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Summary:

Coskata, a startup working on the next generation of cellulosic ethanol with support from GM and Khosla Ventures, tells us that it’s in the process of raising a Series C equity financing. Update: Coskata’s chief marketing officer Wes Bolsen says the planned round will be approximately […]

Coskata, a startup working on the next generation of cellulosic ethanol with support from GM and Khosla Ventures, tells us that it’s in the process of raising a Series C equity financing. Update: Coskata’s chief marketing officer Wes Bolsen says the planned round will be approximately $50 million. Bolsen also says the company is “past the valuation where VC groups are going to put in the majority of the round, so it will set us up well to get some of the big players in on the round for commercialization.”

The company’s confirmation and explanation today comes after Coskata CEO Bill Roe said at the Jefferies Clean Tech conference last week that the money was being raised “as we speak.” JP Morgan is assisting with organizing the round, and Roe said that it would likely have “important partners” that will have a “broader interest in getting these plants off the ground.”

Coskata’s fundraising is just the latest indicator of the high cost of building the next generation of ethanol plants, something that many companies don’t appear to have anticipated. More than a dozen companies are attempting to build the first cellulosic ethanol plants in the U.S., but several have abandoned or suspended plans recently. Land management company Alico abandoned the ethanol biz completely, citing cost concerns, and Canadian biotech company Iogen saw more funding for a cellulosic plant in Canada, instead of a planned plant in the U.S.

Coskata has no intention of suspending or abandoning plans, but rather says that it is blazing ahead. Previously the company raised almost $30 million from Globespan Capital Partners, GM, Khosla Ventures, GreatPoint Ventures and Advanced Technology Ventures. In Roe’s presentation he outlined the company’s progress on its pilot lab, demo commercial plant, and no less than two commercial facilities.

Roe said its pilot facility at its labs in Warrenville, Ill., which it has named Project Horizon Runway, is “up and running.” And its demo commercial facility, dubbed Project Lighthouse, is currently being constructed “modularly” in Canada before it’s moved to its permanent location of Madison, Penn. The company chose Madison because it’s the site of potential partner Westinghouse Plasma. Coskata has no intention, however, of selling the ethanol made at this demo plant; GM will use the ethanol to test its flex-fuel vehicle program.

Roe also said the company is in the process of firming up plans for two commercial plants this year in order get those up and operating in early 2011. Both plants will be built in the U.S., with partners, and one will use gas from sugar processing, and the other wood biomass, Roe said.

When it comes to financing those facilities, Coskata isn’t only relying on its Series C round, but is planning to work with large partners that can provide either operating experience or feedstock supplies. “While we do believe in participating in operating facilities, we know who we are: We’re a startup,” Roe said. “This all about speed…so we’ve organized a comprehensive licensing model to put this in the hands of major partners.” Good idea, focus on doing what you do best.

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