Royal DSM, the global Life Sciences and Materials Sciences company, and POET, LLC, one of the world’s largest ethanol producers, today announce a joint venture to commercially demonstrate and license cellulosic bio-ethanol, the next step in the development of biofuels, based on their proprietary and complementary technologies. POET–DSM Advanced Biofuels, LLC, is scheduled to start production in the second half of 2013 at one of the first commercial-scale cellulosic ethanol plants in the United States.
The two partners will produce cellulosic ethanol from corn crop residue through a biological process using enzymatic hydrolysis followed by fermentation. The first commercial demonstration of the technology will be at Project Liberty, which is currently being constructed adjacent to POET’s existing corn ethanol plant in Emmetsburg, Iowa. The initial capacity is expected to be 20 million gallons in the first year, growing to approximately 25 million gallons per year.
POET-DSM Advanced Biofuels, LLC, intends to replicate and license the technology to additional plants to be built at the other 26 corn ethanol facilities in POET’s network and license it to other producers in the United States and the rest of the world. The U.S. Environmental Protection Agency (EPA) estimates that in the United States as many as 350-400 new bio-refineries will have to be constructed by 2022 to meet the volume requirement of 16 billion gallons/year of cellulosic bio-ethanol under the Renewable Fuel Standard.
DSM and POET will each hold a 50% share in the joint venture, which will be headquartered in Sioux Falls, South Dakota. The initial capital expenditure by the joint venture in project Liberty will amount to about $250 million. The closing of the joint venture is subject to regulatory approvals and other customary closing conditions.
The joint venture is expected to be profitable in the first full year of production (2014) and to deliver substantial revenues with above-average EBITDA contribution in the medium/longer term.
Both partners in the joint venture bring deep expertise and experience in different areas of cellulosic bio-ethanol. They also share the same vision for a bio-based economy.
Jeff Broin, POET founder and CEO, said: “This joint venture brings together two companies leading the transition from a fossil-based economy to a bio-based economy. The partnership has set an ambitious goal: to make cellulosic bio-ethanol competitive with corn ethanol, which is the most competitive liquid transportation fuel on the market today. We believe that the joint venture positions us well to meet our ambitious cellulosic ethanol production goals.”
Feike Sijbesma, CEO/Chairman of the DSM Managing Board, commented: “This cooperation is a milestone in realizing DSM’s strategy. By leveraging the unique opportunities in Life Sciences and Materials Sciences we can contribute our heritage of over a century in both biotechnology and chemistry to this joint venture with a biofuels leader. Together we shall deliver the key to unlock the cellulosic bio-ethanol opportunity. As the world is facing unprecedented challenges with a growing population making an ever bigger claim on the planet’s resources, we need to accelerate the transition to a bio-based economy and this joint venture is a significant step in that direction.”
As one of the world’s largest producers of corn ethanol, POET has been actively developing cellulosic bio-ethanol for more than a decade. In November, 2008, the company started operating a cellulosic bio-ethanol pilot plant at its research center in Scotland, South Dakota. For the past five years, POET has been working with farmers to bale, transport and store corn crop residue—the cobs, leaves, husks and some stalk left in the field after the grain harvest.
DSM already has a unique position in the development of cellulosic ethanol as the only company offering both yeast and enzyme solutions to increase conversion rates to make the technology commercially viable. DSM has vast experience in scaling up biotechnological processes and an extensive global footprint and relationships to help accelerate technology adoption in key markets.
Cellulosic bio-ethanol from corn crop residue represents a large opportunity. If the technology is replicated at POET’s network of 27 existing corn ethanol plants, it could produce up to one billion gallons of cellulosic bio-ethanol per year.
In an analysis of the Renewable Fuel Standard, the U.S. EPA projected 7.8 billion gallons of cellulosic bio-ethanol coming from corn crop residue by 2022. Beyond that, the U.S. Departments of Energy and Agriculture have estimated that more than one billion tons of biomass is available in America that could produce enough cellulosic bio-ethanol to replace a third of the country’s gasoline use.