Jamerson: All is well at Mascoma

By Anna Austin | January 03, 2009
Web exclusive posted Dec. 8, 2008 at 10:34 a.m. CST

Much like other companies weathering the economic storm, Massachusetts-based Mascoma Corp. has beenevaluating its finances. However, what may differentiate Mascoma from other businesses is that the cellulosic ethanol research and development company sees the bright light at the end of the tunnel.

In fact, it has never been in the dark, according to Mascoma President and Chief Executive Officer Bruce Jamerson. "We are still full steam ahead," he told EPM.

In mid-November, EPM confirmed that the company had laid off five to 10 employees, including President Colin South and two vice presidents. Despite speculation that the company may be facing financial troubles similar to other ethanol companies, Jamerson said that isn't so. He described the staff reduction as a way to secure a solid financial future. "It was a preemptive move to get ahead of the curve, in terms of getting expenses down," he said. "It was hard to do. We looked at expenses all throughout the company, such as equipment purchases, real estate expense and consumables we buy across the board. Unfortunately, because we are a young company (Mascoma was founded in 2006), personnel are our biggest expense, so we needed to take some action there. These weren't performance related at all."

It seemed to be the right thing to do with the state of the economy and capital market in order to preserve capital, according to Jamerson. "With that being said, the company is doing the best it has since I have been here," he added. He joined Mascoma in March 2007 after stepping down as president of ethanol producer VeraSun Energy Corp., which recently filed Chapter 11 bankruptcy.

"Our financial resources are fine," Jamerson said, adding that Mascoma won't need to raise capital next year. "[The layoffs] were more anticipatory and externally driven. In fact, companies that are wise will take preemptive steps to cut expenses whether it's in general or personnel, given this economic time. The ones that don't will be more at risk. Reducing risk is making sure our financial resources last longer and sets the stage for the long haul."

Jamerson said the company continues to push forward on its projects, including its 30 MMgy demonstration plant in Rome, N.Y., which is nearly complete. "We are literally in the process of finishing construction and will begin testing," he said. "Our Michigan facility is a green light. It's going well. We just signed our deal with the state of Michigan after negotiating for a few months."

In early October, Mascoma received a $23.5 million grant from the state of Michigan to build a 40 MMgy commercial-scale cellulosic ethanol facility, which it expects to be complete between 2011 and 2012. In addition, the project received $26 million in funding from the U.S. DOE.

Mascoma expects to complete work with the DOE before the end of the year, according to Jamerson. "We're full steam ahead on developing that project," he said. "As far as science milestones in the lab go, we are ahead of schedule."

On Dec. 2, Mascoma announced it had appointed Massachusetts Institute of Technology professors Chris Kaiser and Dianne Newman to Mascoma's Scientific Advisory Board. Jamerson said the positions are paid and the additions are good investments for the company, providing assets to its technology department. General Motor Corp. Director of Global Energy Systems Andreas Lippert was also appointed to the board in September.

In May, GM announced it had provided an undisclosed monetary investment to Mascoma and completed an agreement with the company to evaluate materials and other fuels produced by Mascoma for engine applications. The two companies also announced they would collaborate on expanding Mascoma's commercialization projects on a global level.

Jamerson said GM's current financial crisis is not having an effect on Mascoma. "They will continue to be investors, no matter what happens in the future," he said. "The broader, more important point is that the relationship with them is continuing on."

GM currently leads car manufacturers in providing flexible-fuel vehicles (FFVs) and has a goal of converting 50 percent of its fleet to FFVs by 2012, providing the infrastructure is in place. "In some ways, we are talking to them even more than before because we want to understand how the auto industry is responding," Jamerson said. "They are still a good partner of ours. We are a GM supporter; they are the most pro-ethanol of the car companies."

GM's proposed restructuring plan presented to Congress in early December includes a $4 billion immediate loan from the federal government through Dec. 31, and up to $6 billion by the end of the first quarter of 2009. Additionally, it calls for a total term loan facility of up to $12 billion through December 31, 2009, a $6 billion committed line of credit from the federal government, and $18 billion in term loan and revolving credit facilities.

GM's plan also suggests full compliance with the Energy Independence & Security Act of 2007, which includes the renewable fuels standard mandate that requires U.S. consumption of 11.1 billion gallons of renewable fuels in 2009, reaching a level of 36 billion gallons in 2022. GM also indicated it would continue its goal of 50 percent FFVs in 2012.

Jamerson said Mascoma supports a federal financial auto plan that will help provide financial stability to the auto industry. "It's important for the ethanol industry to have an active, engaged auto industry, and we think all the car companies deserve this support. It would not only help them and us, but it will be good for the country," he said.

To learn more about Mascoma, visit www.mascoma.com.