With the promise of a $75 million loan from the Mississippi Development Authority in hand, Redwood City, Calif.-based Virdia is ready to begin scouting for a site to convert the state’s soft pine into sugars for biofuel makers.
The one certainty about the plant’s location is that it will be near an ample supply of pine and must produce at least 150,000 tons of sugar to be commercially viable.
Virdia plans to open the plant in 2014. A second larger plant that is to follow would have a production capacity of 500,000 tons of sugar, the company says.
An out-of-use pulp plant or brownfield site would suffice, as would co-locating with a power generating plant that is using bio-mass, the company says.
Virdia started life as HCL Clean Tech. The privately held startup company adopted the Virdia name in early March, a move that coincided with the naming of biofuels sector veteran Philipe Lavielle as CEO.
Lavielle, in a press statement accompanying his appointment, said Virdia is “much closer to realizing our mission on a large scale.”
To secure the $75 million loan from the State of Mississippi, Virdia will have to satisfy state officials that it has adequate private capital backing. So far, it has raised $20 million from insiders and a handful of venture capital firms and closed on a $10 million venture deal with Triple Point Capital.
Sally Williams, spokeswoman for the Mississippi Development Authority, said she is unsure whether the $30 million in private money is sufficient to satisfy the state’s loan terms.
Virdia contemplates a $1 billion investment in Mississippi facilities, according to Williams. “I don’t know the time frame. I know we’re several years out.”
In full operation, Virdia expects to employ about 700 workers, Williams said.
In addition to new jobs, the economic development agency’s attraction to Virdia lies in the biotech company’s potential to create a large and sustainable source of cash for Mississippi’s vast timber resources. It has developed a process that converts cellulosic biomass to fermentable sugars and lignin, which are used as feedstock for the renewable chemicals industry and the biofuels sector.
The company has started a test plant in Danville, Va., though the volume of cellulosic biofules the plant is producing is far from commercial levels, Virdia says.
No commercial volumes of cellulosic biofeuls are produced currently in t the United States, according to a Bloomberg story that cited the U.S. Environmental Protection Agency as its source.
As a further sweetener, the state intends to grant Virdia up to $155 million in various tax incentives over a 10-year period.
The Virdia deal represents a doubling down by the Mississippi Development Authority on the future of biofuels. In 2010, the state extended a $75 million low-interest loan to Pasadena, Texas-based biofuels company KiOR in exchange for a commitment to invest $500 million of its own money in the first three of five plants.
The KiOR plants in Mississippi are to convert wood chips to renewable crude through a process called pyrolysis, a feat only accomplished in test facilities
The publicly traded KiOR is expected to open its first plant in Columbus in the third quarter. A second plant is to go up in Newton and a third in southwest Mississippi. Specific sites of the final two facilities have not been determined.
The Columbus plant is to produce 500 bone dry tons of wood per day and is expected to produce 11 million gallons of renewable fuel blends annually.
The subsequent plants could produce as much as 1,500 bone dry tons a day, the standard for commercial production facilities.
At this scale,KiOR believes it will be able to compete not only with other biofuels producers, but with oil production offshore and from tar sands, the company says.
KiOR went into its arrangement with the Mississippi Development Authority with signed agreements from Hunt Refining Co., FedEx Corporate Service and Catchlight Energy to buy fuel blends from the Columbus plant. Catchlight is a 50-50 joint venture of subsidiaries of Chevron and Weyerhaeuser.
The official private commitments “triggered the state’s assistance in KiOR’s case,” said Williams, the MDA spokeswoman.
Dr. Randall Rousseau, hardwood management extension forester with the Mississippi Cooperative Extension Service, said the new arrivals to Mississippi’s fledgling biofuels sector likely will boost a timber industry suffering from prolonged price drops. “Biomass will definitely help out,” he said in a interview last week. “It gives the landowner some options.”
And with options come leverage for the grower, Rousseau noted. “They (the biomass companies) would like to not pay pulp wood prices. But my guess is that they’re going to have to compete with other paper mills.”