Amyris (AMRS 86.67%) is teaming up with Total (TTE 0.75%) to expand the market of advanced biofuels based on their renewable farnesene product. Through the formation of the 50-50 joint venture, Amyris will gain access to a global commercialization base, while Total will take a directed step forward in becoming a major supplier of renewable fuels in addition to its already established dominance in traditional oil and gas operations.
The advantage for Amyris
The technology that Amyris has established is truly remarkable, but like many start-up companies, the long-term success of their technology is entirely dependent on the ability to scale-up the technology to a profitable level. Amyris' renewable farnesene plant in Brazil has met high output standards, and thus has demonstrated the capability to transfer the technology beyond the lab-scale to production scale while simultaneously achieving projected efficiencies. The production accomplishments to-date have essentially been used as leverage for additional debt as Amyris continues to reinvest into the expansion of its own technology.
Total's commitment
The growing expenses being incurred by Amyris as the scale-up process continues are the first reason why the joint venture with Total is a great thing for Amyris. Total is huge and has access to, from Amyris' point of view, what seem like endless capital resources. Total is already Amyris' largest investor, holding about 18% of its outstanding common stock. It is clear that Total believes in the technology that Amyris has to offer, and it is not out of the question for Total to invest even more in Amyris.
Total's investment in SunPower (SPWR -3.17%) illustrates its commitment to renewable energy ventures, and the specialty chemical portion of biofuels is a great play in renewables for anyone, let alone an energy company with countless international resources and market exposure. Total's approximate 66% stake in SunPower came in 2011 when SunPower's technology was sufficiently established and its efficiency lead over the competition seemed like a permanent fixture. The investment provided financial strength and continues to promote growth opportunities through continued research and development and even acquisitions that would otherwise not be obtainable by a company that was previously hovering between the labels of small- and micro-cap. Amyris is looking for the same result.
A growing market
International commercialization resources are the second major reason why the joint venture makes great sense for Amyris. Technologically, Amyris as a company is in a similar situation now to where SunPower was two years ago when Total agreed to buy 60% of SunPower. Amyris has ramped up production, demonstrated advanced technology unique to the industry, and found a marketable, renewable product that can compete with traditional energy. It is currently limited in distribution, however, providing its renewable diesel product to only Brazil.
Amyris' initial plans for the renewable jet fuel at the center of the joint venture with Total is to begin sales also in Brazil. Total, on the other hand, has operations in 130 countries along with global commercialization and marketing experience that will be leveraged in the venture to expand the reach of the renewable jet fuel product. Expanding the global reach of a product with a growing demand is a combination that can only help Amyris.
A win-win situation
Total wants to expand its reach in renewable energy, and this venture with Amyris provides the technological base needed to make a substantial mark in the industry without the full expense of expansive organic research and development that would be necessary to become a major player in renewable fuels. Amyris needs the capital resources and global reach that Total brings to the venture, and is worth considering as a buy today based on the new arrangement.
