Indonesia food giant invests in Heliae

Indonesia food giant invests in Heliae
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Heliae raises $15M from Salim Group – R&D center in 2012, aiming for commercial production in 2014; food, feed, fertilizer now, fuels later.

In Arizona, Heliae announced a capital raise of  $15 million in funding from international conglomerate Salim Group’s agribusiness company, PT PP London Sumatra Indonesia, through its wholly-owned subsidiary, Agri Investments.

This marks a total of close to $50 million in funding that Heliae has received since launching in 2008.  As a start-up venture spun out of Arizona State University with the support of Science Foundation of Arizona, Heliae’s mission is to develop and validate technology solutions for the commercial production of algae for a variety of potential uses including food & feed, fertilizer, chemicals, pharmaceuticals, cosmetics, and fuel.

This new round of investment will support tangible steps toward creating an international presence for Heliae’s technology by funding continued research and development at Heliae’s demonstration facility in Arizona, and taking steps toward operating an R&D center in Indonesia. The aim is for commercial production in 2014.

The Heliae story

You can forgive yourself if the Heliae story feels a little fuzzy. They have enough stealth in their approach to the mission to make a SEAL team proud.

Here are the key notes in the narrative. Spun out of Arizona State University in 2008 as a technology for the commercial production of kerosene from algae using technologies developed at ASU’s Laboratory for Algae Research & Biotechnology.

At the time, ASU entered into a $3 million R&D collaboration with Heliae Development  and Science Foundation Arizona to develop, produce and sell kerosene-based aviation fuel derived from algae. Heliae itself was a closely-held investment of members of the Mars family – they of chocolate, Doane Petcare, Wrigleys gum and Life Savers fame. Less known over in Planet Mars is the division known as Mars Fishcare, which supplies home aquarium and pond products, including Aquarium Pharmaceuticals.

Ah, hence the stealth – the Mars family is famous for it. It took decades before they allowed the first reporter into one of their factories to see a machine stamp the “M” on an M&M.

With the Mars family investment, the company tapped former BioFuel Energy COO Dan Simon as CEO and, unsurprisingly but critically, expanded the focus beyond fuels and into foods, feed and fertilizers. But it had not, by any means, abandoned fuels. Last year SkyNRG signed an MOU with Heliae to produce algae-based jet fuel, and at last year’s Paris Air Show, Heliae Development and Azmark Aero Systems announced a collaboration to develop and promote algal fuels in jet engines.

The technology’s raison d’être? Bringing the low-cost of open ponds systems to the high yields of the closed PBRs. The Heliae system, ultimately, is going to look something like a greenhouse, and is expected to be built out to a 160 acre-demonstration, with groundbreaking on its pilot plant scheduled for later this month in Arizona – and includes a patent-pending extraction process in its IP portfolio.

How do they get the capex and opex down?  For sure, it is stubbornly high costs that have plagued the crowded field of closed photobioreactor systems and prevented them from getting into the food and feed markets, much less the fuel pool.

Over at Heliae, a lot of answers lie behind the Great Wall of We’ll Let You Know Later that commonly guards most early-stage algal technologies. We do know that the Heliae solution is designed as a bolt-on solution for industrial CO2 emitters or nitrogenous waste sources – and their algal strains are reported to be producing at rates that are well above industry norms.

Heliae’s take

“The recognition and support of the Salim Group delivers a sense of validation to our work,” said Dan Simon, President and CEO of Heliae. “These additional funds will help us broaden our reach and allow us to build a presence in Southeast Asia. Of equal importance to Heliae is the strategic relationship we have developed with Salim’s team and alignment of both groups – we look forward to the large impact we’ll be able to make collectively.”

Frank Mars, co-Founder and Chairman of the Board for Heliae, stated, “I am personally pleased to welcome the Salim group into the Heliae family.  As one of the most prominent equatorial-based food businesses in Southeast Asia, their Chairman, Anthoni Salim, recognizes the need to develop new and sustainable sources of nutrition and agricultural inputs to support the region’s growing demands.”

Salim Group’s take

“Frank and I are of one mind on developing the solutions to address today’s issues with soil fertility, fresh water, growing demand for fish and animal feeds and ultimately sustainable fuel,” said Anthoni Salim. “Our two families are committed to impacting the world’s future in a positive way.  Both the large impact we see with algae and Heliae’s comprehensive approach to developing algae technology solutions formed our rationale for this strategic investment.”

The Digest’s Take

It’s been a while since there’s been a strategic investment in algal-based technologies of this size, so welcome it is on simply that level – good news for algal fans, everywhere.

But let’s focus on on three aspects that are especially interesting.

The Rock Star factor. Anthoni Salim is not all that well known in the US and Europe, but he’s Indonesia’s 5th wealthiest individual (net worth, reported by Forbes at $3.6 billion), and has multiple food, cement, real estate, banking, and mining public companies in his control. Over in Asia, his name is an established brand.

The Food Factor. Over the next few years, expect a fairly healthy number of algal companies to pivot to the feed and food sectors, en route to entering fuels. Solazyme, as it usually does, pointed the way in its collaboration with France’s Roquette. PetroAlgae recently rebranded itself Parabel and is headed in that direction.

Why? Feed and food, while smaller markets than fuels, offer vast gulfs of opportunity, and higher per-ton prices. More importantly, Asia is long capital and short feed. Especially fish feed – a hugely important sector for Asian countries on every level, facing declining yields from ocean harvesting, growing populations, and costs rising in fishmeal so fast enough to make an oil baron blush.

The Connection Factor. Connecting the Salim Group (owner of one of the largest integrated food companies in the world – IndoFoods, Agri Investments Pte Ltd., Lonsum and so on) and members of the Mars family, another one of the largest integrated food companies in the world – well, that’s worth tracking through just about any macro financial lens you’d like to look at it through, and the connection runs through Heliae.

Next steps for Heliae

Well, they obviously have to get the pilot plant up and running, move towards a demonstration at scale within something approaching the 2014-15 timelines, and prove that they can shake out the costs and keep the systems running. Tasks that have felled many a promising technology coming out of the lab – the vital conversion from science project to corporation.

Next, prove out the “Mikey likes it” test – that the algae works for the food and feed applications they have targeted. Sign the downstream distribution agreements — for a company that has Mars and Salim DNA, that should be a snap. Then go big, and as costs shake out further, tap into the fuel markets — especially should oil pass $150 a barrel as expected this decade.

Knocking tomorrow and the pay-back problem

Easier to write than do. One of the reasons that former presidential candidate Newt Gingrich derided President Obama as “President Algae” – critiquing the President’s focus on a long-term fix through transforming the feedstock mix, rather than relaxing environmental goals to relieve pressures in the here and now with more oil and gas drilling.

It’s easy to knock tomorrow – after all, by definition tomorrow’s not here yet, and fails the “if we don’t have it, there must be a good reason” test. Lots of things fail the straw man, “where are the gallons?” test.

Take five year old children, for example. Why invest public dollars in their moral or scholastic education, when you absolutely know, in five years, all you are going to have is a ten-year old that is going to require even more investment?

To raise kids, we have to take perplexing 25-year journeys through dark waters, with financial requirements and returns that would not, ahem, exactly thrill corporate executives seeking 20 percent IRRs and three-year payback.

But there are those in every generation who undertake the journey – understanding that part of the magic is in the journey itself – in the unexpected discoveries along the way. Parents are confident that, given the right applications of innovation, imagination and discipline, that the modern adult will appear. If only corporate parents could learn therefrom.

So too it is with advanced technology. And with Heliae, there go Mars and Salim, off on their journey. Two families with a track record of getting it done.

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