No Revenues, No Problem! Thoughts on Coskata’s IPO Filing

Last week Coskata became the latest biofuel/biochemical maker to file for an initial public offering (IPO). The biofuels producer hopes raise $100 million to help fund its Boligee, AL cellulosic ethanol facility, which will use the company’s gasification and fermentation platform,  as well as ongoing development efforts.

The filing included by-now familiar figures on the addressable market and risks, so I pulled out a few noteworthy points:

•   “We are a development stage company and have generated limited revenue."

They were not kidding, but in all fairness their sales history is not the weakest among biofuels IPOs (table). Coskata  posted $250,000 in revenue for its fiscal year ended December 2010, and joins a growing list of biochem/biofuel firms looking to go public with little or no commercial sales.

Those that have launched, namely Codexis, Amyris, Gevo, and Solazyme, were posting sales figures in the range of $38-$83 million. Four of the seven yet to launch have generated less than $1 million in sales in their latest fiscal year.   Many revenue streams are dominated by government grants, with limited to zero product sales.

• Fuels First!

Biochemical efforts are taking a backseat to biofuels. Several companies, like Elevance or Gevo, have decided to target biochemicals either before fuels or concurrently. Ideally, this strategy delivers a quicker route to commercial sales, higher margins, and meaningful volumes (instead of being a drop in the bucket in the behemoth fuels market).  It also gives companies an opportunity to bring down the cost of cost of production—ultimately facilitating a smoother entry into fuels.

Coskata gives its biochemicals pipeline an addressable market of $100 billion. The company  is collaborating with Total Petrochemicals on a microorganism that can produce propanol, a precursor to propylene. Total is working separately with IFP Energies Nouvelles and Axens to develop an optimized technology to dehydrate alcohols.  Coskata expects to expand its efforts into four-, five-, and six-carbon chemicals, and has demonstrated in the laboratory that it can produce propanol, butanol, butanediol, hexanol, organic acids, and certain fatty acids.

• Going it Alone

Coskata expects its Boligee plant to be funded by a combination of IPO proceeds, cash on hand, and $88 million in debt financing through the USDA’s Biorefinery Assistance Progam. The first phase of the project will produce 16 million gals/year in 2013. Modular expansions will add 62 million gals of annual capacity in 2015.

The estimated cost of the facility was not disclosed, although a comparably-sized cellulosic biorefinery project announced recently by Mascoma and Valero is expected to cost $232 million. Mascoma and Valero have signed a definitive agreement to form a jv to build and operate the 20 million gals/year facility at Kincross, MI. Funding will include a “significant financial commitment” by Valero and an $80 million DOE grant. Mascoma filed for an IPO in September.

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