BioAmber to begin commercial operations at Sarnia this quarter

By Erin Voegele | August 05, 2015

BioAmber Inc. has released financial results for the second quarter, reporting construction was completed on its first commercial-scale bio-succinic acid plant in June. That facility, located in Sarnia, Ontario, is currently undergoing commissioning, with commercial operations expected to begin this quarter.

“Completing construction was a major milestone for the company,” said Jean-Francois Huc, CEO of BioAmber. “Commissioning is progressing well and we expect to be in commercial operation this quarter. We are seeing an acceleration of bio-succinic acid’s use in polyurethanes, paints and coatings, with a growing number of customer product launches coinciding with our Sarnia plant coming into production.”

According to information released by BioAmber, a grand opening ceremony for the plant is scheduled for Aug. 6. The final cost of the plant is expected to be $141.5 million, which is approximately $4 million above the high-end estimate made at the onset of the project. The company also noted that ongoing commissioning and startup activities have progressed well during the quarter, with functioning utilities throughout the plant and sterility testing successfully completed. Regarding the projects safety statistics, Huc noted the BioAmber has recorded more than 630,000 work hours on the project without a single loss-time injury and without a single environmental incident.

During an investor call, Huc elaborated on the status of commissioning activities. All utilities have been commissioned and are operational throughout the plant, he said. The facility’s raw materials handling and storage systems have been commissioned and are now receiving commercial shipments from suppliers. In addition, sterility testing is complete. According to Huc, the facility has encountered typical problems associated with plant startup, but to date, has not encountered any problems that have resulted in any significant delays to the commissioning schedule.

“We are now in the process of running our initial fermentations,” Huc said, noting the company expects to have results shortly. The goal, he added, is to generate performance similar to what was achieved at the French demonstration facility. In parallel, Huc said the company is beginning to purify succinic acid and assess the quality of the final products in order to confirm it meets specification.

Huc said BioAmber will strive to achieve several goals before the end of the year. In the coming weeks, the company aims to confirm that its yeast is operating as it should and that the resulting succinic acid meets customers’ quality specifications. Moving into the fourth quarter, the company plans to initiate its two take-or-pay agreements, qualify new customers, and being selling succinic acid to them.

Huc indicated the company anticipates a rapid ramp in sales during the final quarter of this year and throughout next year. “We are poised for growth and are putting in place the elements we need to build the second plant, which will further accelerate growth and profitability,” he said.

During the call, Huc also discussed two commercial deals BioAmber closed during the second quarter. Bayer MaterialScience has begun commercializing a new range of polyurethanes for textiles that incorporate bio-succinic acid supplied by BioAmber. In addition, Flokser has launched an innovative synthetic leather fabric using biobased materials supplied by DuPont Tate & Lyle BioProducts and BioAmber.

In addition, Huc addressed the impact of fluctuating oil prices on BioAmber’s products and operations. One strength of our business, he said, is that the company has limited exposure to oil prices because only 25 percent of Sarnia volume commitments are projected to be straight substitution of petroleum succinic acid. According to Huc, BioAmber is confident it can complete at $50 per barrel oil.

Regarding plans for the company’s second commercial facility, Huc said the company’s primary objective is to secure mezzanine debt at the corporate level. Given the company’s degree of de-risking, Huc said BioAmber believes it can secure 65 percent debt on the proposed plant. In addition, he said that BioAmber has engaged commercial lending institutions for project level debt, and is in discussions with government programs in the U.S. and Canada that could provide loan guarantees or direct low interest loans. “We are striving to achieve financial close on the next plant by the middle of 2016, and to have the plant built in 2018,” he said.

BioAmber reported revenues of $342,000 for the second quarter, down from $415,000 during the same period of last year. The decrease is primarily attributed to a reduction in average selling price partially offset by an increase in volume sold. Gross loss for the quarter was $410,000, down from $1.8 million during the same quarter of the prior year. The company reported a net loss attributable to BioAmber shareholders of $14 million, or 58 cent per share, for the quarter, compared to a net loss of $14 million, or 75 cents per share, for the same quarter of the previous year. Adjusted net loss attributable to BioAmber shareholders was $9.5 million, or 39 cents per share, compared to $7.5 million, or 40 cents per share, during the same quarter of last year.