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Valero to finance, operate $232 million Mascoma plant

By Mascoma Corp. | December 13, 2011

Mascoma Corp. announced that it has entered into definitive agreements with Valero Energy Corp., the nation’s largest independent oil refiner and a leading ethanol producer, to develop and operate its 20 MMgy commercial-scale cellulosic ethanol facility in Kinross, Mich.

The cost to construct, commission and start-up this facility is expected to be approximately $232 million, based on current external engineering estimates, and includes certain up-front infrastructure costs that will enable the expansion of the facility to 40 MMgy. These costs are fully funded, with Valero providing the majority of the financing, and the remainder from awards by the U.S. DOE and the state of Michigan. Construction of the Kinross facility is anticipated to start in the next three to six months and is expected to be completed by year-end 2013.

The Kinross facility will use Mascoma’s proprietary consolidated bioprocessing (CBP) technology platform, which has been developed by Mascoma over the past five years, to convert hardwood pulpwood into ethanol. Hardwood pulpwood is a selectively harvested, naturally regenerated feedstock and is an underutilized, abundant resource in the surrounding area.

“Valero’s substantial financial commitment to the Kinross facility demonstrates Mascoma’s technology leadership, as well as our ability to attract the significant investment that has posed a key challenge to advanced biofuels production in this country,” said Bill Brady, president and CEO of Mascoma. “Our partnership with Valero to develop and operate the Kinross cellulosic ethanol facility, and facilities beyond Kinross, is a major step forward in our goal to provide a low-cost, more sustainable alternative to petroleum-based products.”

Highlights

- Frontier Renewable Resources LLC, a subsidiary of Mascoma, and Diamond Alternative Energy LLC, a subsidiary of Valero, have formed a joint venture, Kinross Cellulosic Ethanol LLC, to develop and operate a hardwood cellulosic ethanol facility in Kinross, Mich.

- Mascoma and Valero will finalize certain ancillary agreements relating to the Kinross facility, including construction, feedstock supply and ethanol offtake marketing.

- Mascoma will contribute the proceeds from its DOE cooperative agreement award and its State of Michigan grant to the joint venture, while Valero will provide additional financing required to develop the Kinross facility.

- Valero will provide project management to build and will operate the Kinross facility, and will hold a majority interest in the joint venture. Mascoma, through its subsidiary Frontier, will hold a minority interest. Valero will market the ethanol produced at the Kinross facility.

- Mascoma will receive royalties for a certain time period based on ethanol yield milestones.

- Valero will have the option to expand the Kinross facility’s capacity to up to 80 MMgy.

- Mascoma and Valero have developed a framework agreement for partnering on additional cellulosic ethanol facilities beyond Kinross.

“This partnership provides an exciting opportunity to combine Mascoma’s innovative CBP technology platform and expertise with Valero’s project management, operating, distribution and marketing capabilities,” said George Stutzmann, vice president of alternative energy of Valero. “We view this first commercial-scale cellulosic ethanol facility in Kinross and our partnership with Mascoma as an important foundation for potential expansion beyond Kinross.” 

 

 

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