BP buys out Verenium for $98 million

By Kris Bevill | June 10, 2010
Posted July 15, 2010

Verenium Corp. announced today that BP Biofuels North America will acquire all of its cellulosic biofuels interests for $98.3 million. The sale includes the pilot- and demonstration-scale cellulosic ethanol facilities in Jennings, La., the research and development facilities in San Diego, and all of the company's cellulosic enzyme technology. BP will also become the sole investor in Vercipia Biofuels, a joint venture formed by BP and Verenium in 2009 to develop a commercial-scale cellulosic ethanol facility in Florida. Verenium will revert back to its original business model, which includes commercial enzyme development, and said it intends to continue developing enzymes to be used in a range of different applications, including cellulosic ethanol production.

Verenium President and CEO Carlos Riva said that while the company still believes in the potential of cellulosic ethanol, it was determined that the best opportunity for Verenium to be profitable in that sector is through its enzymes business. "Building commercial [cellulosic ethanol] plants represents a capital intensive business model which, given the current state of capital markets, resides more properly with a large organization like BP," he said. By selling its cellulosic business, Verenium will be able to continue to explore cellulosic ethanol opportunities, but without financial burden.

BP first acquired an interest in Verenium nearly two years ago when it partnered with the company to commercialize its cellulosic ethanol technology. As part of the initial investment, BP provided Verenium with $90 million in exchange for rights to its cellulosic ethanol technology. BP paid Verenium $24.5 million up front and delivered $2.5 million to Verenium monthly for 18 months to co-fund its cellulosic ethanol initiatives. (See "BP invests $90 million in Verenium") Since that time, the partnership launched Vercipia Biofuels to construct a 36 MMgy cellulosic ethanol production facility in Highlands County, Fla., which is scheduled to become operational in 2012.

"We are very pleased that our strategic development partnership with BP has successfully advanced our cellulosic ethanol technology to the cusp of commercialization," Riva said. "We believe that BP is the right company to make the investment needed to carry this forward and expedite the commercialization of the technology."

It was not immediately clear as to what BP's total investments were in Verenium prior to the sale announcement. During a conference call to discuss the sale, Riva said complete investment disclosures will be made public at the close of the sale, which is scheduled to take place this quarter. BP said the sale agreement proves its commitment to becoming a leader in the U.S. cellulosic biofuels industry and leaves BP Biofuels well-positioned to accelerate cellulosic ethanol technology but did not provide an immediate comment related to future plans for operations at the Jennings site or the Florida facility.