Verenium Cranks Up Demo Plant — What Next?


Remember cellulosic ethanol startup Verenium? Last we heard the company had started the commissioning phase of its cellulosic ethanol demo plant in May 2008, and it had big plans to start construction of a 30-million-gallon-per-year commercial plant in the middle of 2009. Well, a glowing story on the company came out in USA Today this week, which says the company just this week “cranked up” the demo plant. Verenium spokesperson Morgen Grandjean provided a few more details to us in an email and said the commissioning phase of the demo plant is 75 percent completed. The plant is currently producing small amounts of cellulosic ethanol at this time, but “the plant has not been running continuously.”

The USA Today article makes no mention of plans for a commercial scale plant. Instead, the story says Range Fuels’ commercial plant is expected to be the first in the U.S. later this year. Verenium’s Grandjean told us in an email that the company is “still slated to break ground on our first commercial facility in the second half of this year.” So, either the company failed to tell the USA Today reporter that information, or the reporter failed to include it. We would guess that, if the company does start construction of a commercial plant in the “second half of this year,” it will be more towards the end of 2009.

The USA Today story also doesn’t mention some financial hurdles facing Verenium: In December, the company put out an announcement that said it wasn’t in compliance with NASDAQ rules for maintaining a minimum market capitalization. The company had until this week to regain compliance; if it was unable to meet that deadline it could appeal or apply for transfer to the Nasdaq Capital Markets. We’re not sure what the company’s moves were.

The company has been spending very heavily. That’s not surprising given that Verenium is just turning on its demo plant and hasn’t started any considerable production yet, but for just the three months ending Sept. 30, 2008, the company reported a net loss of $133.24 million. And that loss was way up from the same period for 2007, in which the company reported a loss of $20.50 million. At this point the company has little revenue coming in; for the quarter ending Sept. 30, the company reported revenues of $16.38 million.

One thing Verenium does have in its corner is the promise of more funding from its partnership with biofuels bigwig BP (s BP). The deal with BP provides Verenium with $45 million in payments over the first 12 months of the agreement, and $2.5 million per month over an 18-month period. The deal created a special purpose entity called Galaxy Biofuels, which will have access to Verenium’s technology and will be jointly owned by BP and Verenium.

Verenium is actually better off than many companies trying to pioneer cellulosic ethanol in this difficult economic climate. BlueFire Ethanol told Reuters recently that it is delaying groundbreaking on its cellulosic ethanol plant in Lancaster, Calif., for several months.

Verenium’s coverage in the USA Today article positions cellulosic ethanol as a solution that is just around the corner. The article says: “Simply put, the nation will soon be running its cars, at least partly, on debris,” and also emphasizes that while corn-based ethanol makers are struggling, cellulosic ethanol makers are laying the groundwork for the next revolution. The cellulosic ethanol companies are struggling with many of the same things that the corn guys are facing in 2009 — especially access to capital. And even if those challenges are conquered, cellulosic ethanol won’t make much of a dent in the fuel supply for many years to come.



What do you think about investing in Verenium? Would you be able to provide anymore updates on Verenium?



I used to feel very positive about next-gen biofuels (e.g. cellulosic ethanol, algae biodiesel). However, over the past year, I’ve become increasingly convinced that the future of transportation lies with electrification rather than improved liquid fuels.

That’s not to say that natural gas and next-gen biofuels can’t play a part, but the focus going into improving battery technology right now leads me to believe that this is ultimately where things are headed.

Brian J. Donovan

Louisiana Enacts the Most Comprehensive Advanced Biofuel Legislation in the Nation

Governor Bobby Jindal has signed into law the Advanced Biofuel Industry Development Initiative, the most comprehensive and far-reaching state legislation in the nation enacted to develop a statewide advanced biofuel industry. Louisiana is the first state to enact alternative transportation fuel legislation that includes a variable blending pump pilot program and a hydrous ethanol pilot program.

Field-to-Pump Strategy
The legislature found that the proper development of an advanced biofuel industry in Louisiana requires implementation of the following comprehensive “field-to-pump” strategy developed by Renergie, Inc.:

(1) Feedstock Other Than Corn
(a) derived solely from Louisiana harvested crops;
(b) capable of an annual yield of at least 600 gallons of ethanol per acre;
(c) requiring no more than one-half of the water required to grow corn;
(d) tolerant to high temperature and waterlogging;
(e) resistant to drought and saline-alkaline soils;
(f) capable of being grown in marginal soils, ranging from heavy clay to light sand;
(g) requiring no more than one-third of the nitrogen required to grow corn, thereby reducing the risk of contamination of the waters of the state; and
(h) requiring no more than one-half of the energy necessary to convert corn into ethanol.

