During their last quarterly update Overseas Tanker Corp ($OSG) discussed the growth of a new cargo segment for oil tankers: renewable diesel. Could chemical tanker companies be the next to benefit from the trend towards cleaner petrochemicals?
ByMark Bergen (Bloomberg) Solugen, a Houston chemicals startup, is one of several companies trying the replace the dirtiest ingredients incommon industrial materials—like fertilizer, cleaning products and cement—with cleaner natural materials.
Unlike many businesses entering this field, which have struggled to find commercial traction,Solugen says it’s making serious money. Chief Executive Officer Gaurab Chakrabarti says his company’son track for morethan $100 million in revenue this year. Last week, the company raised $200 million in financing, just a year aftertaking $357 millionfrom investors. That puts Solugen’s valuation “well north of $2 billion,” saysChakrabarti.
Other clean technology upstarts rely on “a lot of hopes and dreams,”he adds. “We hope to be the company that shows that world it’s possible to be profitable.”
Solugen pitches itselfas a sustainablechemical plant, without the noxious waste and emissions.The company takes corn syrup andmixes it withgenetically engineeredenzymes,through a proprietary process,to create substitutes for common chemicals normally made using phosphates and oil. Solugen produces about ten thousand metric tonsof product a year from its Bioforge facility, a plant in Texas converted from an old petroleumwax distillery. And it sells to more than 30 customers in industries like agricultural and personal care products as well asthe Defense Department.
Most petrochemicals in the US come from China or other parts of Asia. So Solugen has a smaller energy footprint both from its natural materials, as well as cutting out the need to ship products from overseas.“It’s really a double whammy,” saysStefan Unnasch, managing director for Life Cycle Associates, an environmental consultancy.
His firm analyzed Solugen’s manufacturing process to find that, in some instances, the startup had a “carbon-negative” operation—Solugen can storethe embedded carbon dioxide from sugars in a way that negates its other emissions from hauling in corn and churning out chemicals. (Solugen only gets this carbon-negative footprint with itsingredients for concrete production and toxic disposal operations, according to the analysis, but not for other useslike water treatment facilities.)
The Texas startup is one of several companies working on synthetic biology, an umbrella term for redesigning molecules for use in healthcare, life sciences or manufacturing. It’s a big potential market—as large as$1.2 trillion,according to estimates from investment bank William Blair.
But few companies have entered the field without losing gobs of money.The first startups designing sustainable materials, which emerged a couple decades ago, were outmatched when oil and natural gas prices fell.More recent entrants have struggledbeyond the pilot phase of production in getting commercial interest. Amyris Inc., a California business creating synthetic materials for beauty products, lost $342 million last year.Zymergen, a once-hot company working on genetically modified chemicals,sold earlier this yearto Gingko Bioworks Inc. after a 60% decline in Zymergen’s stock price and a year generating zero product revenue.
“It’s been a very choppy road because of the capital investment required,”says Matt Larew, a life sciences analyst with William Blair.“This is a very nascent industry.”
Solugen’s investors are bullish on the company because they believe it’snot reliant on one industry or even one chemical formula. For now, Solugen uses the sugar molecules in corn syrup. But it soon expects to replicate its genetic engineering process with recycled carboard, somehow turning the material into a stand-in for commonpetrochemicals. (That’s coming within “a couple years,” saysSean Hunt, Solugen’s chief technology officer.)
“They didn’t just get lucky. They’ve actually got a repeatable process and platform,” says NatalieHugh Tydeman, senior investment director for KinnevikAB, a Swedish firm that invested $50 million intoSolugen’s latest financing round. Kinnevik is planning to help Solugen enter the European market soon.
Europe’sfertilizer shortagesince the war in Ukraine has already boosted Solugen’s fortunes. “All of a sudden farmers andagriculture companies needed a supply,” saysChakrabarti, the CEO. “And we just happened to be at the right place at the right time.”
Solugen’s production plant,which opened in 2021, has “software-like margins” of around 60%, says Chakrabarti. But the company isn’t profitable yet because it’s plowing money into expansion.Next year, Solugen plans to open aproduction facility in Minnesota that is three times larger than its Texas plant. It raised money to finance the project.
It also raised money because it could.“We don’t know where the world is going,” says Chakrabarti. “We might as well have as much cash on hand.”
