Coskata has a pretty sweet deal in its grasp, if it can work out the details with a Florida sugar producer. This morning, U.S. Sugar Corp. and the cellulosic ethanol startup say they have entered into an agreement to look into building a 100 million gallon per year cellulosic ethanol facility in Clewiston, Fla., that will convert leftover sugar cane into ethanol. U.S. Sugar has been in the process of selling much of its land in the Everglades to the state of Florida so that it can be restored, and Florida Governor Charlie Crist has also endorsed building ethanol plants on the land as a way to keep jobs in the area.
Coskata and U.S. Sugar have been negotiating a potential deal for a $400-450 million ethanol plant for several months, but they’ve been waiting for the state to work out the contract for purchasing the land from US Sugar. Last week, U.S. Sugar said negotiations with the state concluded in a deal under which U.S. Sugar would sell 181,000 acres that it owns for $1.34 billion to Florida but retain ownership of the sugar mill, refinery and citrus processing facilities, railroads, office buildings and equipment. That deal still needs to be approved by the boards.
The almost-finalized state land deal means Coskata’s negotiations can go forward, explains Wes Bolsen, Coskata’s VP of marketing. Leaving the infrastructure in the hands of U.S. Sugar means the sugar producer will likely be looking to invest some of its $1.34 billion into building out its existing assets. U.S. Sugar says it plans to submit an application to the Florida Energy Office for a couple million dollars worth of grants for the project and plans to also ask the U.S. Department of Agriculture for a loan guarantee.
For Coskata, the deal would provide a massive partner that will soon be flush with cash and looking for new businesses to move into. Bolsen explained that there aren’t many biofuel startups with access to $1.34 billion to invest in biofuels infrastructure in these difficult economic conditions. Bolsen also said that the economics of the plant make sense and co-locating it next to existing sugar production will be able to reduce biomass collection and transportation costs to produce cellulosic ethanol for less than $1 a gallon.
Coskata has some newly raised cash of its own, too. Bolsen also tells us that Coskata just finished raising its Series C round of financing, which was targeted at $50 million and has also been in the works for months. That round was supposed to include JP Morgan Chase and new high profile investors, but Bolsen says that details of the deal will be announced shortly.
Politically, advocating an ethanol plant that can use leftover sugar cane material is a way for Governor Crist to alleviate the pain of the area losing any of its industry. Clewiston, Fla., has been called “America’s Sweetest Town,” because of the surrounding sugar business. The plant could also help the state meet Florida’s next-generation ethanol mandate.
Don’t forget that it’s not a done deal yet. The companies need to work out ownership structure of the plant, and how the companies will come up with the $400-450 million in capital costs.