We look at the Virdia story, and Stora Enso \u2014 in search of The Bottom Line.<\/p>\n
In Finland, Stora Enso said that it has acquired Virdia for $33 million with additional potential payouts totaling approximately $29 million following completion of specific technical and commercial milestones by 2017.<\/p>\n
Founded in 2007 as HCL CleanTech, Virdia developed the CASE process, which converts cellulosic biomass to high quality fermentable sugars and lignin using acid hydrolysis (the HCL in the company\u2019s former name referred to \u2018hydrochloric acid\u2019).<\/p>\n
Applications for low-cost cellulosic sugars range from renewable fuels and fuel intermediates, including diesel, jet fuel, ethanol and butanol; renewable chemicals and materials such as biosurfactants, lubricants, plastics and synthetic rubber; and nutritional additives such as baker\u2019s yeast and amino acids for the animal feed industry. Virdia\u2019s CASE process also produces lignin in dry or soluble forms, which has proven to be feedstock for plant-based plastics and other thermo-chemical transformations.<\/p>\n
Acid hydrolysis has been around for a long time \u2013 the original, known process goes back to World War Two. Virdia\u2019s core technology is in the complete recycle of the acid \u2013 extracting the acids from the sugar stream so that it can be re-used. Other advantages are the cost-competitiveness and high purity of the output.<\/p>\n
As a result, CEO Philippe Lavielle told the Digest in 2012 that \u201cWe are competitive with $4 bushel corn dextrose sugars, and we think we have a stronger long term position than companies producing dextrose. The long term price for sugars will depend on the market segments, but we see that 15 cents a pound is like a threshold. The question for all of us is \u2018can we make it work at 15 cents?\u201d<\/p>\n
\u201cPulp wood and hardwood substrates are available in mass quantities today,\u201d said Lavielle, \u201cand that makes them the feedstock of choice for today. Our process has access to those materials and it will be some years before the enzymatic route is competitive there.<\/p>\n
\u201cOur CASE process has yields of 95-97 percent of the available sugars, both C5s and C6s, and by producing C5 sugars such as xylose, it gives you a very valuable product stream for producing furfural or xylene chemistries. By contrast, if you can of 80-85 percent with enzymatic process today, you are doing well.<\/p>\n
The company proceeded as far as construction of a pilot plant, which opened in Danville, Virginia in 2012. In 2012 when he came aboard, Lavielle told the Digest that the company would build, own and operate its first plant, and after that the company would pursue other business models including licensing its technology. Lavielle told the Digest in 2012 that financing for the first plant was complete and the company will have a finalized engineering package complete in September. Following that, it would take 18 months to build, and the company expected to have its first commercial facility open in 2014.<\/p>\n
Scale? Lavielle said that, for its first commercial plant, the company is pursuing a 150,000 tonne and a 50,000 tonne project \u2013 the latter option was \u201cnot optimal financially,\u201d but would demonstrate the technology.<\/p>\n
It is not clear at what stage discussions with Stora Enso turned from partnership or strategic investment to outright acquisition, but it was clear the venture investors Burrill & Co and Khosla had taken the technology as far as they could.
\nThe two ventures capital firms had announced their investment in HCL CleanTech back in 2009, as part of a $5.5M Series A investment round.<\/p>\n
\u201cBasically, the Company tackles the pre-treatment and hydrolysis step all at once, without use of enzymes,\u201d said Burrill & Company Director, Greg Young. \u201cAccessing cheap sugar locked in biomass is one of the greatest challenges now faced by those pursuing renewable fuels and chemicals. HCL CleanTech\u2019s technology represents a step change in accessing these sugars, and drops into the pretreatment step of any fermentation-based process or chemical reforming technique which starts with oligosaccharides. We are eager to see this proven at scale, at which point it becomes immediately relevant to adjacent industries aiming to use biomass as a feedstock.\u201d<\/p>\n
Burrill & Company and Khosla Ventures were joined in the Series A round of financing by Zohar Gilon, the lead seed investor, and the founders.<\/p>\n
Although Virdia had announced \u201c$100 million\u201d in financing in 2012, $75 million of that was in the form of low-interest development loans associated with a first commercial project, from the state of Mississippi. (the state also provided up to $155 million in various tax incentives over a 10-year period). The company raised $20M in a Series B round from its existing investors and Tamar Ventures,<\/p>\n
The company also secured $10 million in venture debt from Triple Point Capital and landed several high-profile grants along the way. Chief among these, $900,000 to Virdia and Virent to support Virent\u2019s conversion<\/a> of Virdia\u2019s pine tree sugars into drop-in biofuels. In 2011, LS9 and Virdia picked up a $9.0 million grant to develop<\/a> and demonstrate process improvements for pretreatment, conversion to sugars, and subsequent conversion of those sugars to fuels.<\/p>\n Following the completion of the BIRD project, the Digest asked the partners about next steps. \u201cCommercialization,\u201d said Virdia CEO Philippe Lavialle, flatly. In terms of produced approved jet fuel, Virent\u2019s Cortright added, \u201cWe will need input from the OEMs, and we will go through the ASTM process, same as the oil-based fuels. It will take a couple of years.\u201d Given the timelines for fuel certification and the scale-up steps for commercialization, Virent is indicated that 2017 to 2020 is the expected timeline for \u201cworld-class scale.\u201d<\/p>\n Before doing so, however, Virdia has come under the wing of Stora Enso and ceased to be an independent company.<\/p>\n In all, the company raised some $25.5 million in known venture funds, and tapped $10 million in venture. debt. It look very much as if the acquisition made the original investors whole \u2014 or close to it \u2014 with an upside kicker in the additional $29 millionin incentives for hitting targets through 2017.<\/p>\n Stora Enso says that the acquisition is a new step in implementing the Division\u2019s strategy, following the recent lignin extraction investment at Sunila Mill in Finland.\u2028\u2028\u201cThis acquisition is in line with our strategy of growing in bio-based chemicals, ingredients and solutions, building on cost-effective, non-food-competing raw materials. These solutions will contribute to a more sustainable future by replacing fossil-based materials in various applications with renewable and cost-effective choices. We are now investing in a new technology platform that will enable us to reach new industries and value chains, and create significant sustainable profit growth for our company,\u201d says Juan Carlos Bueno, EVP, Stora Enso Biomaterials.<\/p>\n Last July, the company said that it will build a biorefinery at their Sunila pulp mill in southwest Finland, investing 32 million euros for the project. The plant will be up and running by late 2015, and will create turnover of 80 million euros per year. Stora Enso hasd been looking into the lignin business even back then, anticipating an ability to sell the polymer for speciality chemical and high-tech material manufacturers.<\/p>\nStora Enso\u2019s Biomaterials Division<\/h4>\n