(2) Decentralized Network of Small Advanced Biofuel Manufacturing Facilities
Smaller is better. The distributed nature of a small advanced biofuel manufacturing facility network reduces feedstock supply risk, does not burden local water supplies and provides for broader based economic development. Each advanced biofuel manufacturing facility operating in Louisiana will produce no less than 5 million gallons of advanced biofuel per year and no more than 15 million gallons of advanced biofuel per year.

(3) Market Expansion
Advanced biofuel supply and demand shall be expanded beyond the 10% blend market by blending fuel-grade anhydrous ethanol with gasoline at the gas station pump. Variable blending pumps, directly installed and operated at local gas stations by a qualified small advanced biofuel manufacturing facility, shall offer the consumer a less expensive substitute for unleaded gasoline in the form of E10, E20, E30 and E85.

Pilot Programs
(1) Advanced Biofuel Variable Blending Pumps – The blending of fuels with advanced biofuel percentages between 10 percent and 85 percent will be permitted on a trial basis until January 1, 2012. During this period the Louisiana Department of Agriculture and Forestry Division of Weights & Measures will monitor the equipment used to dispense the ethanol blends to ascertain that the equipment is suitable and capable of producing an accurate measurement.

(2) Hydrous Ethanol – The use of hydrous ethanol blends of E10, E20, E30 and E85 in motor vehicles specifically selected for test purposes will be permitted on a trial basis until January 1, 2012. During this period the Louisiana Department of Agriculture and Forestry Division of Weights & Measures will monitor the performance of the motor vehicles. The hydrous blends will be tested for blend optimization with respect to fuel consumption and engine emissions. Preliminary tests conducted in Europe have proven that the use of hydrous ethanol, which eliminates the need for the hydrous-to-anhydrous dehydration processing step, results in an energy savings of between ten percent and forty-five percent during processing, a four percent product volume increase, higher mileage per gallon, a cleaner engine interior, and a reduction in greenhouse gas emissions.

Act No. 382, entitled “The Advanced Biofuel Industry Development Initiative,” was co-authored by 27 members of the Legislature. The original bill was drafted by Renergie, Inc. Representative Jonathan W. Perry (R – District 47), with the support of Senator Nick Gautreaux (D – District 26), was the primary author of the bill. Reflecting on the signing of Act No. 382 into law, Brian J. Donovan, CEO of Renergie, Inc. said, “I am pleased that the legislature and governor of the great State of Louisiana have chosen to lead the nation in moving ethanol beyond being just a blending component in gasoline to a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline. The two pilot programs, providing for an advanced biofuel variable blending pump trial and a hydrous ethanol trial, established by the State of Louisiana should be adopted by each and every state in our country.”

State Agencies Must Purchase or Lease Vehicles That Use Alternative Fuels
Louisiana’s Advanced Biofuel Industry Development Initiative further states, “The commissioner of administration shall not purchase or lease any motor vehicle for use by any state agency unless that vehicle is capable of and equipped for using an alternative fuel that results in lower emissions of oxides of nitrogen, volatile organic compounds, carbon monoxide, or particulates or any combination thereof that meet or exceed federal Clean Air Act standards.”

Advanced Biofuel Price Preference for State Agencies
Louisiana’s Advanced Biofuel Industry Development Initiative provides that a governmental body, state educational institution, or instrumentality of the state that performs essential governmental functions on a statewide or local basis is entitled to purchase E20, E30 or E85 advanced biofuel at a price equal to fifteen percent (15%) less per gallon than the price of unleaded gasoline for use in any motor vehicle.

Economic Benefits
The development of an advanced biofuel industry will help rebuild the local and regional economies devastated as a result of hurricanes Katrina and Rita by providing:
(1) increased value to the feedstock crops which will benefit local farmers and provide more revenue to the local community;
(2) increased investments in plants and equipment which will stimulate the local economy by providing construction jobs initially and the chance for full-time employment after the plant is completed;
(3) secondary employment as associated industries develop due to plant co-products becoming available at a competitive price; and
(4) increased local and state revenues collected from plant operations will stimulate local and state tax revenues and provide funds for improvements to the community and to the region.

“Representative Perry and Senator Gautreaux have worked tirelessly to craft comprehensive advanced biofuel legislation which will maximize rural development, benefit consumers, farmers and gas station owners while also protecting the environment and reducing the burden on local water supplies,” said Donovan. “Representative Perry, Senator Gautreaux, and Dr. Strain, Commissioner of the Louisiana Department of Agriculture and Forestry, should be praised for their leadership on this issue.”

About Renergie
Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita. Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol. Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline. Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

Please feel free to visit Renergie’s weblog ( for more information.


The $133 million loss was mainly a non-cash write-off. Very sloppy reporting.

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