Summary:

The long-promised but perpetually fledging biofuel industry still remains a big focus of government support. The U.S. Department of Agriculture announced Thursday that it has made a conditional commitment for a $232.5 million loan guarantee to biofuel maker ZeaChem.

ZeaChem Breaks Ground On Next-Gen Ethanol Plant

The long-promised but perpetually fledging biofuel industry still remains a big focus of government support. The U.S. Department of Agriculture announced Thursday that it has made a conditional commitment for a $232.5 million loan guarantee to ZeaChem to build the company’s first commercial-scale refinery to turn plants into fuels and other chemical products.

This is the same USDA program loan guarantee program that delivered a loan guarantee to now-defunct biofuel maker Range Fuels. To date, none of the next-gen biofuel companies have produced advanced biofuels at any commercial scale, despite hundreds of millions of funding in venture capital and government funds.

The loan guarantee will enable ZeaChem to build a plant in Boardman, Ore., which could produce 25 million gallons per year of products. At least 51 percent of the plant’s production will be cellulosic biofuel (including ethanol), and the rest will be chemicals such as acetic acid and ethyl acetate, the USDA said. The total cost of the project is around $390.5 million, the USDA added.

With the guarantee, the government promises to pay back the loan if ZeaChem isn’t able to. Silicon Valley Bank will arrange the loan, said ZeaChem CEO Jim Imbler during a conference call. The rest of the project cost will be equity coming from “a variety of sources,” but Imbler declined to divulge more details.

ZeaChem will have to meet certain performance goals before the USDA will complete the loan guarantee package, Imbler said. The company will work on meeting them starting this year through a demonstration plant located next to the site for the proposed commercial refinery. ZeaChem announced the completion of the demonstration plant earlier this month, and the plant will make acetic acid and ethyl acetate. ZeaChem also plans to produce cellulosic ethanol at this demonstration plant later this year.

Colorado-based ZeaChem is among the many companies that have been trying to move into commercial production of their advanced biofuel technologies. Problems with technology development and lining up financing have been two big stumbling blocks. Range Fuels shut its refinery in Georgia last year after building it only the year before, and that plant went to another biofuel developer, LanzaTech, in a liquidation sale earlier this month.

Companies such as KiOR and Coskata have sought funding through initial public offerings though they both have yet to reach mass production. KiOR went public last year while Coskata filed for an IPO last December but hasn’t made its public market debut (here is an in-depth look at KiOR’s IPO and why its pre-IPO investors are still waiting for the big payday).

The USDA says ZeaChem’s biorefinery in Oregon will be open for business by late 2014. The company raised a $19 million round from private investors last year. About 30 percent of the feedstock for the refinery will be agricultural waste such as wheat straw and corn stover, while the remainder will be woody biomass from a nearby poplar farm called the GreenWood Tree Farm Fund.

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