Microbes eat gas, make fuel

New Zealand fund invests $60M into biofuel startup LanzaTech

The New Zealand government’s $27 billion fund set up to cover future pension payments has invested $60 million into startup LanzaTech, which uses microbes to turn industrial waste gas into biofuels and chemicals. LanzaTech was founded in 2005 in New Zealand, but now has headquarters in the U.S. in Illinois, and plans to have its first commercial plant in operation in 2016.

The $60 million from The New Zealand Superannuation Fund is an extension of the Series D round that was announced earlier this year (and we covered here), bringing the Series D round to $112.6 million. In total LanzaTech has raised $160 million to date. The New Zealand fund has also backed other later stage energy startups like fuel cell maker Bloom Energy, and says it has a return of 9.9 percent.

LanzaTech demo plant at BaoSteel Steel Mill.
LanzaTech demo plant at BaoSteel Steel Mill.

Other investors in LanzaTech include Khosla Ventures, Mitsui, Siemens, CICC Growth Capital Fund I, Qiming Venture Partners, K1W1 and the Malaysian Life Sciences Capital Fund. Khosla Ventures, which funded the company early on and has a large portfolio of biofuel and biochemical startups, is LanzaTech’s largest shareholder.

LanzaTech’s secret sauce is that it’s developed genetically modified microbes that eat waste gases — like carbon monoxide and carbon dioxide — that are produced in industrial processes, like steel manufacturing and oil refining. The microbes digest the gases and can produce various biofuels, like ethanol, or biochemicals, which can then be sold or used.

LanzaTech demo plant with WBT in Taiwan.
LanzaTech demo plant with WBT in Taiwan.

LanzaTech has been working with Chinese steel manufacturers Baosteel and Capital Steel and Chinese coal producer Yankuang Group to commercialize its technology. In China, LanzaTech’s partners have been willing to fund these initial plants, which has helped keep Lanzatech’s capital costs relatively low.

If the technology works as advertised at scale, the company’s technology could be a powerful tool to help clean up toxic gases that are spewed out at power plants and factories. The byproducts of the cleaning is the renewable fuels and chemicals, which can help cover the costs of installing the LanzaTech technology.