The ground is being turned in Sarnia, Ont., for North America's largest bio-based chemical plant, and its Montreal-based owner, BioAmber Inc., says the business is going as planned, except for the sagging share price.
Armed with $35-million in federal and provincial loans and the proceeds from a May initial public offering, BioAmber is building a $125-million plant that will process high-fructose corn syrup into succinic acid, a basic building block from which plastics and polyesters are fashioned. The company says that it can produce the bio-chemical feedstock at half the cost of competing petrochemicals – given current corn and oil prices – while slashing greenhouse gas emissions by more than 90 per cent.
The Sarnia plant is the culmination of more than 15 years of development by BioAmber and its predecessor companies, with work that includes a large demonstration facility in France that has been fermenting sugars and producing succinic acid since January, 2010. And it is a major step for a fledgling bio-based chemical sector that hopes to compete against the world's largest oil companies to supply the massive plastics and polyester industries.
But having been burnt by other companies who've made aggressive claims in the bio-based chemistry industry, investors are showing skepticism and have driven down the company's share price by nearly half since it started trading at $8.40.
"We've been painted with the historical track record of other companies in our sector," said BioAmber chief executive Jean Francois Huc, who travelled to New York City this week to raise the company's profile at investor conferences organized by Credit Suisse Group.
"But what really distinguishes us is that we have the funding we need; we have demonstrated at a larger scale than any of the other start-ups that our technology works, and we have demonstrated that we can sell the product and have secured a large number of customers over the next four years through supply agreements."
BioAmber says that it can profitably produce the bio-based chemical so long as oil prices stay above $35 (U.S.) a barrel. At a $95 crude price and a $6.50 per bushel corn price, it expects its costs will be 50 per cent lower than a petrochemical competitor.
Mr. Huc said the company screened more than 100 locations before opting to locate its first full-scale commercial plant in Sarnia. He said the city offers a well-trained work force that is familiar with the needs of the chemical industry; excellent transportation access to major North American markets; and proximity to the cornfields of southwestern Ontario and the agricultural processors that produce high-fructose syrup from the corn.
The company also touts its environmental benefits. Because it used biomass for its feedstock rather than petroleum and actually consumes carbon dioxide in the fermenting process, it claims its greenhouse gas emissions are 90 per cent lower than the petroleum-based chemical. And as governments move to impose GHG rules for industry, that green advantage would become an economic one.
But like the ethanol industry, the corn-based chemical companies face concerns about diverting agricultural products to produce fuel or, in this case, chemicals.
Mr. Huc said BioAmber doesn't buy the actual corn but instead purchases only the high-fructose corn syrup. "We're not going to increase the demand for corn and we take a very small fraction sugar that is now produced," he said, noting pressure on food companies to reduce the use of high-fructose syrup in products such as Coke and yogurts.