A Solazyme Investor's Guide to Moema's Commercial Equipment: Upstream

Part two of this four-part series on equipment at Solazyme's largest renewable oils facility looks at often neglected, but important, systems.

May 29, 2014 at 10:20AM

We recently looked at the infrastructure supporting operations at the 100,000 metric ton per year facility in Moema, Brazil, owned by renewable oils and bioproducts manufacturer Solazyme (NASDAQ:SZYM) and feedstock producer Bunge (NYSE:BG). It's a good idea for investors to familiarize themselves with the equipment at Moema to understand exactly what goes on behind the scenes, to debunk any misconceptions, and to have background knowledge to lean on when management discusses the facility in the future. Besides, contrary to popular belief, the equipment and its importance can be understood by any investor.

In part two of the four-part series we'll dig into the upstream category of equipment, as presented in Solazyme's presentations to keep things simple. This equipment is probably the least obvious within the facility, but serves a critical role in supporting the operations of the fermentation tanks and keeping the facility in compliance with internal quality standards and local, state, and federal environmental standards.


Source: Solazyme.

Science doesn't stop at commercial scale

While strain development occurs in the labs and pilot facilities in South San Francisco, the need for wet labs and bench space doesn't vanish at a commercial-scale facility. Solazyme still needs lab space at Moema for quality control measures to ensure production strains are producing at their designed specification. Once it's determined that microbes work as designed they're transferred to the seed train (discussed in part three: fermentation) before making it to the commercial fermentation tanks for creating product. Scientists and engineers will check microbes prior to and during full-scale operations at 625,000 liters by sampling the commercial fermentation tanks at regular intervals during each batch. 

If, for whatever reason, the microbes aren't growing as they should or producing the expected products in the correct distribution during a commercial batch, then engineers will have actionable data in hand to correct the problem. The same holds true for determining the sources contributing to unexpected changes in pH, dissolved oxygen content, or an unexpected product altogether. Expected data for each batch is equally useful, however, and is stored on site with the batch number. In the event a product is recalled, Solazyme, Bunge, or a customer can look at the data to pinpoint the problem batch or batches -- limiting the monetary repercussions of the recall.

Quality and environmental standards
Solazyme needs the ability to quantitatively demonstrate that sterilization equipment (discussed in part one: infrastructure) is working as designed, which is where compliance monitoring systems come into play. There's no point in sterilizing incoming sugarcane syrup, supporting nutrients, water, or air if potential contaminants are still lurking when it gets sent to the fermentation tanks. And although it isn't technically "upstream," monitoring what goes out of the facility (external compliance) is just as important as monitoring what comes in (internal compliance).

What good would it be to champion the drastic reduction in land use for producing renewable algal oils compared to agricultural oils if Solazyme dumped its waste into the environment? Sustainability extends beyond the sourcing of raw materials. Thus, everything discharged from the facility must meet strict environmental requirements to reduce the risk of biologic and nonorganic contaminants escaping into the surrounding area. That includes wastewater, liquid waste from fermentation tanks, gaseous emissions, and solid waste. Luckily, streams discharged from the sterilization equipment and standard wastewater treatment equipment are closely checked by various compliance monitoring systems throughout the facility.

Foolish takeaway
Solazyme states that all of its supporting infrastructure and upstream equipment are online at Moema. It may not be obvious from reading through the company's presentations, and you may be tempted to skip right to the fermentation section of the graphic, but efficient and reliable upstream processes allow fermentation to occur in the first place. Similarly, ensuring waste streams are in compliance with federal, state, and local environmental standards keeps a facility from being fined or even shut down. In part three, we'll take a look at the fermentation equipment at Moema.

Solazyme is having trouble starting, but America isn't
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolioCAPS pageprevious writing for The Motley Fool, or his work for SynBioBeta to keep up with developments in the synthetic biology industry.

The Motley Fool owns shares of Solazyme. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers