Verenium, BP in $90 Million Ethanol Deal

8/6/08Follow @wroush

Verenium (NASDAQ: VRNM), a Cambridge, MA-based biofuel firm, and BP, the United States’ largest oil and gas producer, announced a strategic partnership today under which Verenium will receive up to $90 million over the next year and a half for work on facilities producing low-cost cellulosic ethanol.

Verenium controls the rights to a class of microbes, called ethanologens, that it says are more effective than conventional yeasts at breaking down high-cellulose materials such as so-called “energy grasses” and fermenting them into ethanol. In return for access to Verenium’s technology, BP said it will pay the startup $45 million in three installments over the next year, plus $2.5 million per month for R&D expenses over the next 18 months. BP and Verenium have also formed a jointly owned subsidiary that will own any new ethanol-related intellectual property developed by the two companies, and they say they hope to form a joint venture aimed at building commercial-scale cellulosic ethanol plants.

“This deal puts us at the front of the cellulosic biofuels game,” Sue Ellerbusch, president of BP Biofuels North America, said in a statement. “In partnering with Verenium, we now have the most advanced technology for transforming these energy grasses to biofuels, increasing our ability to invest earlier in the U.S. to meet the requirements for cellulosic ethanol laid out in the recent energy bill.” Ellerbusch also said the deal could help BP to exploit its new assets in Brazil, where it recently took a $60 million stake in Tropical BioEnergia, which is building two plants to make ethanol from sugar cane.

Fermenting high-cellulose feedstocks such as sugar cane, elephant grass, wood chips, and even garbage is seen as a way to make ethanol without diverting corn needed for food production. A number of companies based in the Boston and Seattle areas, or funded by Boston and Seattle investors, are seeking low-cost ways to produce cellulosic ethanol, including InEnTec, Mascoma, and Coskata.

Verenium, which was formed in 2007 through the merger of Cambridge’s Celunol and San Diego’s Diversa, also has strategic partnerships with several other firms, including Syngenta (the agribusiness company formed in 2000 from the merger of Novartis and AstraZeneca’s agricultural divisions) and Bunge Oils of St. Louis. The company dedicated its first demonstration-scale bioethanol plant, in Jennings, LA, in May. The plant is expected produce as much as 1.4 million gallons of ethanol per year.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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  • http://blog.innovators-network.org Anthony Kuhn

    Wait until BP owns most of the ethanol production in the world and all the car manufacturers will have already changed over to an ethanol-oil blend! Think gas is expensive now, just you wait…

  • George

    It’s actually ethanol that’s keeping the cost of gas from being even higher than it already is. Anything we can do to invest in and develop new sources of renewable biofuels, and in the process free ourselves of foreign oil, is in all of our best interests.

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