Our old friend, Brian Westlake, re-surfaces again to help us figure it all out, and delve into the real story.
“Well, g’day, g’day, g’day, what’s all this confusion about Renmatix and LanzaTech?” So began my friend Brian Westlake.
“Jim, I figured you’d call, completely stumped as usual. Let’s sort
you out, matey, and quickly. Let’s make it quick. The waves here at
Byron Bay are compelling. Now, what exactly are you hearing about
LanzaTech?”
I explained that in Georgia, LanzaTech bought the Range Fuels
Soperton site for $5.1 million at an auction yesterday at the property.
“And yer question is ‘what’s the value proposition?’ Is this
something Vinod Khosla shoved down their throats? Something along those
lines, ay?”
Yep. Although there been some confusion, I mentioned, as to whether LanzaTech bought RangeFuels or just the Georgia site.
“Bought Range Fuels? That’s total bollocks, mate. You’ve
been reading ICIS again. The company wasn’t up for auction, it was just the site.”
Range Fuels Rewind
For a moment, we went through the Range timeline. Range Fuels closed
its doors last fall after attempts failed to refinance, or sell the
company as a whole. Range had stopped making payments on its
government-guaranteed loans, and found its payments under a DOE grant
suspended after the company had ultimately failed in its demonstration
project, which called for the catalytic conversion of syngas into
ethanol.
“And you think Vinod is behind this?”
Well, people are talking.
“Aw, Jim, you need to get to know these people better. Not Vinod’s
style to impose on his CEOs. Not Jennifer Holmgren’s style to lead her
company down a path that advantaged one investor.”
OK, I can buy that.
$25M in infrastructure for a $5.1M check
“Here’s the thing. It’s a $5.1 million deal for, I don’t know, $20 or
$25 million in site value. Jennifer would tell you, “why be patient?”
when you can get all that, for that, and right away, instead of waiting
12-24 months for Christmas.”
But, she could have bought the project directly via the USDA. Why run the auction risk?
“Not at that price, cobber. Now, you’ve got this all wrong. Consider this acquisition similar to the LS9 deal.
Where that company picked up a 12 Mgy capacity site and fermentation
infrastructure in Florida, last year, for under $3M, by cherry-picking a
site out of foreclosure?
“There you go, much better already.”
Son of the Range gasifier
But what’s LanzaTech going to do with the Range Fuels gasifier?
“Ah, that’s right. Everyone’s got their knickers in a knot over the
troubled Range gasifier, now in LanzaTech’s possession. But you don’t
need it, don;t you see. Whether it can produce beyond the 125 tons per
day of biomass or so that it did demonstrate, well it's academic at the
price they acquired the site.”
Academic?
“Jim, don’t you see? LanzaTech’s phone must be ringing off the hook
with gasifier companies, vying for a partnership with LanzaTech.
Especially now that they have branched out beyond industrial off-gases.
Sean Simpson’s microorganism – and you know as a ridgy-didge Aussie I
don’t hand out lollipops to Kiwis just for fun – that bug could well aim
for other higher-value chemicals.
Isn’t LanzaTech looking more and more like Coskata?
“LanzaTech has one advantage you’re overlooking, They don’t have
themselves embroiled in a trade secret dispute with INEOS Bio. But
you’re missing the big picture. It’s not about Coskata. For that matter,
there’s INEOS Bio active in that space, not to mention MSW-to-ethanol
players such as Terrabon, Enerkem and Fulcrum, or wood-to-ethanol
projects like Mascoma or American Process. It really doesn’t have much
to do with all that.
So, what’s it about?
“Catch a clue, old mate. LanzaTech needs its own house, You’re all
tied up in whether this is Vinod somehow escaping his fate on Range.
Their own house.
“Yeah. Let’s take the site LanzaTech is developing with Bao Steel in
China to take advantage of waste gases from steel production.
Nice project that one.
“Well, try explaining to your new Chinese partners that you want to
do some scale-up investigation on a new feedstock, one that isn’t
off-gases from a steel blast furnace.”
Problematic, yes.
“Problematic?? Apoplectic! But you owe the duty to the LT shareholder
to investigate all the possibilities inherent in the micro-organism. So
there’s the problem of mixed objectives, disagreements and problems,
avoided.”
What about jet fuel?
“And there’s another point. You’re coffee must be kicking in. It’s a
site that can be utilized to make low-cost jet fuel from wood biomass in
the US, for sale to the US military. Not to mention the bloody RFS.
The Renewable Fuel Standard
How is the RFS mixed up in this?
“You complete nimrod, how are you going to qualify a fuel made from
industrial off-gases under RFS, when it specifies you have to make it
from biomass? Where’s the biomass in a blast furnace?”
Ah.
Over to Renmatix
“Righto, I think we have you straightened out on that one. Now, what about Renmatix? What don’t you understand about that one?
