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Biofuel Seed Developer Ceres Looks To Cash In On 16 Years Of R&D

Ceres, which uses advanced plant breeding and biotechnology to make better seeds for biofuels, is working to commercialize its products. Ceres Chief Executive Richard W. Hamilton Richard W. Hamilton, Ceres’ chief executive, says the Thousand Oaks firm’s seeds are superior to those of competitors. (Ceres Inc. / November 3, 2013) By Ronald D. White November 3, 2013, 5:22 p.m. The road to a clean biofuels future is not easily traveled. Ceres Inc. in Thousand Oaks has some highly regarded science on its side as a producer of genetically modified seeds for crops used to make biofuels. Under the motto “Growing tomorrow’s fuel today,” Ceres has used advanced plant breeding and biotechnology to make better seeds for sophisticated versions of crops such as sweet sorghum, high-biomass sorghum, switch grass and miscanthus. Started in 1997 by a UCLA professor and his corporate partners with more than $50 million in private capital, Ceres makes seeds that can be converted into a new kind of ethanol using plant fibers instead of corn kernels or sugar cane. Ceres sells seeds and provides seeds for trials to ethanol mills, including some in Brazil, and to power producers, cellulosic biofuel companies and growers. It also has its own breeding center in central Brazil and on customers’ fields, but it doesn’t refine products into biofuels. Ceres has been and remains a research-and-development company, but it has reached that crucial stage in which it is working to commercialize its products. The company, which raised $74.75 million in its initial public offering last year, has been profitable in only three years: 2003, 2005 and 2006. Richard W. Hamilton, Ceres’ president and chief executive, is looking to better days ahead with what he touts as seeds superior to those of competitors. “From a competitive standpoint, for the second year now, our portfolio of products outperformed products from other seed companies,” he said in a conference call with analysts. “This is according to feedback from mill customers where comparable or side-by-side trials were available.” He would not otherwise comment, a Ceres spokesman said, because the company was in the process of planning for its release of fiscal fourth-quarter results this month. Hamilton joined the company in 1998 as chief financial officer, rising to chief executive in 2002 to replace Walter De Logi, who remained chairman. The Latest For the third quarter, which ended May 31, Ceres reported that it lost $9.3 million, a wider loss than the $8.4 million in the year-earlier quarter. Sales, though, rose to $1.4 million from $1.1 million. The company, which has 96 employees, also said it would cut 17 positions in a cost-saving move. On a more positive note, Ceres extended a joint market development agreement with Syngenta in Brazil, where Ceres has introduced its sweet and high-biomass sorghum varieties to some of that country’s ethanol mills. Ceres is providing seed and research support to the project. Brazil’s ethanol mills operate about 200 days a year, but the use of Ceres sweet sorghum could extend mill operations an additional 60 days a year. Accomplishments The science behind Ceres seeds is highly regarded; it involves a process similar to mapping the human genome, but Ceres was mapping the cellular level of plants. Ceres has 100 U.S. patents related to its research and an additional 200 pending in the U.S. and abroad. The crops have the commercial potential to be sturdier and more productive for biofuel production, analysts said. “These traits include high drought tolerance, high sugar content, nitrogen-use efficiency and increased biomass yields, among others,” Hamilton said. The company’s seeds have given it significant strengths, particularly in comparison with similar products from much larger competitors Monsanto Co. and DuPont Co., said research analyst Caleb Dorfman at Simmons & Co. International. “Since Ceres’ hybrids both outperformed competitors’ hybrids and demonstrated that sweet sorghum can be profitable when cultivated correctly, we believe a large-scale adoption of sweet sorghum is still likely,” Dorfman said. Challenges Even so, Dorfman said in a recent note to investors, “it has been a tough road for Ceres.” He pointed to “lackluster planting and harvest” last year and noted that the “high expectations for the 2013 harvest were crushed” when ethanol mills told Ceres that they would need another year of field trials before deciding whether to proceed with commercial-scale plantings. Ceres said it needs to reduce costs and preserve cash. The company had $37.4 million in cash and marketable securities on hand at the end of the third quarter. “While we continue to believe a capital raise is necessary,” Dorfman said, “these cuts could help delay a cash infusion until market conditions are more favorable.” The company didn’t get as much as it had hoped for in its February 2012 IPO. Originally seeking as much as $23 a share, Ceres ended up going public at $13. Shares have been hovering below $1.50 after hitting a 52-week low of $1.10 last summer. It gained 2 cents, or 1.4%, to $1.48 on Friday. Analysts Despite its challenges, Ceres still attracts some attention on Wall Street. Of seven analysts who regularly cover Ceres, two regard it as undervalued and rate it as a strong buy. Another analyst rates it as a buy for the same reason. Two analysts are hedging their bets and telling investors to hold their Ceres shares. Dorfman considers Ceres “overweight,” meaning he expects the stock to outperform competitors in the coming months. ron.white@latimes.com Continue reading

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US Leads Global Advanced Biofuels Market

