By Eric Wesoff
Mascoma, the New Hampshire-based biofuel company, has filed with the SEC in preparation for the firm's upcoming IPO. That means a huge injection of cash for the company, which has made waves with its developments in cellulosic ethanol production.
In its initial Form S-1 filing, Mascoma said it will sell up to $100 million worth of shares in its IPO, although how many shares actually get sold is a matter yet to be seen. In any case, it will be a huge boost for the company as it gets closer to starting construction on a production plant in Michigan that's a joint venture with Valero. The filing states that the Michigan plant is expected to produce 20 million gallons of ethanol per year, which is down from prior estimates of 40 million gallons.
Mascoma is backed by a number of top venture firms, including SunOpta, Khosla Ventures, Flagship and General Catalyst. Morgan Stanley (NYSE:MS), UBS and Credit Suisse (NYSE:CS) are underwriting the IPO. SunOpta holds the biggest stake in Mascoma, about 20 percent, after the two firms worked out a $51 million merger last September.
Mascoma has made its name by developing proprietary yeasts that, according to the firm, eliminate the need for a number of expensive enzymes used in biomass conversion. In the S-1 filing, Mascoma states that its first commercial application of its technology will be a drop-in yeast substitute for corn ethanol producers. Mascoma's lab research suggests the new yeasts may offer a cost savings of one to two cents per gallon. Of course, those claims aren't based on large-scale commercial use, but with 13 billion gallons of ethanol produced in the U.S. last year, even minute savings can add up to millions.
That possibility is going to be a key factor for investors pricing Mascoma stock.
Additionally, Mascoma is planning to get more involved in the production side. The already-announced hardwood bioprocessing plant in Kinross, Michigan should begin construction in the next three to six months. The S-1 mentions the company is also looking at a location in Drayton Valley, Alberta where ground would be broken in the next 12 to 24 months.
Mascoma has demonstrated its consolidated bioprocessing (CBP) tech at its demo facility in Rome, New York. The Rome facility is capable of producing a few hundred thousand gallons a year with a yield of 67 gallons of ethanol per short ton of hardwood pulp. That's down from a 71 gallon yield in lab studies, and it's unclear whether Mascoma's commercial production will see a similar scale-based efficiency loss.
In fact, Mascoma claims that the Kinross facility will see yields of 83 gallons per hardwood short ton thanks to refinement of manufacturing processes since the demo facility was built. With those yield estimates, Mascoma expects the Kinross facility to produce ethanol at an unsubsidized cash cost of about $1.77 per gallon. The company states its target is to bring that number below a dollar within the next few years with a combination of further refinement of manufacturing, economies of scale and microorganism improvement.
- According to the filing, Mascoma had $15.5 million in revenue in 2010, 86 percent of which was from government grants. That's worth repeating -- 86 percent of revenue came from government grants.
- Mascoma's net loss for 2010 was $26 million.
- The company currently has a deficit of $138 million.
- So far, Mascoma has raised $135.3 million “from private placements of equity securities and debt financing, including $105.3 million in proceeds from the sale of preferred equity securities, $10.0 million in proceeds from the sale of convertible notes, and $20.0 million in borrowings under our secured debt financing arrangements.”
2011 has been a strong year for biofuel IPOs. Mascoma looks to continue that streak.