Tuesday, May 13, 2014

You Say Sugar, Proterra Says Sucrose

To understand privately held Proterra, it is necessary to understand sucrose.  Of course, we all know it is a sugar, more specifically the white grainy stuff we like to put on our cereal and in our iced tea.   Sucrose is found naturally in whole foods and is made in concentrations from beets, sugar cane and other organic sources rich in carbohydrates.  Most of the alternative energy industry has trying to harness the energy in organic materials for fuel, much like the human body extracts energy from food.

Instead of purchasing some carbohydrate rich feedstock, Proterra grows its own.  The company has bred its own army of microorganisms and has them deployed in a proprietary photobioreactor.  The microorganisms  -  cyanobacteria by name  -  are facile at using carbon dioxide, sunlight and water to produce sucrose that can be sent directly to a fermentation step and turned into fuel.  The design of the photobioreactor is now protected by a patent issued in February 2014.  In December 2013, the company had received patent protection for its unique biosynthetic sugar-making process.  The company already received patent protection for the genetic code of its microorganisms.

With seemingly every nuance protected from competitors, Proterra seems ready to bring its sugar to market.  Last month the company issued a press release claiming four months of continuous operation of a pilot plant.  The company claims the experience has given them confidence their microorganisms and photobioreactor can be scaled to higher volume production.  This has been the step that has presented a stumbling block for many of the cellulosic ethanol producers.

Proterra confidence stems in part from the economics of its process.  Management believes its microorganisms can produce sucrose at a cost well below the cost of processing organic crop or waste materials.

The company has strong backing from venture capital.  If historic patterns play out, there will come a point in Proterra’s development that these investors will look for an exit through sale of the company or an initial public offering of common stock.  I will be watching Proterra’s news.  An off-take agreement or the construction of a scaled plant would be strong hints that commercial production is around the corner.

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

 

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