Another hot biofuel IPO has been announced: Coskata has filed with the SEC to raise up to $100 million, following Fulcrum's $115 million filing in September. The Warrenville, Illinois-based Coskata is the latest entrant in the race to produce cellulosic ethanol at industrial levels. According to its filing, Coskata's business plan focuses on utilizing low-cost feedstocks, like woody biomass and municipal waste, using a hybrid biothermal process to break down cellulose that Coskata claims produces extremely high yields.

Central to Coskata's potential is the company's technology platform. So far we've mostly seen biofuel companies trying to crack cellulose with either biochemical or thermochemical processes. As referenced in Coskata's S-1, research firm Sandia has projected biochemical and thermochemical conversion to be 55 and 74 gallons of ethanol per bone-dry ton of feedstock, respectively.

Coskata says it has hand-picked the best parts of both processes to develop its own platform, including developing its own microbes, which is expected to reduce the operating costs incurred from licensing biocatalysts from other firms. The firm predicts the platform will lead to yields of 100 gallons per ton of softwood, a number that's backed up by Sandia's estimates. That's an impressive claim, albeit as yet untested at a commercial level.

The company has tested its platform at its Pennsylvania demo facility for over 15,000 hours of ethanol production using wood waste, sorted municipal waste and natural gas as feedstock. Coskata plans on building its first commercial facility in Alabama, with a first-phase production goal of 16 million gallons per year (MGY), eventually ramping to 78 MGY upon addition of new production lines.

At 78 MGY, Coskata projects an unsubsidized cash operation cost of under $1.50 per gallon, assuming both a feedstock cost of $64 per ton (which is reasonable) and the company's high projected yield (which is yet to be seen). In comparison, Fulcrum said in its S-1 that it was shooting for ethanol under $1.30 a gallon at a lower 70-gallon-per-ton yield. Of course, until we see either company successful scaling up, we won't know whether or not either set of numbers means much. The market price for ethanol was around $2.71 a gallon as of December 9.

With that in mind, let's look at Coskata's financials:

  • Since its inception in 2006, Coskata has produced only $134,000 in net revenue, all of which came in 2010. Coskata has produced no revenue in 2011, according to its unaudited report.
  • Coskata's net loss in 2010 was $28.7 million, and the firm lost $23.3 million (unaudited) through the first nine months of 2011.
  • As of September 30, 2011, the company had an accumulated deficit of $88.2 million.
  • Through September 2011, the company had raised a total of $120.9 million in paid-in capital, along with $280,000 in common and series A, B, C and D stock sales.
  • Coskata has $18.9 million in cash, and total capitalization stands at $33.1 million.

The numbers don't look particularly stellar for Coskata, especially considering that in the five years since its inception it hasn't been able to capitalize on even niche markets -- like other biofuel aspirants have -- to build any meaningful revenue. The company acknowledges as such in its S-1, writing: “We are a development-stage company with a limited operating history.”

Additionally, the firm's risk factors are substantial. Like just about everyone in the biofuel sector, Coskata is vulnerable to volatile feedstock and oil prices, and has to sort out the construction of its commercial facility, as well. But the bigger issue for Coskata lies in its technology platform. The firm's hybrid solution does offer a promise of high yields, but being a proprietary platform, it is as yet untested at the commercial scale, and the company lacks experience in pulling this feat off with other platforms. Coskata also needs to find some sort of commercialization or research partnership with a larger firm to help secure financing and smooth the bumpy road to commercialization.

In the end, Coskata presents a bit of a quandary. The upside is that the firm is shooting for the current holy grail of biofuel production: a high-yield platform utilizing low-cost (and sometimes free) feedstock that isn't corn.

On the other hand, in just about every facet of operations, Coskata is untested at the commercial scale.