BioAmber Goes Ballistic
Word arrived from Minnesota that BioAmber has signed a 210,000 ton per year take-or-pay contract for bio-based succinic acid with Vinmar International.
Explaining why BioAmber (BIOA) stock shot up nearly 17% in today’s trading despite a global equities pullback that affected almost everyone else in industrial biotech.
Under the terms of the 15-year agreement, Vinmar has committed to purchase and BioAmber Sarnia has committed to sell 10,000 tons of succinic acid per year from the 30,000 ton per year capacity plant that is currently under construction in Sarnia, Canada.
Bottom line, BioAmber continues to roll and roll. We looked at a number of the drivers in May, in “Why are all the traffic lights turning green for BioAmber?” There, we noted:
“BioAmber is avowedly pursuing a strategy based in careful aggregation of strategic partners that bring investment and offtake as well as financing relationships, while building further applications for their molecules in work with R&D partners that could be expected to translate into commercial partners down the line. Which is to say, starting with an economically and environmentally advantaged molecule and then working in partnership with downstream customers to establish markets for that molecule.
“It’s very different than the conventional biobased fuels strategy, which has been to set mandates to create market certainty, and use that to create a favorable financing environment, and encourage engagement with incumbents.”
Expansion at Plant #2
As part of the new succinic acid master off-take agreement, this second plant will be expanded to an annual capacity of 100,000 tons of bio-BDO and 70,000 tons of bio-succinic acid. Vinmar plans to make a 10% or greater equity investment in the expanded plant and has committed to off-take and BioAmber has committed to sell a minimum of 50,000 tons per year of bio-succinic acid for 15 years following the plant’s start-up date. Vinmar also has the option to secure additional bio-succinic acid tonnage under the take-or-pay contract if BioAmber has not committed the remaining volume at the time the plant’s financing is secured.
Building a plant #3
Vinmar also committed to off-take and BioAmber committed to sell a minimum of 150,000 tons per year from a new, third plant following its financing, construction and commissioning. The plant would be dedicated to bio-succinic acid production and would have an annual capacity of 200,000 tons per year. Vinmar plans to invest at least 10% of the equity in this third plant, which BioAmber expects to start up in late 2020, based on the projected development of the succinic acid market.
Expanding the BDO deal
In a related announcement, BioAmber and Vinmar also broadened the scope of their previously announced 100,000 ton per year 1,4 butanediol (BDO) plant, which the parties currently plan to start up in late 2017. Under that agreement, following the financing, construction and commissioning of the BDO plant, Vinmar has committed to purchase and BioAmber has committed to sell 100% of the BDO produced for 15 years.
More than 100% of capacity sold out
The Vinmar take-or-pay contract, together with the take-or-pay agreement signed in April 2014 with PTTMCC Biochem (a joint venture between Mitsubishi Chemical and PTT of Thailand), guarantees the sale of 50% of Sarnia plant capacity during the first three years of operation and 33% of plant capacity for the following 12 years.
In addition, BioAmber has signed 19 supply and distribution agreements and seven MOUs to date, and the cumulative volume of these contracts exceeds the available capacity for sale in Sarnia. BioAmber has been selling bio-based succinic acid for over four years and to date 38 customers have qualified the company as a succinic acid supplier and purchased product from the existing production facility in France.