Verenium discloses cellulosic ethanol struggles

By Sarah Smith | March 10, 2008
Web exclusive posted April 3, 2008 at 2:45 p.m. CST

The quest to commercialize cellulosic ethanol comes with a high costboth technological and financial. For Massachusetts-based Verenium Corp., the complexity of that quest started on page 37 of its 200-page annual regulatory filing to the U.S. Securities and Exchange Commission, and extended through the remainder of the report.

After noting it had raised $174 million from 2006 into 2007, Verenium reported a total of nearly $240 million in net losses for 2005, 2006 and 2007. The company, which needs $90 million to support continued cellulosic ethanol research, detailed accumulated debt of $437 million and looming cash deficits. It planned to generate additional working capital from a sale of $71 million in notes, corporate partnerships, grant funding and "incremental" product sales. In the "risk factors" section of the statement, the company acknowledged, "If we are unsuccessful in raising additional capital from any of these sources, we may need to defer, reduce or eliminate planned expenditures, restructure or significantly curtail our operations, file for bankruptcy or cease operations."

Referring to plans to develop a 1.4 MMgy demonstration plant, the company said, "We have experienced, and may continue to experience, significant delays or cost overruns related to our cellulosic ethanol plant construction projects. We may not achieve any or all of our goals, and thus we cannot provide assurances that we will ever be profitable or achieve significant revenues. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis."

Verenium has experienced some success. Its pilot plant in Louisiana was experimenting using biomass sources, such as sugarcane bagasse, energy crops, agricultural waste and wood products to make low-cost ethanol. The company also explored large-scale industrial opportunities for products derived from the production of biomass-derived sugars.

In 2007, Verenium was one of four recipients of a U.S. DOE grant to develop improved enzymes for the conversion of biomass to fuel. The company disclosed that it had dedicated substantial resources to the development of our proprietary technologies. The company was also part of a $125 million consortium, led by Oak Ridge National Laboratory, to develop a Bioenergy Science Center in Tennessee that will research methods of making biofuels.

Verenium, which was started in 1992 as Industrial Genome Sciences Inc., changed its name in 1997 to Diversa Corp. In June 2007, it merged with Celunol Corp. and became Verenium. It has an enzyme division and a biofuels division.

The company noted that "the ethanol production and marketing industry is extremely competitive" and "some of our competitors have substantially greater production, financial, research and development, personnel and marketing resources than we do."

Highlighting what may be the risk factor investors care most about, the company acknowledged the worst-case scenario: "We may not be successful in the development of individual steps in, or an integrated process for, the production of ethanol from cellulosic biomass at commercial scale in a timely or economic matter or at all."