Well,
BASF announced plans to invest $30 million in the US technology firm Renmatix, as part of a new $50 million Series C investment round announced yesterday by Renmatix.
“Too right. Smart gang there at BASF. You didn’t believe me back in
November when I said that BASF chairman Kurt Bock practically put it on a
silver platter for you.
That’s right, what did they say?
“Only that they aim to grow 2 percentage points above chemical
production and thus increase sales by an average of 6 percent per year
until 2020. That’s a target of 115 billion euros. And they’re targeting
emerging markets. And they are all over the sustainability angle.
“Sustainability is becoming one of the main drivers of growth and value
creation,” they said. Do you you need me to draw a map for you? They’re
going to be looking at this sector to help them drive massive growth.
That’s what I told you in November. You need to get the wax out of your
ears.”
The Russians are coming
But who are the other investors? They raised $50 million, what about the other $20 million?
“Well, matey of mine, think Russia, that’s all I can tell you.”
Russia?
“They are streaming out of Russia, high net worths. China too. It’s
built around key individuals, not some faceless Pushkin Equity Partners
or Dostoyevsky Capital. Your CEOs and their boards will have to be all
over them, but Renmatix clearly got the jump on a few companies.
Wink-wink.”
What this country needs is a good five-cent sugar
What’s everyone’s interest in the low-cost cellulosic sugars that Renmatix makes? Why the heat right now?
“How dense can you be, Jimbo? If Renmatix’ technology works at scale,
its a new game. Those are 4-cent sugars they propose to produce. Per
pound. That’s well less than 40 cents per gallon for the feedstock.
That’s like getting, say, 100,000 tons per year out of a full-scale
Renmatix plant at the something like $20-$30 per bone dry ton of
biomass. Plus, they’re talking less than $1.25 per gallon in capital
costs. Total game-changers, those low-cost sugar companies. Keep your
eye on all of them. Comet, Proterro, even Bluefire is getting into it.”
$20 per bone-dry tone. That’s cheap.
“Too right it is. I think Coskata is working with $55 per ton in its
IPO, for a fuel that has an OPEX of $1.50 or less per gallon, according
to the Coskata IPO. You do the maths.”
What’s the Series C investment going towards – what do you hear?
“Don’t you talk to anyone anymore, Jim? Ask Mike Hamilton, the CEO
over at Renmatix. Part of it will be equity, and there’ll be some
technical development on other biomass.”
The BASF partnership
What about the relationship with BASF?
“Too soon to tell, isn’t it. They’ll both want a long-term
relationship. Whether, and how, that spills over to a customer
relationship, or technical partnership, that remains to be seen, ay?
Validating the industry
What do you think it says about Renmatix?
“It’s a complete validator of the technology. I mean, BASF, it’s not
like they just parachuted into the space yesterday. It’s a $100 billion
revenue company, with 100,000 people. They’re bigger than the global
biofuels industry, all by their onesy. They’ve been watching it
carefully, and putting their strategy together, for years. And they do
their due diligence. That’s not someone else’s money they’re investing
here – it’s hard yakka, making money in the chemicals business,. They’re
not putting it into Renmatix on a finger-crossed basis. They are
selective and diligent. But, it validates the whole space, really.”
Low-cost cellulosic sugars?
“No, you complete dolt, the whole space of biofuels and biomaterials.
Look beyond how they are making the sausage – in this case, with a
low-cost cellulosic sugar – and look at what they are trying to make. If
BASF thought for a minute like those flaming idiots at the Wall Street
Journal that there’s no hope in cellulose’s, this wouldn’t have
happened.”
So, why Renmatix?
“It has to be the new management. Technology’s remarkable the same.
Mike Hamilton’s an old sea dog in the chemicals business. They speak the
same language now, as BASF. Sustainability. It’s a buzzword, but when
you drill that down to providing a product from renewables at costs
comparable to the old fossil fuels boys, Renmatix and BASF are
completely on the same page. Everyone sees where it’s going, as far as
the long-term value of trusting your company to the idea that someone
ids going to be able to push a couple more holes in the ground and keep
supplying you with low-cost fossil fuels, forever. It’s a non-starter.”
Cellulosics and the Journal
Er, what about those flaming idiots at the Wall Street Journal?
“Matey, it’s the editorial board. Do they ever come out of the cave?
Their reporters are the real deal. But I wonder about that editorial
page. That paper used to be about what companies like Dow, Dupont, Waste
Management, and BASF were thinking. These days, the Journal must think
that half the companies in their own Index are completely off their
rocker. Here in Sydney we have the Financial Times, and they’re not
making the same mistake. Everyone is jumping in.
“Which reminds me, time to jump back into the surf. We’re up at
Byron, the surf is incredible. 1.5 meter swell from the east, should be
over two meters by the weekend. Time to go now, over and out.”
