Sweetwater Energy raises $10M; begins ramp-up to first commercial

Sweetwater Energy announced it has closed on a $10 million bridge loan. The loan closed as Sweetwater said that it is now opening its Series B investor round to begin construction of a first commercial facility.

Sweetwater make quite a splash with a series of high-profile deals in 2012-13 based around the production of cellulosic sugars for cellulosic ethanol add-on projects, with Pacific Ethanol, Ace Ethanol and Front Range Energy among those who signed on to get a hold of Sweetwater’s low-cost sugars. Then, silence descended as a combination of policy uncertainty and low fuel prices put sections of the cellulosic ethanol industry into “suspended animation” as project developers struggled to find financiers.

With that slowdown, questions began to emerge around the viability of some of the companies aimed at making cellulosic sugars for ethanol players — some of those questions will now be put to rest as Sweetwater emerges briefly from stealth to confirm that it continues to raise capital, and ready its technology for commercial scale. One key wrinkle in the Sweetwater story — the company has added a direct-to-chemicals component to its strategy, and that will be the focus of the first commercial plant.

More about fuels

“We’re very pleased to have closed this loan, which secures Sweetwater’s operations as we begin building our full-scale commercial biomass-to-biochemical conversion facility,” says Sweetwater CEO Arunas Chesonis. “We have the best pretreatment technology in the industry right now, and we’re very excited to now ramp it up and become a player in the biochemical space.”

What about fuels? “The projects and plans are still there,” said Chesonis. “If corn spikes to $5.50 or $6.00, or if if ethanol prices go up and oil trends toward 70-80 per barrel, things will come back on the table. But with the price of oil the last 6 months, and the price of corn, confusion in Washington and some technology flameouts in the industry, it’s really tough for cellulosic ethanol projects to obtain financing.”

More about chemicals

For now, Sweetwater Energy is saying openly that “uses a unique technology to convert low-cost plant materials to a variety of high-value biochemicals” without getting into tremendous detail about the chemicals themselves except to say that there are, potentially, “dozens of biochemicals, many of which have traditionally required much more expensive methods to manufacture.”

We speculate that Sweetwater is aiming at organic acids — where the petrochemical industry, starting from hydrocarbons, has the added process step and cost associated with adding oxygen — whereas biomass contains sufficient oxygen to start with. That could mean end targets like polylactic acid, succinic acid, malic acid, acetic acid and so on.

Feedstocks, and project details

We know more about the feedstocks,which include waste wood, agricultural residues, and purpose-grown crops such as switchgrass which have been tested already in Sweetwater’s demonstration plant in Rochester, NY.

What do we know about the first commercial at this stage? Details are sketchy, but we do know that the first commercial project is expected to cost $52 million, with a capacity around 60-70 million pounds of chemicals (equivalent of 9 million gallons of fuel), and the Series B investment round is aimed squarely at raising the equity portion of that investment.

Sweetwater closed its $16 million Series A round in 2013, which along with grants from the New York State Energy Research and Development Authority, funded the development of its demonstration-scale plant at its Lee Road location to validate and optimize the technology.

The Bottom Line

So, Sweetwater is back in the public eye after a year in low-profile mode. We’ll expect to learn more about the scaled-up design and improvements or changes, if any, in the technology approach after the company has completed its Series B, which is expected to happen this year.  For chemicals play, expect a partnership, we think, and expect it in fermentation technology given that this is a cellulosic sugars play.