Australian Algae Company Issues Bonds to Fund Americas Expansion

In a sign that algae biofuels are moving closer to commercialization, Australia’s Algae.Tec Ltd. has decided to issue $200 million in European bonds to help finance expansion in the Americas, reports Bloomberg.

The move comes because the US regulatory climate is becoming more favorable for algael biofuels. Airlines are now allowed to use the biofuel blend as jet fuel and the US EPA recently raised the requirement for how much biodiesel must be blended with petroleum under the Renewable Fuel Standard.

And as part of the "tax extenders" package passed in the fiscal cliff deal, the definition of biofuels includes algae for the first time. The deal extended the $1 per gallon tax credit for biofuels.

Algae.Tec’s bond offering begins next month and should be completed by mid-year, with proceeds targeted to build factories in Texas and Brazil.

Each plant will cost an estimated $100 million for construction; feasibility studies begin immediately with a target completion date of 2015, reports Bloomberg.

Algae.Tec will retain a 90% stake in the factories, says the company’s chairman Roger Stroud.

Planning for an Australia plant is already complete and government approvals are expected by the end of the first quarter. Once the bond issue is completed in mid-2013, the company anticipates construction will begin on those two plant within 12 months.

"Based on current commodity prices the financials around all three projects are showing strong returns," Stroud told Bloomberg.

Algae.Tec’s technology can also trap carbon emissions released by industrial processes, which can then be used to feed the algae. On this front, it’s working with a Texas utility to reduce its emissions and is in talks with a food manufacturer in Brazil.

The company is also planning a European plant in partnership with airline Deutsche Lufthansa AG to make algae biofuels for jet fuel.

The global market for algae biofuels is projected to reach $1.6 billion over the next two years because of increased interest from the Defense Department, corporations and airlines, which flew their first flights on algae blends in 2011.

In the US, San Diego is a hotbed for companies that are developing non-food based biofuels, with 40 companies including algae pioneers Sapphire Energy and Cellana clustered there.

That’s because of favorable local and state policies for biofuels and the presence of research institutions such as the University of California, Scripps, Salk Institute for Biological Studies and BP’s Biofuels Global Technology Centre, according to Bloomberg.

Sapphire Energy, which has raised over $330 million, is building a Green Crude Farm in New Mexico, which it calls the world’s first commercial demonstration scale algae-to-fuel facility for transportation. Celllana is commercializing marine microalgae.