Who Are the Next Biofuels IPOs?

John Davis

On the heels of their great story yesterday on the investment in algal-biodiesel players PetroAlgae and Solazyme (not to mention Joanna’s piece on Gevo preparing for a $150 million IPO), our friends over at Biofuels Digest have put together a list of the top 10 most likely next IPOs in the biofuels sector. The list includes many Domestic Fuel regulars, such as Solazyme, REG and Imperium:

The biofuels companies coming forward are early-to-middle stage: their shared goal is expansion capital, and though they are seen by many as a value-add play for agriculture, or as a technology play, these are best understood as above-ground oil fields, and as a proxy for oil exploration. The difference: the risk for these ventures is less in the geology than in the biology. It is not a question of finding and extracting reserves, as much as growing and extracting them.

1. Solazyme. Already secured investment from Keating Capital, which expressly invests in companies within 18 months of an IPO event. Gaining revenues from military contracts. Has a raft of strategic partners that will prove attractive.

2. LS9. If Amyris goes well, LS9 might well follow at a suitable interval. Their demonstration facility in Florida is easily expandable to 11 Mgy, which would supply them with a revenue stream. Also has attractive strategic partners in the likes of Procter & Gamble. Has a magic bug that, like Amyris’, converts sugar to diesel – though based on e.coli rather than yeast and may have a wider range of near-term molecules – and thereby a story in chemicals – that it can produce.

3. Sapphire Energy.If Solazyme goes, and goes well, Sapphire could follow. They have a big capital raise for their vertically integrated company that intends to be an owner-operator of more than 1 billion gallons in capacity by 2025. The company has scant revenue, and is building out its demonstration plant, but when its operations in New Mexicom are complete, there may be reasons to turn to the public markets for more dollars.

4. REG. The Renewable Energy Group wanted to IPO a few years back, but withdrew. Since then, its been consolidating biodiesel assets at “popular prices”, and has a distribution arm. If biodiesel gets its story back with the US mandate taking hold, REG will likely need fresh equity to balance off any increasing debt and fund its expansion. Not for the near-term, but keep an eye out.

5. Virent. This bioforming technology also converts sugar to diesel, and if Amyris goes well, that’s a sign for this company. Depends on the attitude of investors like Shell and Honda. Shell may feel a little disappointed in the lack of enthusiasm for Codexis from investors. But the company has vowed not to pour money into biofuels “wantonly or unadvisedly” as the wedding vows go, and expansion capital will have to come from somewhere.

6. Iogen. Another Shell baby, and the company is now organizing its expansion from its long-running pilot to a 23 Mgy facility in Saskatoon. After that, where will growth capital come from? Iogen is a major strategic customer for Codexis, and moving this unit forward also leverages Shell’s investment in CDXS. In a couple of years, they might feel the urgency to expand, while using other people’s money to do so.

7. Enerkem. Enerkem has figured out the capitalization through its 10 Mgy demonstration projects in Edmonton and Mississippi. After that, it gets speculative, but this is a company that intends to grow, and may find the public markets as tempting as the public sector investment it has rolled up so far.

8. Lanzatech. A sleeper, just now expanding into China, where it can deploy its steel gas-to-ethanol technology in a country that has a lot of steel, many reasons to use ethanol, and not to many good options among food crops. There’s no reason to suppose it might well find financing among the Asian exchanges.

9. Coskata. A company that needs a financing path from its demonstration projects to commercial scale – its been offered private financing at what it termed unacceptable valuations for the company, so unless those turn around, it may look to public markets for expansion capital. Has a great story with strategic partners like GM.

10 (tie). Imperium. A long-shot. Imperium went for an IPO a few years back, then withdrew. Is developing advanced biofuels technologies that can be deployed at its 100 Mgy gen 1.5 facility in Washington state. If these efforts, aimed at producing drop-in renewable jet fuel and diesel, prove successful, there will be a lot of hungry aviation buyers available, and good reasons to raise money in the public markets based on aviation fleet or ground transportation fleet contracts.

10 (tie). Joule Unlimited. A long-shot because the company is at such an early-stage. But it has a big, big story. A microbial technology that generates fuel directly from sunlight and CO2. Savvy management. On the fast-track. Strong DOE support. Its economics are highly advantaged compared to conventional fuels. A muncher of the dread CO2, but using non-productive land with high yields.

Biodiesel, biofuels