Solazyme Joint Venture Brings Algae Plant to Brazil

04/03/2012 News

Solazyme, Inc. (NASDAQ: SZYM) is taking another step toward large-scale production of fuels and chemicals from algae.

The company announced a joint venture with global agribusiness firm Bunge (NYSE: BG) to build and operate a commercial-scale oils production plant in Brazil. In 2010, Bunge took an equity stake in Solazyme.

Solazyme Bunge Produtos Renováveis Ltda., will be located next to Bunge's Moema sugarcane mill in Brazil and will produce 100,000 metric tons of oil a year.

"Bunge is excited to partner with Solazyme to commercialize its innovative sugar-to-oil technology platform, which will enable us to link our sugar and vegetable oil value chains," says Ben Pearcy, Managing Director, Sugar & Bioenergy, and Chief Development Officer at Bunge. "The tailored oils we expect to produce will not only expand our portfolio and address the growing demand of the fuels and oleochemicals industries, but also increase our capabilities to leverage new technologies for future opportunities in sugar and bioenergy."

The plant will use Solazyme's manufacturing process and then benefit from Bunge's global presence in sugar and vegetable oil markets, large-scale processing experience and significant footprint in Brazil. It will be equally financed by the two partners and be operational in late 2013.

Separating the oil from algae has proven to be difficult and expensive. Solazyme's solution is to grow algae in closed, indoor tanks where it ferments by feeding on sugar rather than using lots of land required for photosynthesis. This makes algae competitively priced with petroleum products, while also yielding byproducts derived from algae's protein and fiber. Importantly, Solazyme can generate commercial volumes in just several days.

Solazyme is the first algae-to-fuels company to list on a major public exchange and its Solajet fuel was used in the first commercial flights to run on algae-based jet fuels. The company has a contract with United Airlines to deliver 20 million gallons of algae-based jet fuel a year, starting in 2014.

Until the biofuels market takes off, Solazyme is first targeting the nutrition market, offering alternatives to eggs, butter and oils, and the cosmetics market, with anti-aging products, a key growth area. Since the launch of its Algenist skin care line in 2011, Solazyme has generated about $3.5 million in sales, estimates Canaccord Genuity.

The chemicals market is very large ($3 trillion a year according to the American Chemistry Council) and is ripe for petroleum substitutes that can reduce greenhouse gas emissions, toxic byproducts, and lack of biodegradability. Chemicals enable production of about 95% of manufactured products in the US. Right now, the majority are made from oil, natural gas and coal.

The global market for biobased chemicals currently stands at about $170 (chemicals, plastics, fuels) and will grow to more than $500 billion by 2020, according to McKinsey.

This week, competitor Sapphire Energy raised $144 million, bringing its total backing to over $300 million.