Coskata looking at bio-propylene

The blog normally does not cover IPOs (initial public offerings) filed by biofuel companies given that there are so many biofuel companies out there. But the one thing that caught the green blog’s attention in their $100m IPO announcement is that the company defined itself as a technology leader in renewable fuels and bio-based chemicals.

Could it be that Coskata is expanding its expertise beyond cellulosic ethanol? Hence, we delve into their S-1 registration filed at the Securities and Exchange Commission (SEC).

The company did say that it is initially focusing on producing cellulosic ethanol and expected to begin construction of its first “Flagship” commercial-scale facility in Boligee, Alabama, next year. Phase 1 capacity of Flagship is 16m gal/year at an unsubsidized cash operating cost of less than $1.5/gal (assuming feedstock cost of $64/bone dry ton of softwood). According to Coskata, market price for ethanol as of December 9 was $2.71/gal.

Completion of Phase 1 is expected by 2013. Total production capacity from Flagship is expected to be 78m gal/year (by 2015) using woodchips and woodwaste for feedstock.

We believe we will be one of the first companies in the world to produce cellulosic ethanol at commercial-scale using a syngas fermentation process, qualifying us for both advanced biofuel and cellulosic biofuel credits under RFS2. We will selectively target international markets based on feedstock availability, strong market demand and local government support. – Coskata

Coskata has been running its demonstration facility dubbed “Lighthouse” in Madison, Pennsylvania, for over 15,000 hours until October. Lighthouse operations is expected to resume next year. I am not sure how much cellulosic ethanol was produced in that run time but the company said the product meets ASTM International standards although their technology has not been tested by a broad range of potential licensees or joint venture partners.

As usual, like any other startup renewable chemical companies (and advanced biofuels companies), Coskata has not yet generated any significant revenue. The company expects to continue to incur operating losses throughout at least 2013. Coskata also expects its $87.9m Phase 1 Flagship project will be financed with a combination of debt, cash on hand and a portion coming from the IPO.

CHEMICAL POTENTIAL

Several advanced biofuel startups have been diversifying into the bio-based chemicals sector given the higher potential profits for chemicals vs biofuel. Most of all, it is quicker (but not easier) to get into the chemicals sector especially if you’re looking into drop-ins as long as you have partners who know the chemical industry’s well-oiled system. Cases in point are Codexis, Amyris, Gevo, Solazyme, Aemetis (formerly AE Biofuels), Virent, Zeachem and LanzaTech.

Now, this is the first time that the blog has heard Coskata planning to enter the bio-based chemicals market although it is easy for them to go into the ethylene business where ethanol can be easily converted into ethylene. But who would want to go into ethylene especially in the US where abundant shale gas is in the forefront of chemical discussions these days?

According to the company’s S-1 report, Coskata reportedly possessed a propanol production technology – and combined with alcohol dehydration technology, they can produce propylene. The company has  partnered with Total Petrochemicals (since December 2010) and IFP Energies Nouvelles & Axens on this research.

Coskata and Total have been collaborating on the development of microorganisms and syngas fermentation platform to produce propanol from biomass, waste and [or] fossil fuels such as coal and natural gas. Total and IFP Energies together have been developing a new process to dehydrate alcohol into alkenes (such as propanol to propylene), which can then be linked to Coskata’s syngas fermentation platform producing propanol.

“We believe this will result in the commercial-scale deployment of an end-to-end process to competitively produce propylene, allowing us and our future licensees and joint venture partners to access a large and fast growing market for a key petrochemical intermediate.” – Coskata

In terms of development and commercialization timeline for their bio-propylene, Total and Coskata’s partnership has a term of 20 years although could be terminated early upon mutual agreement. First phase of the partnership is to develop the microorganism which started in early 2011. Second phase of the program will involve scale-up of the strains at a demo plant using both biomass-derived syngas and syngas from natural gas. Final phase will be the development of engineering package and cost estimate for the process.

Upon successful collaboration, the companies expect to have joint ownership of the propanol production technology, Coskata owning exclusive licensing rights, and preferential access by Total Petrochemicals to use the technology for its own propylene production.

Coskata noted that on-purpose propylene production has been growing significantly given the static production of byproduct propene from oil refining and natural gas processing especially in the US and European markets.

Coskata cited global propylene consumption (via SRI Consulting) is expected to grow at an average 5%/year over the next 5 years. Polypropylene account for two-thirds of global propylene consumption as per ICIS data.

Aside from ethylene and propylene, Coskata expects over time to expand its chemicals platform to producing four, five and six carbon chain chemicals. The company said it has already demonstrated in a laboratory setting their production of butanol, butanediol, hexanol, organic acids and certain fatty acids.

By the way, Coskata also has a collaboration deal with Japanese chemical company Sumitomo although it did not disclosed what particular project they are working on. The companies said they are collaborating to develop commercial-scale projects that will be deployed in Australia, Indonesia, Japan, Thailand and other Asian countries.  Sumitomo will screen local partners, conduct feasibility studies and establish joint venture entities to develop, own and operate plants.

We are in discussions to license our technology platform to one project identified through our collaboration with Sumitomo. This agreement will expire in October 2013, but will automatically extend for additional one-year terms unless one of the parties provides notice of its intention to terminate the relationship. – Coskata

BACKGROUND

Coskata based in Warrenville, IL, was formed in July 2006 by GreatPoint Ventures. In terms of technology, Coskata claimed that it is using a novel synthesis gas fermentation platform using combined biochemical and thermochemical methods (they called it Hybrid Biothermal process).

The company’s investors include Khosla ventures, General Motors, Total, Blackstone Group and Sumitomo, among others.



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