Dutch oil giant Shell (s RDS) and Brazilian ethanol giant Cosan (s CZZ) sealed the deal Wednesday on a $12 billion joint venture to turn sugarcane into pump-ready fuel. How will the massive partnership affect Codexis (s CDXS), Shell’s biocatalyst partner and recent entrant to the public markets?
Codexis CEO Alan Shaw spoke to us Wednesday, and while he couldn’t say just how the deal would impact the company’s short-term financial picture, he did say that Codexis would be working on converting 100 percent of the sugarcane plant — the one-third that’s sugar, and the rest of the cellulosic material that’s left over — into biodiesel through a direct fermentation process. Just what share of the overall venture’s production might come from Codexis technology in the coming years he couldn’t specify.
Still, Codexis is “already significantly engaged” in the Brazilian project (an MOU was signed in February), and expects to have its technology working there next year, Shaw said. While Shell has turned over its 16-pecent stake in the Redwood City, Calif.-based company to the yet-to-be-named venture, it and other investors (Chevron, Pfizer (s pfe), General Electric (s ge)) are holding onto their Codexis stock, he added.
“This joint venture is very much about Shell’s future,” Shaw said. Indeed, Shell says it will invest $2 billion in the project, and will retain rights to buy back Cosan’s half in ten years. The new joint venture is expected to add some 2 billion liters (528 million gallons) of annual production capacity to Cosan’s already existing 18 billion liters (4.75 billion gallons) per year in ethanol sales, and Shell and Cosan together have 4,500 gas stations to sell the fuel.
Shell has had a 3-year partnership with Codexis, and accounted for 76 percent of its revenues in 2009. Codexis was one of the first biofuel startups to link its fortunes so publicly to Big Oil, but it has since been followed by others. IPO candidate Amyris has a partnership with French oil giant Total; Chevron (s CVX) has invested in LS9 and Solazyme as well as in Codexis; and Exxon (s XOM) is in a $600 million partnership with Craig Venter’s Synthetic Genomics to genetically engineer algae for biofuel. Other biofuel startups are inking deals with agriculture giants: Gevo, the Khosla Ventures-backed cellulosic ethanol company that filed for an IPO this month, has a partnership with Cargill.
Shaw said he believes Codexis is ahead of its competitors in getting its technology into the massive refining, transport and distribution networks needed to bring biofuels to market at a scale that matters. “This joint venture is real, it’s happening today, one of the world’s largest oil companies has put its weight behind it,” he said.
Shell also turned over its stake in Canadian biofuel company Iogen Energy, which will also be part of the new joint venture. Codexis is working with that company to turn wheat straw into ethanol, in what Shaw dubbed a “North American solution” to match Brazil’s interest in cellulosic sugarcane waste for fuel.
Beyond its partnerships with Pfizer and other pharmaceutical companies, other projects underway for Codexis include carbon capture, and Shaw said the company expected to announce a “big brother partner” in that field some time this year.
For more research on cleantech financing check out GigaOM Pro (subscription required):