Green bond benefits BioAmber
The system works, and in this case BioAmber Inc., a NYSE-listed, Sarnia, Ont.-based biotechnology company that recently reached commercial production at the world’s largest succinic acid plant, is a beneficiary.
In early 2014, Export Development Canada became the country’s first issuer of green bonds when it raised US$300 million. The bonds — which were earmarked “for loans that will preserve, protect or remediate air, water or soil, or help mitigate climate change” — came with a three-year term and carried a 0.75 per cent coupon.
Part of the capital raised from that issue made its way to BioAmber, which has spent the past couple of years building its plant in Sarnia. That plant, a joint venture with Mitsui &
Co. (which has a 30 per cent interest), cost US$140 million. The plant employs 60 workers and is unusual in that it doesn’t use fossil fuel to produce the bio-succinic acid. Instead, sugars in various forms are the raw material.
“(Succinic acid is) a building block chemical that is used in a variety of products, including plastics, polyurethane, paints lubricants, spandex and personal care ingredients,” said Jean-Francois Huc, the company’s chief executive officer. “It’s a specialty chemical that’s also made by the petrochemical industry. We are making it with new carbon instead of fossil fuel carbon and we don’t emit any greenhouse gases in the production. We are clean and lower cost (than the competition),” he added.
EDC led a $20 million commercial project finance facility to help with the construction of the Sarnia plant, which when fully operational sometime in the next year, will produce 30,000 metric tons a year. (Comerica Bank and Farm Credit Corp., another federal agency, were also in the syndicate.)
When it made the loan, EDC said BioAmber’s Sarnia facility represented “an excellent example of nextgeneration clean technology, providing global industries with viable, biobased and carbon neutral materials for industrial production.”
BioAmber has been around since 2008. “The idea was to commercialize technology developed by the U.S department of Energy,” said Huc, who was born in Sudbury, Ont., and spent a decade in Europe before returning to Canada in 2002.
Until the end of 2014, BioAmber ran a demonstration plant in France for five years. “The goal was to develop market demand, refine the technology and to make sure that it could compete with petroleum. That took a lot of time,” Huc said.
BioAmber went public via an offering of US$10 units — with each unit consisting of a common share plus a share purchase warrant — in the spring of 2013. (It tried to go public 18 months earlier.) In all, US$80 million was raised.
Huc said BioAmber is listed on the NYSE because of the large U.S. investor interest for small cap growth companies with technology “that’s disruptive to the chemical industry.”
Once the Sarnia plant is in commercial production, BioAmber is looking to build a second, much larger, facility. Huc said the facility, which will cost about US$500 million, will be located either in Sarnia or a site in Louisiana. A decision is expected by next March.
Huc plans to rely on debt to finance the new plant, adding that almost 90 per cent of the expected production has been sold under “firm take or pay agreements. That’s what makes us confident about being able to secure debt for the plant,” he said.