In a push to start large-scale production of its microbe-excreted biofuel, LS9 Inc. has hired a new CEO and wants to raise $75 million to $100 million over the next six months to build a demonstration plant by the end of 2010.

The plant is expected to produce up to 2.5 million gallons per year of diesel fuel made by the company's genetically engineered microbes, Bill Haywood, the new LS9 CEO and a 30-year oil industry veteran said Wednesday.

Raising up to $100 million also will allow LS9 to begin engineering work on a full-scale commercial plant that is expected to produce up to 100 million gallons of the company's biofuel per year, Haywood said. This commercial-scale plant could be up and running by 2012.

Haywood's push to raise money marks a shift for the quiet, South San Francisco, Calif. startup. The company has landed $20 million in equity financing from Khosla Ventures, Flagship Ventures and Lightspeed Venture Partners. And it has gone through two leaders in the three years since its founding.

LS9 is among a handful of companies – Synthetic Genomics, Amyris Biotechnologies and Codexis among them – that are creating microbes or enzymes that they hope can produce cheaper and more energy-efficient biofuels than corn-based ethanol or biodiesel made by soybeans and rapeseed.

LS9's path is in the microbes it has genetically engineered to eat sugar and excrete hydrocarbons – specifically, fatty acid alkyl esters – which it says are virtually indistinguishable from the common petroleum-based diesel fuel on the market today. LS9 says it can produce its fuel using 35 percent less energy than is needed to make sugarcane-based ethanol.

The company's technology has won accolades from the World Economic Forum and MIT Technology Review, among others (see World Economic Forum Crowns Greentech Pioneers and MIT Tech Review Names Tesla CTO Innovator of the Year).

So far, LS9 has made only about 5,000 liters of biofuel in a pilot fermenter at its headquarters, Haywood said. That fuel is being tested at Southwest Research Labs, and their tests should be done in the next three weeks, he said.

Haywood takes the helm of LS9 from Robert Walsh, former president and a 26-year veteran of Royal Dutch Shell. Walsh replaced LS9's first acting CEO, Doug Cameron, who was also chief scientific advisor for Khosla Ventures, in July 2007.

"Each of those guys, at the time they were running things, added a lot of value," Haywood said. While his predecessors were well-suited to building LS9s scientific and testing capabilities, "Now I think we're turning that corner into production, beginning that process, and I think you have to bring some different skill sets in."

LS9 hasn't decided on a location for its demonstration plant yet. Haywood wouldn't disclose how much the plant is expected to cost.

He also wouldn't say how much it costs to make LS9's biofuel in current lab settings.

But by the time LS9's demonstration plant is up and running, it will use sugarcane as a feedstock. "We want to be in the equivalent of $40 to $50 per barrel price," he said. "We're not there yet, but that's where we want to be."

Given that $50 per barrel would equate to about $1 a gallon, LS9 has its eyes on a pretty attractive price target, said Rick Kment, biofuels analyst with DTN in Omaha, Neb.

Still, he said that LS9, along with its competitors, will have to prove it can deliver on those low prices at full-scale production.

"Right now there are so many people vying for that magic bullet, to move this to commercialization," Kment said.

While Kment called $100 million a "hefty chunk of change" to build a demonstration plant in the midst of what appears to be a growing global financial crisis, he also said that venture capital firms will likely continue to invest in a number of second-generation biofuel makers in the hopes of hitting the nickel on one that can meet its goals.

Among LS9's competitors are La Jolla, Calif.-based Synthetic Genomics, founded by well-known genome entrepreneur Craig Venter. Synthetic Genomics raised $30 million in 2005 from investors including Draper Fisher Jurvetson, and last year received an undisclosed amount of funding from oil giant BP. In April the company told Earth2Tech it was seeking $100 million to $200 million more.

Another competitor, Emeryville, Calif.-based Amyris Biotechnologies, reported that it had raised $70 million as of last summer from backers including Khosla Ventures and Kleiner Perkins Caufield & Byers.

Other companies also are using genetic engineering in their quest to make ethanol from nonfood sources such as wood or cellulose (see E. coli Bacteria: Biofuel's Savior?).

And companies such as Solazyme want to use genetically engineered organisms to make biofuels from algae.