Verenium: Still Waiting on DOE Loan Guarantee, BP Deal Ends in 3 Weeks

It’s tough being a company trying to develop the next-generation of cellulosic ethanol. The good news for cellulosic ethanol maker Verenium, (s VRNM) which announced its fourth quarter 2009 and full year financials on Thursday afternoon, was that it managed to lose a lot less money in 2009 than in 2008. Verenium announced a net loss of $56.24 million in 2009, down from a staggering net loss of $189.00 million in 2008. However, the company’s 2009 revenues dropped slightly to $65.91 million for the year, down from revenues of $69.66 million in 2008.
But read over the company’s earnings call and there’s a variety of other concerns on the horizon. For starters the company’s joint technology development deal with oil giant BP, called Galaxy Biofuels, is set to expire on April 1, 2010 — so in less than three weeks. The deal, initially set to last just 18 months, was supposed to end on February 1, 2010, but Verenium managed to extend it.

We’ll see if Verenium can keep pushing back the end date of that high-profile deal. On the BP Galaxy deal Verenium’s CEO Carlos Riva commented on the earnings call:

[W]e and BP are continuing discussions regarding the terms for advancement of our cellulosic ethanol technology and building upon the joint technology development program, which was established in August of 2008. These discussions continue.

Verenium’s EVP and CFO Jamie Levin was more bullish on being able to extend the BP Galaxy deal during the Q&A portion of the earnings call:

I think the expectation is that we’re going to find a more permanent solution or a more permanent approach to the way that we fund the technology going forward, but at this stage, I think it’s too early to discuss. But I don’t think the intention is to continue just a month-by-month extension process for very much longer.

Verenium is also still banking on a loan guarantee to help it build its now-delayed first commercial cellulosic ethanol plant. Back in early 2009 the company said it hoped to break ground on its first commercial plant in Highlands County, Florida in the second half of 2009. That didn’t happen. The company made that announcement just after it regained compliance with NASDAQ listing requirements, after having received delisting warnings from NASDAQ because its market capitalization fell below the minimum threshold of $50 million.
Then in June 2009 Verenium announced that the plant in Highlands, which will be jointly owned by BP and Verenium through the joint venture Vercipia Biofuels, had “been selected by the U.S. Department of Energy (DOE) to enter the due diligence phase of its Title XVII Loan Guarantee Program.” Verenium also said at that time that the Highlands project was then “scheduled to break ground in 2010.”
So now it’s three months into 2010, and the company has announced no progress on a loan guarantee. Verenium CEO Carlos Riva said on the earnings call that:

The next announceable event in that process would be the signing of a conditional term sheet for a DOE loan guarantee. However, I will comment that the DOE loan guarantee office is currently developing its view on how to evaluate projects such as this, an analysis that must incorporate the RFS-2 rules from the EPA, which were only recently announced as well as the structure of the future market for cellulosic ethanol, which will pack the price of our products and the revenues we generate.

In other words, they’re at the mercy of the DOE timetable. Verenium clearly has some promising deals in the works, but seems to have a very hard time meeting its own deadlines.