Verenium Forms BP Joint Venture, But Delays First Plant to 2010

Cellulosic ethanol maker Verenium might have an important partner in UK oil giant BP, but it still can’t help the company from the pitfalls of the difficult capital markets. This morning Verenium says that it is moving forward with a previously announced joint venture with BP, using $45 million in investment dollars, but at the same time, Verenium says its first cellulosic ethanol plant likely won’t “break ground” until 2010. Originally Verenium had been hoping to start construction on that first plant before the end of 2009.

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Pushing back that date is an abrupt move from the cellulosic ethanol maker given that just a month ago spokesperson Morgen Grandjean told us that Verenium would still break ground on its first plant this year. He was responding to our story: Verenium Cranks Up Demo Plant — What Next?. And a week after our story ran, the company put out a press release saying it “anticipates breaking ground on this facility in the second half of this year.”

Kelly Lindenboom, V-P of corporate communications for Verenium tells us that given the slower loan guarantee process and difficult capital markets, it looks like 2010 will be more realistic for Verenium’s first plant. That 36 million gallon-per-year plant is due to be built in Highlands County, Fla., and cost between $250 and $300 million — cellulosic ethanol production is planned to begin in 2012.

While a several month-long delay isn’t a big deal, all of the cellulosic ethanol makers have been racing to be the first to build commercial plants in the U.S., so this push back could put the company behind competitors. Cellulosic ethanol maker Range Fuels is expected to be building the first commercial cellulosic ethanol plant in the U.S. later this year. In this morning’s release, Verenium calls its first plant “one of the nation’s first commercial-scale cellulosic ethanol facilities.”

Despite Verenium’s deal with BP, it’s just not a good time to be spending hundreds of millions on next-generation projects. In December Verenium said it wasn’t in compliance with NASDAQ rules for maintaining a minimum market capitalization, but in January regained compliance. Next week the company plans to report fourth-quarter and full-year earnings results, so we’ll be able to see how the economy has been affected by the economy.

But in comparison to many of the corn and cellulosic ethanol producers, Verenium’s technology is valuable enough to convince BP to make a substantial commitment. BP invested $90 million in Verenium, and is spending an additional $22.5 million on the joint venture.

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