Khosla: We’re Filing Another Biofuel IPO in 4 Weeks or So

Coskata: So Close, Yet So Far for the Cellulosic Ethanol Biz

Greentech investor Vinod Khosla saw two of his biofuel companies IPO in recent months — Amyris and Gevo — and at the Wall Street Journal’s ECO:nomics conference on Thursday he told the audience that a third biofuel IPO will be on its way soon. (I didn’t attend the event, but read transcriptions of the onstage interview provided by the WSJ.)

Khosla said specifically:

We’ll be filing another IPO within the next four weeks or so. I won’t go into names. Again, a company that expects it will be competitive without a subsidy with tar — and offshore drilling.

I’m not sure if the “tar” reference is a mistake in the transcription or if it’s in reference to tar sands. But anyway, if you know Khosla’s biofuel portfolio at all, there are a couple of options: KiOR, Coskata, or LS9. (Let me know if you think I missed one.) It’s decidedly not Range Fuels (hopefully!), as they stopped running their plant recently. My bet would be on KiOR or Coskata.

KiOR is the four-year-old company KiOR President Fred Cannon described as being able to crunch into seconds the millions of years it takes to carbonize biomass (turn it into fossil fuels) in nature, at the Khosla Ventures limited partner event last year. KiOR’s “Biomass Catalytic Cracking Process” uses a catalyst originally developed to help the oil industry break down heavy crude oil into more easily refined products for the oil industry. It turns out the same catalyst can be used to aid the process of pyrolysis, or super-heating organic matter in the absence of oxygen to break it down into a substitute for crude oil.

KiOR is seeking a $1 billion loan guarantee from the Department of Energy, and announced last month that it had received a term sheet for that (a term sheet isn’t a guarantee of an award, and I’ve talked to companies that have received term sheets, but not actual awards). Usual terms of loan guarantees include that the company that receives it has to meet an equity commitment requirement for the DOE to finalize its guarantees. Thin-film solar company Solyndra was also looking to IPO after it received its loan guarantee, but then canceled that plan shortly thereafter.

KiOR has a plan to build multiple plants to turn wood chips and other plant waste that would crank out 250 million gallons per year of next-generation biofuels. What remains to be seen is how KiOR’s process will perform at larger scale. As of May 2010, Cannon told me the company was producing about 15 barrels of renewable crude per day at its Houston plant, a far cry from commercial-scale production, but I haven’t gotten an update from the company on its latest volumes.

The other option for a biofuel IPO looks like five-year-old Coskata. While Coskata has been under the radar, seemingly stalled during the downturn, it recently received a letter of intent from the U.S. Department of Agriculture for a $250 million loan guarantee to build a plant to make ethanol from woody biomass. Now, unlike KiOR’s term sheet, that’s an actual award. Coskata has plans to build a plant that will have the capacity to make 55 million gallons per year.

Coskata uses a hybrid of thermochemical and biological steps, and basically takes feedstock and gasifies it; the resulting bacteria then converts the syngas to ethanol. Coskata is working with five strains of bacteria that “breathe” syngas and “exhale” almost pure ethanol, in contrast with other methods, which produce a variety of alcohols. Coskata raised funding from General Motors, Advanced Technology Ventures, Great Point Ventures and the Blackstone Group, among others.

Khosla also said during the WSJ interview that the returns on his greentech portfolio are actually better than the rest of his portfolio:

I actually recently looked at IPOs and returns in our portfolio in clean tech versus non-clean tech areas.  Turns out clean tech has the highest rates of return and the most IPOs.

And just to remind folks, IPOs are also not a guarantee of long-term success for a company, they are a way for companies to raise funds and also for investors to make returns.

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