BioAmber to make ‘green’ chemical
Montreal company building $125-million fermentation plant in southwestern Ontario
Montreal’s BioAmber Inc. is applying “chemistry inspired by nature” to replace petrochemicals in the manufacture of hundreds of everyday consumer products.
Its patented bio-based technology converts sugar derived from corn to produce a green “platform” chemical called succinic acid. This non-toxic base chemical is sold to producers of plastics, foods, toys, cosmetics, textile fibres, lubricants, de-icing fluids, paints, resins and solvents.
More applications will follow for products such as nylon, carpet fibres, spandex, parts for car interiors and plasticizers that improve the flexibility of PVC (vinyl) — without the toxic effects of conventional plasticizers, the company says.
This sustainable chemical also holds the key to BioAmber’s ambition to build an international business with headquarters in Montreal, technology research in Minneapolis, production in Ontario and beyond, and global marketing via partnerships and joint ventures.
“We’re on the cusp of making clean chemicals at a much lower cost than the petroleum-based competition and with almost zero impact on the environment,” said CEO Jean-FrançoisHuc, a former Sanofi SA executive and management consultant.
Huc, with long-standing family connections with Montreal, helped to found BioAmber with Montrealers Mike Hartmann (now executive vice-president), Thomas Desbiens and Laurent Bernier.
“The supply chain starts with corn grown on the farms of southern Quebec and southwestern Ontario,” Huc said in an interview. “We buy surplus highfructose corn syrup produced by millers such as Cargill Inc., Archer Daniels Midland Co. and Casco (Ingredion Canada Inc.) and convert it by our patented fermentation process into the platform chemical.”
Biotech and conventional chemistry are effectively combined to make the succinic acid sold to such clients as Mitsubishi Chemical, Dow Chemical and Lanxess AG, he explained.
The basic technology acquired from the U.S. Department of Energy in the late 1990s was developed, tested and brought into production by a French company and BioAmber’s former U.S. parent, Diversified Natural Products Inc. DNP spun off BioAmber in 2008 so it could focus solely on building an international sustainable chemicals business. BioAmber followed up with an initial public offering in New York in 2013.
The six-year-old BioAmber, whose shares (BIOA) trade on the New York Stock Exchange at about $10 each for a market valuation of about $200 million (all figures U.S.), is now in a rapid transition phase.
Up until now, it has had its succinic acid made on a toll basis in a big demonstration plant in France. That contract ends at year-end and BioAmber is moving into full commercial-scale production in Canada. It is building a $125-million fermentation plant in Sarnia, in Canada’s “Chemical Alley,” for startup early next year. Annual capacity will be 30,000 tonnes, rising to 50,000 tonnes with a $31-million Cdn expansion in 2016.
Quebec could have competed for the plant, Huc said. “We talked to the government, but there were delays and then the Ontario government came up with a $15-million low-interest loan that finally swung the choice to job-hungry southwestern Ontario.”
Huc said BioAmber has already orders will ensure a rapid path to full production,” McLaughlin said. “It faces the normal technology project risks from installation and technical delays.”
But building the first commercial-scale succinic acid plant in Canada is an important breakthrough and “hopefully it will attract more sustainable industry projects,” he added.
BioAmber expects revenue to hit $100 million and to become profitable when the plant hits full stride in 2016, said Mike Hartmann, executive vice-president.
In 2016, BioAmber will have more than 100 employees, including 60 in Sarnia, 25 at the Minneapolis research centre, 20 at the
“We’re on the cusp of making clean chemicals at a much lower cost than the petroleum-based competition.”
JEAN-FRANçOIS HUC, CEO, BIOAMBER
built a strong niche in a $10-billion global market for succinic acid and that’s the foundation for future expansion. It plans a second plant with 100,000 tonnes capacity “in North America.”
Murray McLaughlin, executive director of Bioindustrial Innovation Canada, said BioAmber has built a leadership position in biobased chemicals, and its patented yeast fermentation process is well proven and highly efficient at the production stage.
The Sarnia-based non-profit group is working on commercialization of bio-based and sustainable chemistry in Canada. It is funded via federal and provincial research and industrial development programs, and benefits from links with Canadian universities and international partnerships.
“The Sarnia plant will be very competitive with petroleumbased materials and advance Montreal HQ and several marketing people in the U.S. and Europe.
“Montreal is the right corporate location for a developing international company like BioAmber,” Huc and Hartmann said.
The company is working with the National Research Council’s Royalmount Ave. labs in Montreal to develop new feedstocks and fermentation processes. Also it has technology agreements with Cargill (yeast) and DuPont (catalysts).
“Until recently the common source of succinic acid was petroleum, but we can produce a carbon-neutral bio-based acid from renewable plant feedstocks ... chemically identical with the petroleum-based version and at a cost equal to $35 oil,” Hartmann said.
“We can achieve a 99 per cent reduction in greenhouse gas emissions and a 60 per cent ener- gy saving, equal to taking 45,000 cars off the road per year, and we’re creating a new sustainable manufacturing industry in Canada,” he said.
A take-or-pay offtake pact with Japan’s Mitsubishi PTTJV, along with supply agreements with clients and other arrangements, ensure total demand will exceed the Sarnia plant’s capacity, he added. The second plant being planned will have a 15-year offtake agreement covering all its output.
BioAmber raised $75 million from an institutional group in 2010 and then came the New York IPO in May 2013. It missed the target $125 million because of unsettled capital markets but raised about $80 million. Warrants could later bring in $44 million more.
An investment group led by European venture capital specialist Soffinova Partners, Mitsui & Co. Global Investment of Japan, Europe’s Naxos Capital and Lanxess AG, along with Montreal greentech investor Cliffton Group have been strong BioAmber backers and remain so, Hartmann said.
The Sarnia project is on time and on budget and is being funded by $45 million in federal and Ontario loans, $25 million from Mitsui and the balance from BioAmber.
As a development-stage company, BioAmber is burning lots of cash this year and next. It reported big losses in 2013 and in the first quarter this year, but at March 31 held $73 million in cash or more than enough to complete the Sarnia project. Management and employees own about 13 per cent of the shares.
The company has just negotiated a $20-million commercial loan from a group led by Export Development Canada, Farm Credit Canada and Dallas-based Comerica Bank.