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Mascoma Corp. Loses a $50 Million Partner: Valero Pulls Out of Michigan Project

Lebanon — Mascoma Corp., the Lebanon-based developer of cutting-edge biofuels technology, has lost its major partner in a proposed $233 million ethanol plant in Michigan.

Although Mascoma did not confirm the departure of the Texas-based energy giant Valero Energy Corp. and its promised $50 million investment, the company did say in an emailed statement Friday that a funding partner is being sought to build the Kinross, Mich., facility and another plant in Alberta, Canada.

Bill Day, Valero’s executive director of communication, confirmed Friday that the energy company is no longer part of the Kinross plant project.

“Mascoma is working on securing the necessary project financing to construct its two planned cellulosic ethanol plants,” the company said.

Building the Michigan plant is critical to the future of the biofuels company, which has incurred at least $150 million in debt and has relied primarily on government grants and smaller amounts of venture capital for its existence.

The proposed plant is expected to produce millions of gallons of ethanol using Mascoma’s proprietary technology and to generate the company’s first earned revenue.

“Mascoma is proceeding with the development of a planned 72 million liter per year multi-product biorefinery in Drayton Valley, Alberta,” the emailed statement said.

“This facility will use Mascoma’s proprietary … technology platform to convert woody biomass to cellulosic ethanol, isopropanol, purified xylose and bio-electricity. Mascoma is working with the Sustainable Development Technology Canada, a foundation funded by the Canadian government, on this project.

“In addition, Mascoma has completed the detailed design engineering and finalized the engineering, procurement and construction bids for the planned cellulosic ethanol facility in Kinross, Mich.

“Mascoma is currently focused on securing the remaining financing for project and will not proceed until there is a firm commitment for all the required funding,” the statement said.

The partnership with Valero was announced in December 2011, when the energy company agreed to provide up to $50 million needed to construct the plant. The project was expected to be completed by the end of this year, but ground has yet to be broken, the Midwest Energy News reported last week.

At the time of the partnership announcement, Mascoma President and Chief Executive Officer Bill Brady heralded the agreement as validation for the company’s technological leadership, as well as its ability to attract significant investment.

Mascoma also was preparing for an initial public stock offering at that time, although no official date was announced.

The IPO has apparently been put on hold. The company had hoped to raise $100 million from the sale of stock.

In a side arrangement, Valero had agreed to use Mascoma’s yeast in the energy giant’s other corn ethanol plants. It’s unclear if that pact is still in place.

On Friday, Mascoma said in the statement that the company has been working closely with the Department of Energy and the state of Michigan on the status of the project, “and to date, Mascoma has met all of the grant obligations for the state and federal funding that the company has received.

At this time, Mascoma cannot determine the start date for construction of the Kinross project, but the company continues to pursue new options and actively engage with interested parties.”

Professors from the Thayer School of Engineering at Dartmouth started Mascoma in 2005, and the business was hatched at the Dartmouth Regional Technology Center, a business incubator that has been an essential part of the area’s growing biotechnology sector.

Mascoma now has a building on Etna Road for research and development and offices in New York, the Boston area and in Canada.

Warren Johnston can be reached at wjohnston@vnews.com or 603-727-3216.