BP Buys Up Verenium’s Biofuel Biz for $98.3M

BP (s BP) — yep, the company that’s responsible for spewing millions of gallons of oil into the Gulf of Mexico — is simultaneously investing more money into the next generation of biofuels. This morning BP said it will buy up Verenium’s (s VRNM) cellulosic ethanol business for $98.3 million.

The aquisition includes Verenium’s demonstration facility in Jennings, Louisiana, its R&D facilities in San Diego, Calif., and all of the intellectual property around cellulosic ethanol. Verenium says it will retain the intellectual property for its enzyme business.

Given Verenium has been losing money for years, and at one point received delisting warnings from NASDAQ because its market capitalization fell below the minimum threshold, Wall Street is understandably supportive of the acquisition. Verenium’s stock rose over 50 percent to $3.83 in afternoon trading.

At the end of the day Verenium just couldn’t bring in enough revenue or raise enough money to move into wide scale commercial production of its next-gen biofuel cellulosic ethanol on its own. Verenium had a net loss of $56.24 million in 2009, down from a staggering net loss of $189 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.

That situation is standard for cellulosic ethanol companies to date, and one reason why the former CEO of biodiesel maker Imperium Renewables, Martin Tobias, once told me that next-gen ethanol was a business that should be left to the giant oil companies.

BP previously had two different development deals with Verenium — a joint technology development deal called Galaxy Biofuels, and a joint venture called Vercipia Biofuels that intended to build a plant in Highlands County, Florida. According to the latest financials, the Galaxy deal expired in April, so that revenue stream had recently dried up for Verenium.

Foreshadowing the BP acquisition back in March, Verenium’s EVP and CFO Jamie Levin commented on the then-soon-to-expire Galaxy deal:

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 was also banking on a DOE loan guarantee that never came through to help it build its first commercial cellulosic ethanol plant in Highlands County, Florida. Back in early 2009 the company said it hoped to break ground on its first commercial plant in the second half of 2009 (that didn’t happen). Then in June 2009 Verenium announced that the plant in Highlands had “been selected by the U.S. Department of Energy (DOE) to enter the due diligence phase of its Title XVII Loan Guarantee Program,” and would “break ground in 2010.” To date, there’s been no word of a DOE loan guarantee for Verenium or if the Highlands Plant will still break ground this year.

Back in the day Verenium was a Khosla Ventures investment. Founded in 1994 as Celunol, the company reportedly raised more than $60 million from Khosla Ventures, Braemar Energy Ventures, Charles River and Rho Ventures. In 2007 Diversa bought Celunol for over $100 million and it was renamed Verenium. Now it has changed hands again for about the same price.

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