reports by Global Industry Analysts and Frost & Sullivan project that the global succinic acid market will grow to approximately 145,000 and 180,000 metric tons, respectively, by 2015 based largely on bio-succinic acid's performance, cost advantages and environmental benefits.