Virdia Gets Funding to Turn Wood Into Sugars for Biofuel Makers

Virdia Inc., a closely held biotechnology company, is planning its first commercial plant in Mississippi to convert wood into sugars that can used to produce transportation fuel, nutritional products and specialty chemicals.

The state agreed to provide a $75 million loan and $155 million in tax incentives, Redwood City, California-based Virdia said today in a statement. The company hasn’t decided on the location for the plant, which is expected to go into production in 2014. The total cost will exceed the state backing.

Cellulosic biomass may replace food crops such as corn and sugar cane as a sugar source for biofuels, chemicals or nutritional additives for animal feed, said Philippe Lavielle, who was named Virdia’s chief executive officer today. Virdia, which is changing its name from HCL CleanTech Inc., will sell its cellulosic sugars to industrial fermentation companies.

Supplying biofuel companies and chemical makers “will be a natural fit for us,” Lavielle said in a telephone interview. “The big volume markets are going to be in fuels.”

Oil companies in the U.S. are mandated to blend 36 billion gallons (136 billion liters) of biofuel with their fuel products by 2022, including 16 billion gallons made from cellulosic feedstocks. Global biofuel requirements call for at least 72 billion gallons by 2021, according to the closely held company’s statement.

Converting Ethanol Plants

No commercial volumes of cellulosic biofuels are produced currently in the U.S., according to the U.S. Environmental Protection Agency. Refiners may use Virdia’s products to make cellulosic fuel at existing corn-based ethanol plants, Lavielle said.

“This is another good example of where our products would find their markets, converting first-generation ethanol plants into second-generation plants just by using our sugars,” Lavielle said.

The Mississippi plant will use concentrated acids to process 350,000 tons of wood a year, less than a typical pulp and paper mill, into 150,000 tons of sugar, Lavielle said. Later plants may produce as much as 500,000 tons of sugar a year, he said.

Virdia is initially focusing on wood, and may later consider source crops such miscanthus and switchgrass, Lavielle said. “If you process wood then you can process all these grasses with no problem, but these aren’t available today,” he said.

Lavielle replaces co-founder Eran Baniel, who is now vice president of business development. Lavielle was previously vice president of business development at Genencor International Inc., a unit of Danisco A/S.

Virdia also said it received $20 million in venture capital from Khosla Ventures, Burrill & Co. and Tamar Ventures to fund engineering work for the plant, and $10 million in debt from TriplePoint Capital LLC. That follows $15 million in seed funding received previously, Lavielle said.

To contact the reporter on this story: Andrew Herndon in San Francisco at aherndon2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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