BP to Acquire Vereniums Cellulosic Biofuels Business for $98.3M; Verenium retaining Enzyme Business

BP and Verenium Corporation announced an agreement for BP Biofuels North America to acquire Verenium’s cellulosic biofuels business, including the facilities in Jennings, LA and San Diego, CA, for $98.3 million. Verenium will retain its commercial enzyme business, including its biofuels enzymes products and have the right to develop its own lignocellulosic enzyme program.

Verenium will also retain select R&D capabilities, as well as rights to access select biofuels technology developed by BP using the technology it is acquiring from Verenium through this agreement. In 2008, the two companies had formed a strategic partnership to accelerate the development and commercialization of cellulosic ethanol. (Earlier post.)

We are very pleased that our strategic development partnership with BP has successfully advanced our cellulosic ethanol technology to the cusp of commercialization.

This agreement should give both companies the flexibility to pursue the growth opportunities in the respective businesses and achieve goals in the near-term. As a result of this transaction, Verenium will have the resources to grow our commercial enzyme business while maintaining strategic access to the emerging cellulosic ethanol market in a manner that better fits our resources.

—Carlos A. Riva, President and Chief Executive Officer at Verenium

Gulf Spill
On 12 July, BP successfully installed a new 3-ram capping stack on the failed Blowout Preventer on the gushing undersea well in the Gulf.
Pending a successful outcome of a well integrity test to determine whether or not the well structure can sustain the pressure of being capped in that manner, the capping stack could enable the shutoff of the well while the relief well efforts are completed.
Following a meeting with Secretary Chu and his team, the National Incident Commander announced that additional analysis of the well testing procedure should be performed before starting the well integrity test.
In preparation for commencement of the well integrity test, the middle ram has been closed and a leak has been detected in the choke line of the 3-ram stack. It has been isolated and will be repaired prior to starting the test.
Operations continue on the first relief well. Operations on the second relief well have been temporarily suspended at 15,963 feet to ensure that there is no interference with the first relief well. The relief wells remain the sole means to permanently seal and isolate the well.
Full coverage and discussion on The Oil Drum.

Under the agreement, BP will acquire:

  • The Jennings, LA facilities, including the pilot plant and the demonstration-scale facility as well as the San Diego, CA R&D facilities;
  • Cellulosic biofuels technology and related IP; and
  • Cellulosic enzyme technology and related IP.

In addition, BP would retain scientists and technologists needed to continue the biofuels development program.

Verenium will retain / receive the following:

  • The core commercial enzyme business, including the personnel and supporting technology required to develop the business, including for applications in the biofuels segment;
  • $98.3 million payment from BP;
  • $10.8 million in cash (currently restricted) to be released upon assignment of its lease for the San Diego facility to BP;
  • The ability to access select biofuels products developed by BP using the technology it is acquiring from Verenium; and
  • The ability to transition out of the San Diego, CA facility over the next two years.

BP will become the sole investor in Vercipia Biofuels, a 50-50 joint venture formed by BP and Verenium in February 2009, and will independently manage all of Vercipia’s activities going forward. Similarly, Galaxy Biofuels, a 50-50 joint development company owned by BP and Verenium, will be owned 100% by BP. This transaction is expected to close in the third quarter of 2010.

Vercipia is moving to commercialize cellulosic technology for the production of ethanol from a wide array of non-food feedstocks, including dedicated energy crops, agricultural waste, and wood products. (Earlier post.) Galaxy

Verenium was formed in June 2007 through the merger of Diversa Corporation, a leader in enzyme technology, and Celunol Corporation, a developer of cellulosic ethanol process technologies and projects. This combination yielded an integrated, end-to-end cellulosic ethanol capability.

Verenium’s conversion process originated from technology developed by a team led by Dr. Lonnie Ingram at the University of Florida and originally licensed by Celunol.

The key element of the conversion technology is two types of genetically engineered Escherichia coli bacteria: BW34 to ferment C6 (hexose) in cellulose and KO11 to ferment C5 (pentose) sugars present in hemicellulose.

Ingram modified the E. coli—which could use both 5- and 6-carbon sugars, but produced very little ethanol—with the ethanol-producing capabilities of Zymomonas mobilis. Z. mobilis is a good ethanol producer that is highly alcohol-resistant, but is also very sensitive to its environment, is not very hardy, and can mostly use only glucose. (Earlier post.)

UBS Investment Bank acted as financial advisor to Verenium in connection with the transaction. DLA Piper LLP (US) served as legal advisor to BP. Cooley LLP served as legal advisor to Verenium.

Since 2006, BP has announced investments of more than $1.5 billion in biofuels research, development and operations, and has announced investments in production facilities in Europe, Brazil and the US. This includes partnerships with other companies to develop the technologies, feedstocks and processes required to produce advanced biofuels, and $500 million over 10 years in the Energy Biosciences Institute (EBI), at which biotechnologists are investigating applications of biotechnology to energy.


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