Even though cellulosic ethanol maker Coskata just brought in $40 million in a third round of funding in November, it needs more to finish off its new commercial-scale plant — and the government stimulus package for biofuels looks like just the ticket.
Chief executive Bill Roe told VentureWire that Coskata is “very optimistic” about its chances of receiving the low-interest loans and loan guarantees from the Department of Energy soon. [Update: Previously, this post stated that Roe was all but certain that the company would receive the DOE funds — this was incorrectly stated.]
The plant in question, to be located somewhere in the American southeast, is expected to produce 50 million gallons of ethanol a year and is anticipated to cost between $250 and $300 million. Loans from the DOE could cover up to 80 percent of the debt portion of the financing, VentureWire reports.
Most cleantech applicants for stimulus funds are still waiting to hear back. So far, the only biofuel company to progress past this preliminary stage is Verenium, a publicly-traded company that also produces compounds for agricultural, chemical and pharmaceutical use (not to mention it already has a partnership with BP to build a commercial plant).
Coskata’s new plant project will actually be its second — it just finished one in Pennsylvania capable of producing 40,000 gallons a year. Both facilities will use the company’s special process that transforms non-food organic material — wood and agricultural leftovers in particular — into fuel that costs $1 a gallon to produce.
If Coskata is passed over by the DOE, it could have a hard time scraping together venture capital in this economy. Most firms are looking to fund companies that already have commercial facilities online. The project could wind up indefinitely delayed, or the company might be forced to find a corporate partner that would then own a substantial part of the proceeds. That being said, the company says it has already received a healthy amount of interest from investors, and that its past success in drawing financing is a testament to its ability to progress no matter what the government decides.
In addition to the stimulus funds, Coskata also applied for a $20 million grant to buy additional feedstocks and keep its current plant operational.
Whether or not the DOE will smile on Coskata remains to be seen, but its worth noting that the company has had a charmed run so far — successfully raising money last fall mere months after the economy’s nosedive. Its success have been attributed to its strong brand and powerful connections, including past backers Khosla Ventures, Advanced Technology Ventures and Globespan Capital Partners. It has raised $70 million since its inception in 2006 from those firms and TriplePoint Capital.
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