Valero invests in Enerkem, sees future for cellulosic ethanol

By Erin Voegele | June 02, 2011

Montreal-based Enerkem Inc. announced June 1 the closing of $60 million in financing. Valero Energy Corp. became a new investor in the company as part of an equity round, joining existing investors Waste Management Inc., Rho Ventures, Braemar Energy Ventures and Cycle Capital.

According to Bill Day, Valero’s executive director of media relations, the investment in Enerkem is one of a series of investments his company has made in renewable fuels and biofuels companies. “Valero itself does not do a lot of research or development into renewable fuels,” he said. “We prefer to do investments in companies that are doing that research, or in some cases, just buy the research itself. With a company like Enerkem, which is doing a lot of innovative stuff with biofuels, it’s a good partnership for a company like Valero.” He said Valero thinks Enerkem’s project is one of the more viable and practical of the emerging biofuel technologies.

According to information released by Enerkem, the two companies have also agreed to jointly consider commercial opportunities. “Valero owns 10 corn ethanol plants in the Midwest, but we are also looking at cellulosic ethanol,” Day said. “Once there is some sort of emerging technology for the production for cellulosic ethanol, what we would like to do is add that technology to our existing corn ethanol plants so they could do both corn and cellulosic.” There is also potential for Valero to form an off-take agreement for cellulosic ethanol produced by Enerkerm, he said.

“With Valero joining Waste Management as a strategic investor, Enerkem becomes one of the very few renewable products companies that is aligned with industry leaders from both upstream and downstream parts of the business,” said Vincent Chornet, president and CEO of Enerkem. “This buy-in is yet another testament to the solid ongoing growth of our company, which is uniquely positioned to successfully meet the demand for clean transportation fuels and biochemicals.”

Credit Suisse acted as the agent for the financing round. The investments will support Enerkem’s roll-out of current and future planned projects. The company also recently received $130 million in funding from the USDA and U.S. DOE to support the development of a plant in Pontotoc, Miss., which is expected to break ground in 2011. Construction is already underway on a 10 MMgy facility in Edmonton, Alberta.