Enerkem abandons IPO effort, points to 'better options'

By Holly Jessen | April 30, 2012

Despite interest from "key potential investors," Enerkem Inc. won’t proceed with an initial public offering due to unfavorable market conditions. But the company—with the support of its current investors and partners—is still planning to move forward with developing several municipal solid waste-to-biofuels commercial projects, according to Marie-Helene Labrie, vice president of government affairs and communications. “At this point in time, we believe there are better options for us to finance our growth plan as a private company,” Labrie said.

The Montreal, Quebec-based company filed a preliminary prospectus Feb. 3 for IPO of common shares with the U.S. Securities and Exchange Commission. According to documents filed April 26, the company requested that the SEC consent to the immediate withdrawal of the company’s March 29 registration statement. “In light of current market conditions, the company has determined not to proceed with the initial public offering contemplated by the registration statement,” the document said. “[It] has not been declared effective by the commission, and the company confirms that no securities were sold in connection with the offering described in the registration statement.”

Enerkem’s four-step thermochemical technology converts mixed waste into synthesis gas, or syngas, which can be used to produce biofuels or biochemicals. The first step is methanol production, which can then be refined into cellulosic ethanol for transportation fuels and chemical intermediates for the production of everyday products. The company’s primary focus is the commercial production of cellulosic ethanol and it considers methanol a chemical building block in that pursuit. The company is targeting MSW as a feedstock, pointing out that 435 million metric tons are generated in the U.S. yearly. That translates into a potential 140 million metric tons of feedstock suitable for the company’s technology platform. The company is aiming to produce 100 gallons of cellulosic ethanol per metric ton of MSW.

The company still plans to add ethanol equipment this year to its commercial demonstration plant in Westbury, Quebec, Labrie confirmed. A project to install methanol production equipment at that facility wrapped up in June. Once completed, the plant is expected to produce 1.3 MMgy of cellulosic ethanol. The company has an offtake agreement with Greenfield Ethanol for the ethanol produced in Westbury, which is located in southern Quebec, not far from the Vermont border.

Enerkem also plans to continue developing three 10 MMgy facilities, including two projects in Canada and one in the U.S. Construction began on the Edmonton, Alberta, facility in 2010 and the company plans to be ready to sell methanol produced there by the first quarter of 2013. Construction on the U.S. project, in Pontotoc, Miss., is expected to begin in the fourth quarter of 2012. In January Enerkem received a conditional commitment for an $80 million U.S. DOE loan guarantee for that project. Construction is expected to begin on the third project, set for Varennes, Quebec, in 2013.

For the company’s 10 MMgy facilities, Enerkem calculates its operating costs, before depreciation and amortization, will be $1.50 to $1.70 per gallon, according to the company’s preliminary prospectus filed with the SEC. To reduce operating costs to about $1.05 to $1.25 per gallon the company says it will have to build larger facilities made up of four of its standard 10 MMgy modules, producing a total of 40 MMgy.

Enerkem also has a pilot plant in Sherbrooke, Quebec, which has been in operation since 2003. The facility has a throughput capacity of 4.8 metric tons of feedstock daily. It has been tested using MSW from various municipalities and more than 25 feedstocks.