The US is the dominant force in the advanced biofuels market, with 67 percent of current global projects based in America, according to a study by Navigant Research. The US’ Renewable Fuel Standard, which calls for 21 billion gallons of advanced biofuel production by 2022, will help keep the US at the epicenter of the market in the coming years, according to Advanced Biofuels Country Rankings. However, emerging opportunities for advanced biofuels growth, across a diverse range of non-food feedstocks and conversion platforms, are beginning to coalesce in a number of countries outside the US, the report says. Growth in advanced biorefinery infrastructure will be moderate through 2015, according to the report, as new commercial facilities seek to demonstrate viability at scale and government support retreats from post-stimulus highs across the US, Europe and China. Over the medium term (2015-2018), however, a wave of retrofits and capital light deployments co-located alongside conventional biorefinery infrastructure is expected to usher in an expansion of advanced biorefinery capacity, followed by an increase in greenfield projects, the report says. In other biofuels news, Chempolis, a Finland-based biorefining technology corporation, has signed a memorandum of understanding with Indian oil and exploration company ONGC that investigates building India’s first biorefinery project. Further to the first biorefinery, Chempolis and ONGC are targeting at larger production of sustainable biofuels in India. California-based biofuels company Biosynthetic Technologies has announced that operations of its demonstration production plant within chemical company Albemarle’s existing Baton Rouge facility have commenced. Biosynthetic Technologies is now moving forward with development of a full-scale commercial production plant. Additionally, Iowa Gov. Terry E. Branstad has launched a public-private partnership that aims to expand the market for mid-level biofuels blends. Through the use of current funding, “Fueling Our Future” aims to establish more blender pumps containing petroleum with a high ethanol content and biodiesel at gas retailers around the state. According to research released this week by the National Renewable Energy Laboratory there is no evidence that petroleum blends containing higher amounts of ethanol cause damage to engines, contradicting an earlier study. The NREL study found that the available literature did not show any “meaningful differences” between a 15 percent ethanol blend, or “E15,” and a 10 percent blend, or “E10,” in “any performance category,” directly conflicting a controversial study released by Coordinating Research Council earlier this year. Continue reading

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EU Biofuel Regulations Set To Be Delayed Until 2015

Advanced biofuels producers criticise “bad day for industry and investors” as Environment Committee vote pushes back debate on new rules By Will Nichols 18 Oct 2013 EU lawmakers have effectively postponed the creation of a stable policy regime for biofuels until 2015 in a move that is “bad news for industry and investors”, companies across the sector said yesterday. The Environment (ENVI) Committee of the European Parliament yesterday voted against allowing negotiations with member states on a draft law to cap the use of food crop-based biofuels and measure indirect emissions arising from biofuels production from 2020. The European Parliament approved revising the current biofuels regulations last month. But the motion to start negotiations with the European Council, made up of ministers from member states, was only passed by one vote, which meant it required a second reading before a final vote. MEP Corinne Lepage, rapporteur of the biofuels draft law, was bidding to start a fast-tracked second-reading procedure, arguing the overwhelming majority of industry stakeholders want “a quick result” that could deliver policy certainty prior to next year’s European elections. The proposal split the biofuels industry. Earlier this month, Danish company Novozymes, BA, DONG Energy, WWF and Transport & Environment were among 15 companies and NGOs to call on the EU to start early second-reading negotiations in the hope of delivering a “sustainable, lasting, and stable policy framework for the biofuels industry” before the elections in May 2014. But fast-tracked negotiations were strongly opposed by conventional biofuel producer groups, who would be most affected by new rules requiring firms to calculate indirect land use change (iLUC) emissions arising from deforestation, draining of peatlands and other land clearance for biofuels. In a letter sent this week, six industry bodies argued the science underpinning iLUC calculations is too imprecise to be used to underpin legislation and urged Council representatives to reject a second reading, arguing “no hasty decisions” should be made because of time pressure before May 2014 and that EU institutions needed time for “a healthy debate … before reaching definitive conclusions”. The move to fast track a decision was subsequently quashed by ENVI yesterday, so it is now unlikely that a decision on new biofuels regulations will be taken before 2015. The move was welcomed by Raffaello Garofalo, secretary general of the European Biodiesel Board (EBB). “After the publication of up to date authoritative studies on ILUC a widening range of decision makers supports a more prudent and open-minded approach,” he said in a statement. “Even MEPs close to Ms Lepage realised that early second reading would not have provided sufficient time to assess the relevance of science used in policy.” But campaign groups warned EBB and the rest of conventional biofuels lobby was simply engaging in stalling tactics because the status quo benefits them. Nusa Urbancic, clean fuels manager at campaign group Transport & Environment (T&E), said: “This is an unfortunate case of vested interests winning out over innovators willing and able to produce more sustainable biofuels.” The decision also drew criticism from Kåre Riis Nielsen, director of European affairs at Novozymes, who said the ENVI decision was “bad news for industry and investors who need clarity”. “Once again policy-makers are delaying decision-making on iLUC,” he added. “Ongoing regulatory uncertainty is jeopardising all the parallel EU efforts to attract much needed investments in innovative renewable energy technologies, including in advanced biofuels. “Despite the absence of mandate, we are urging Member States to continue the negotiations on the iLUC proposal and finalise their 1st reading position before the end of the Lithuanian Presidency.” Continue reading

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