Friday, July 18, 2014

Renmatix Wants to be Your Sugar Daddy

In the post “Licella’s Pot is Boiling” on July 11, 2014, I described the progress Licella has made in developing its ‘supercritical water’ process to produce biochemicals and fuel from waste biomass.  Licella is not the only company that has been working on supercritical hydrolysis technologies.  Privately-held Renmatix based in Pennsylvania is also using high heat to break down cellulosic materials into sugar  -  the five-carbon sugar called xylose and six-carbon sugar called glucose to be exact.

Renmatix calls its process Plantrose and claims to have achieved success in a pilot plant located in Atlanta, Georgia.  Wood chips served as the feedstock for those early attempts.  Management speaks with confidence that the process can be applied successfully to a variety of feedstock sources.  The Plantrose process is completed in two steps:  1) separation of cellulose and lignon from biomass and 2) treatment of a cellulose and lignon slurry with hot, compressed water.  The stream of sugar molecules is then cooled and filtered.  The company plans to concentrate its sugar products to fit the needs of its customers.  End products could include succinic acid, butanediol or acrylic acid, among other highly valuable industrial chemicals.

One potential customer is the world-class chemicals company BASF.  In December 2013, BASF entered into an agreement with Renmatix to jointly develop industrial chemicals with Renmatix technology.  BASF had put $30 million into Renmatix almost two years earlier, so this is as much a matter following through on its investment.   The xylose that Renmatix plans to produce is an important building block for BASF chemicals.  BASF is counting on Renmatix to produce renewable sugars at lower cost than has been experienced with other biochemical producers. Alternative production technologies for renewable biochemicals rely on expensive enzymes or acids to break down the cellulose.

BASF is going to have to wait a while to place an order.  Renmatix management has said commercial production would begin in 2017 at the earliest.  The company will need capital to build out production capacity and it appears management is counting on a strategic investment from a partner for its commercial stage.  Besides BASF, the company has partnerships with Virent in the U.S., UPM Kymmene based in Finland, and Waste Management (WMI:  NYSE).  Both Waste Management and BASF among the development partners have already put money into the company's purse. 

The shift of aspiring cellulosic biofuel producers to biochemicals has been a smart move as it appears the interest and potentially the capital is more readily forthcoming from the chemicals industry.  Renmatix is certainly a company worth watching right along with our friends 'downunder' at Licella.

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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