BioAmber's Sarnia facility nears mechanical completion

BioAmber Inc. recently released financial results for the third quarter, reporting that development of the company’s biorefinery in Sarnia, Ontario, is progressing on time and on budget. The facility is expected to be mechanically complete in early 2015.

"Sarnia is in a phase of rapid progress and is beginning its final sprint to mechanical completion.  We are seeing steady advancement with visible change on a daily basis," said Jean-Francois Huc, CEO of BioAmber. "The public offering completed in July strengthened our balance sheet and enabled us to accelerate work on our next plant, including initial engineering work, site screening and funding for the plant. In parallel, we have continued to manage our corporate expenses carefully, and the Sarnia plant remains on track to be mechanically complete in early 2015.”

During an investor call to discuss the quarterly results, Huc walked attendees through several photos of Sarnia site, describing specific progress made in recent months. “We are now averaging close to 200 workers on site daily and we’ve added a night shift for the piping work, as we had planned in our original budget schedule. We now have workers on site around the clock and we are pleased to report that our safety onsite remains exemplary,” he said.

Huc also indicated BioAmber has further strengthened the plant commissioning and startup team in an effort to bring the facility online as quickly and smoothly as possible once construction is complete. “Today we have a team of 20 people that are dedicated to preparation and execution of plant commissioning and startup,” he said, adding that the company’s ability to startup the plant smoothly will be aided by several factors. These factors include the five years of experience gained in operating a large-scale demonstration facility in France, the practical experience gained by key people at the demonstration plant, the extensive startup experience of the team, and help expected from select third parties, including equipment vendors, Cargill and others.

During the call, Huc also unveiled BioAmber’s new logo and discussed the company’s branding strategy. “With the completion of the Sarnia plant, BioAmber will be entering the next stage of its lifecycle, in which we evolve from a development-stage company to an operating company experiencing rapid growth. In this context, we are seeking to strengthen our identity, starting with our logo,” he said. The new logo features a three-loop infinity symbol. It is meant to convey the infinite availability of renewable feedstocks, the infinite viability of safe, carbon-neutral manufacturing, and the infinite growth that can come from building-block chemicals that go into a multitude of products and applications. According to Huc, the three loops are meant to represent the three pillars of sustainability: people, plant and profit. In addition to the new logo, BioAmber has also launched a new website.

Over the past few months, Huc said the company has fielded several inquiries on the impact of falling oil prices on the Sarnia plant’s economic viability. According to Huc, BioAmber previously disclosed that at oil prices of $95 per barrel and corn prices of $6.50 per bushel, the company had half the production cost of petroleum-based succinic acid without any subsidy. While oil prices have dropped to below $80 per barrel, and are forecast to drop as low as $70 per barrel, Huc noted that corn prices are also down significantly, at roughly $3.70 per bushel currently. “At current market prices of roil and corn, our cost advantage is actually increased,” he said, relative to where it is at $80 per barrel oil and $6.50 per barrel corn. Event at $5 per bushel corn, Huc estimated that oil prices would have to drop to below $30 per barrel for BioAmber to lose its cost advantage.

During the third quarter, BioAmber secured a 15-year take-or-pay agreement with Vinmar for at least 10,000 tons per year from the Sarnia plant and 200,000 tons per year from two future succinic acid plants, subject to their being built. A 5-year exclusive bio-succinic acid supply contract was also signed with Xuchuan Chemical. BioAmber secured sight new customers during the three-month period, for a total of 16 new customers so far this year. In addition, the company initiative several preliminary steps in connection with its second commerical plant, which will produce both biobased BDO and biobased succinic acid. Also during the quarter, a public offering of common stock was competed that raised $36 million in net proceeds.

Regarding financial results, the company reported $469,000 in revenue for the quarter, down from $866,000 during the same period of last year. Sales volume increased, but was offset by a decrease in the average sales price that resulted from customers seeking pricing more in line with prices BioAmber has contractually committed to for future Sarnia supply. Revenues increased by 13 percent when compared to the second quarter of the year. According to BioAmber, the company continues to manage sales in an effort to preserve its bio-succinic acid inventory levels in advance of the Sarnia plant start-up. Gross loss for the third quarter was $979,000, compared to a gross profit of $211,000 during the same period of last year. The adjusted net loss attributable to shareholders was $8.6 million, or a loss of 41 cents per share, compared to an adjusted net loss attributable to shareholders of $6.8 million, or 37 cents per share, for the third quarter of 2013.