For young companies toiling over how to convert plant waste and non-food crops into ethanol — the next generation of biofuels — the effects of the downturn are starting to play a familiar beat: access to capital is so limited that companies that could have snagged funds in better economic times are seeing their commercialization plans crippled. The latest is Coskata, one of the better known cellulosic ethanol makers, backed by car maker GM and venture capitalist Vinod Khosla. At the Wall Street Journal Eco:nomics conference this week, Coskata CEO Bill Roe said the company is now waiting for a loan guarantee from the Department of Energy to build its first commercial scale plant and that the plant is basically stalled until then.
Coskata was previously hoping to break ground on the plant — expected to produce 50-100 million gallons of ethanol annually — this year and to complete the factory in late 2010 or early 2011. Coskata Chief Marketing Officer Wes Bolsen told us back in December that the commercial plant time line would probably run more solidly into 2011. When we asked Bolsen yesterday if there was a new time line for the commercial plant, he told us:
“We are highly encouraged by what Secretary Steven Chu and the Department of Energy are saying about how fast they can issue the loan guarantees. The Coskata technology is ready to deploy, but we are hesitant to put any revised timeline out there until we see the closing of the financing.”
Chu said last month that new loan guarantees will be offered under the stimulus legislation by early summer, and at least 70 percent of its share of the stimulus will be disbursed by the end of 2010. Bolsen further explained Roe’s comments and the effect of the downturn on the company’s ability to raise financing: “In this financial environment, banks are not lending to themselves, let alone renewable energy projects.”
If Coskata is having trouble, smaller less-well-connected firms will be struggling even more. Coskata told us last November that it was able to close a Series C round in financing, and the company is backed with at least $30 million from Globespan Capital Partners, GM, Khosla Ventures, GreatPoint Ventures and Advanced Technology Ventures.
Other cellulosic ethanol makers like Verenium, that has a similarly strong partner in oil giant BP, are feeling the effects of the downturn on commercial plant plans, too. Verenium is moving forward with its first commercial plant, but has pushed back breaking ground to 2010 from a previously planned timeline of 2009.