Poet drops DOE loan guarantee, partners with DSM

By Kris Bevill | January 23, 2012

Poet LLC announced Jan. 23 that it will decline the $105 million loan guarantee offered by the U.S. DOE last fall to assist in constructing its first 20 MMgy cellulosic ethanol facility in Emmetsburg, Iowa, known as Project Liberty. The company has opted instead to form a joint venture with The Netherlands-based life sciences and materials sciences company Royal DSM to complete the facility. Poet-DSM Advanced Biofuels LLC will be headquartered in Sioux Falls, S.D., and is a 50-50 partnership that will utilize the pair’s complementary technologies to commercially prove the viability of cellulosic ethanol production. The new company also plans to license the enzymatic hydrolysis technology to Poet’s other 26 corn ethanol facilities and to third parties around the world.

The joint venture’s initial capital expenditure for Project Liberty is estimated to be about $250 million. According to Poet CEO Jeff Broin, the partnership with DSM means that the DOE loan guarantee is no longer necessary. “The loan guarantee commitment from the DOE was an important milestone in our quest to commercialize cellulosic ethanol, and we are appreciative of the work they put into the due diligence process,” Broin said in a statement. “We believe that the joint venture with DSM positions us well to meet our ambitious cellulosic ethanol production goals, and thus the loan guarantee had become unnecessary.” Feike Sijbesma, CEO and chairman of the DSM managing board, said DSM expects the joint venture could generate hundreds of millions of dollars in revenue when taking into consideration the global licensing opportunities.

As part of the joint venture, DSM will continue to develop enzymes used to convert corn stover to sugars for ethanol production. Poet and DSM will collaborate on the conversion process. “This cooperation is a milestone in realizing DSM’s strategy,” Sijbesma said in a statement. “By leveraging the unique opportunities in life sciences and materials sciences we can contribute our heritage of over a century in both biotechnology and chemistry to this joint venture with a biofuels leader. Together we shall deliver the key to unlock the cellulosic bioethanol opportunity.”

A formal groundbreaking ceremony for the facility is being planned for March 13 at the site near Emmetsburg. Construction is expected to be completed in the second half of next year, with commissioning to follow soon after. The original annual capacity of the corn stover-fed plant will be 20 MMgy, but Broin said that will be increased to 25 MMgy as soon as possible. It is possible that the technology developed through the joint venture could be applied to other cellulosic feedstocks such as switchgrass, but in a press call to discuss the joint venture agreement Broin stressed that the immediate focus is on corn residue, a likely fit when considering that Poet’s strategy calls for co-locating cellulosic ethanol plants with all of its corn-based ethanol facilities.

Both Broin and Sijbesma expressed confidence that their companies’ partnership will be among the first in the world to finally prove the viability of commercial-scale cellulosic ethanol production. The pair is staking high expectations on the outcome, suggesting that 1 billion gallons of cellulosic ethanol could be produced from Poet’s plants alone when the technology is installed at its existing facilities. Additionally, they cited a U.S. EPA estimate which calls for up to 400 biorefineries to be built by 2022 in order to meet the 16 billion gallon cellulosic ethanol production mandate for that year as proof of the market for its technology. “Everyone is talking about advanced biofuels, but by making this a reality we are no longer talking,” Sijbesma said. “We are getting this done.”

Broin, whose company has been participating in trial harvests of stover near Emmetsburg for the past five years, spoke to the availability of biomass to supply the hundreds of facilities needed to meet the renewable fuel standard. “There is more than 1 billion tons of biomass available every year in the U.S. that could be used to produce enough cellulosic ethanol to replace a third of America’s gasoline usage,” he said. “This is what Poet has been working toward for about a decade. Now, we have a new partner that can help us make it a reality. This partnership has the potential to change the world.”