10 Top Strategic Investors in Biofuels & Materials

What makes a top strategic investor? Who are the players at the top of their investment game in biofuels now?

The criteria

First of all, by definition, strategic investors are generally non-financial corporate entities for whom the investment represents a strategic initiative. Second, the deals and companies must be visible and credible. Third, investors must be generally investing with outside entities.

In our list, we focused in on six oil companies, two from the feedstock side, and two more from the world of industrial biotechnology.

Oil companies

#1 Shell
Investments: Virent, Codexis, Iogen, Cosan
Why a major player: Shell has been a major investor in the space since investing with Iogen in the early 2000s. Investments in Codexis, Virent and Cellana (eventually discontinued) followed at regular intervals as the company expanded into drop-in fuels and the world of algae. Shell’s crowning achievement, the formation of the $12B Brazilian joint venture with Cosan, called Raizen, closed just this week.

#2 BP
Investments: Vivergo, Vercipia, Tropical Bioenergia, Butamax, Verdezyne, Qteros, CNAA
Why a major player: Like Shell, an early and steady investor in the space – though like Shell, its earliest investments in D1 Oils and a joint venture with Verenium, eventually were unwound into a divestiture and take-over, respectively. Joint venture has been the typical method for BP – partnering with Dupont in the biobutanol venture Butamax; Dupont and British Sugar in the wheat ethanol Vivergo project.

A takeover of Brazil’s CNAA reflected BP’s growing confidence that, through its Tropical Bioenergia venture, it has learned the ropes in the key market of Brazil. An early investor in Sun Ethanol (now Qteros), the company has also lately invested in early-stage renewable chemicals pure-play Verdezyne,

#3 Valero
Investments: O&O assets, Terrabon, Enerkem, Solix, Qteros, Mascoma, Diamond Green Diesel
Why a major player: Valero arrived with its checkbook much later than BP and Shell, but has become increasingly aggressive since a celebrated fire-sale acquisition of 700 million gallons in ethanol capacity from VeraSun resulted in the company’s best performing division. With BP, the company is an investor in consolidated bioprocessing pioneer Qteros; it also made an early investment in Solix but did not participate in the latest round.

In two investments the company paired with Waste Management: with Terrabon and Enerkem Management, it will provide the offtake side as well as capital for waste-based ventures – with Enerkem focused on ethanol and chemicals intermediates, and Terrabon aiming from drop-in fuels.

In January, Valero Energy  became an investor in Mascoma, potentially investing up to $50 million of the equity required to finance the project through Mascoma subsidiary Frontier Renewable Resources; an LOI called for Valero to enter into an off-take agreement for the project’s ethanol production, provide project development and construction oversight services.

But perhaps its most intriguing investment to date is the renewable diesel JV with Darling International known as Diamond Green Diesel. The partners originally stated that they would not proceed without a DOE loan guarantee – but having secured a conditional commitment from the DOE, the partners recently announced they were pulling out of the process, and that Valero would finance the project off the balance sheet of a subsidiary.

#4 Total
Investments: Amyris, Gevo
Why a major player: If its stunning $133 million pre-IPO investment in Amyris, which made it the largest investor in the synth bio pioneer, wasn’t enough, the company also invested in and hit paydirt with an investment in Gevo. The French oil major has been aggressively focused on expanding operations in Brazil and Europe through its Amyris association, but with Gevo has aimed at the US market.

#5 Petrobras
Investments: Guarani
Why a major player: Though its biofuels investment program is just now unfolding, the quasi-state oil company has pledged to remain aggressive in biofuels investment as it also undertakes some major oil & gas operations in the South Atlantic. Its primary vehicle to date: a major investment in the Guarani sugarcane and ethanol operation in Brazil. More acquisitions and JVs are planned for a rapidly expanding 2011-2014 period.

#6 Flint Hills Resources (division of Koch Industries)
Investments: O&O assets, SG Biofuels, Benefuel
Why a major player: Charles Koch wrote in the Wall Street Journal that the company was forced to enter the US ethanol business because of mandates (which it does not favor), but the company has expanded its purview from first-generation ethanol to embrace advanced fuels via SG Biofuels (jatropha).

Feedstock players

#1 Waste Management
Investments: Harvest Power, Agnion, Terrabon, Enerkem, S4
Why a major player: Waste management had been, like Valero, a latecomer to the space. It looks for companies that can utilize some (as yet) untapped WM-controlled waste stream. Paired with Valero as a strategic investor in Enerkem and Tarrabon; also investing in Harvest Power, Agnion, and S4, which offer niche solutions in biopower and bio-based products.

#2 Cargill
Investments: O&O assets, NatureWorks, USJ, BioAmber
Why a major player: If its ethanol and biodiesel assets were not enough to complement a massive (and longstanding) investment in biomaterials pioneer NatureWorkls (a former JV with Dow which was unwound several years ago), its massive JV with USJ in Brazilian sugarcane, ethanol and power – announced this month – should convince any doubters. The company has also joined as a strategic investor in BioAmber.

Chemicals and Industrial Biotech

#1 Dupont
Investments: DDCE, Danisco/Genencor, BAL-Dupont, Butamax, Vivergo
Why a major player: A veteran investor by now, the company has essentially staked its reputation on opportunities in industrial biotech, and a series of JVs has kept it in the thick of first-generaiton and advanced biofuels in the US and Europe. It made two investments with BP – as part of the group forming the UK wheat ethanol venture, Vivergo – and as a co-parent of the biobutanol venture Butamax.

JVs with BAL in a macroalgae to fuels/chems venure, and a co-investment with Danisco in Dupont Danisco Celulosic Ethanol have been highlights among other high-profile investments in the space. For sure, its stjnning $6.8B takeover of Danisco, which gives it control of Danisco subsidiary Genencor, takes the company’s involvement in industrial biotech to the next level.

#2 DSM
Investments: Martek, Verdezyne
Why a major player: Aside from the company’s established industrial enzyme business, DSM stunned the industry by acquiring algal biomaterials pioneer Martek for more than $1B earlier this year. A follow-up early-stage renewable chems pioneer Verdezyne confirmed that the company interests in the space range far afield from Martek’s lauded algae venture.