BP to Invest $90M in Cellulosic Ethanol Producer Verenium

Verenium has managed to stay at the front of the pack of biofuel producers looking to build cellulosic ethanol plants in the U.S., and this morning has announced backing from a major oil player that could help it progress even more. UK oil giant BP will invest $90 million into Verenium over the next 18 months to both access Verenium’s cellulosic ethanol technology, and with plans to create a joint venture to work on cellulosic ethanol production.

The move represents one of BP’s larger commitments to biofuels and particularly cellulosic ethanol. Previously the oil giant committed about $60 million to take a 50 percent stake in Tropical BioEnergia, a Brazilian company that plans to build two ethanol refineries in Brazil. BP is also funding the $500 million academic and industry collaboration the Energy Biosciences Institute, as well as Craig Venter’s biofuel startup Synthetic Genomics.

For Verenium the move is a validation of its progress. On the news of BP’s investment Verenium’s [VRNM] shares rose over 50 percent $3.04. As one of more than a dozen companies racing to build cellulosic ethanol plants in the United States, the company was able to claim a “first” earlier this year; in June the Massachusetts-based company said it had officially opened a “first of its kind” demonstration facility in Jennings, La., which will produce 1.4 million gallons per year of cellulosic ethanol. The company says its demo plant is now in the commissioning phase (final testing and evaluation) and is supposed to be on track to start construction of a 30-million-gallon-per-year commercial plant “in the middle of next year.”

Verenium claims it will also be the first company to build a commercial cellulosic ethanol plant in the United States, and the company is working on 10 different sites it could tap for commercial cellulosic ethanol production, mostly in the Southeast and all in various stages of development. A variety of other startups with similar aims include Range Fuels, Coskata, Mascoma and BlueFire Ethanol.

Verenium has been around longer than some of the younger companies. Founded in 1994 as Celunol, the company reportedly raised more than $60 million from Khosla Ventures, Braemar Energy Ventures, Charles River, and Rho Ventures. In 2007 Celunol was bought by Diversa for over $100 million and was renamed Verenium in 2007.

Though one thing to remember with all this “racing to be first to build cellulosic ethanol plants in the United States” is that the ethanol market has gotten considerably more difficult as of late. The price of corn has gone sky high and the political landscape has started to move away from supporting biofuels. Verenium’s stock had been dropping for months, down 12 percent in February on its weak earnings; for the quarter ended Dec. 31, Verenium posted a loss of $21.6 million, compared with $6.1 million, for the same period a year earlier. This Thursday Verenium announces second quarter earnings.

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