BioAmber expands Vinmar contract, expects to raise $33.6m in stock offering

Further catching up to news from last week, BioAmber announced that it has expanded its take-or-pay contract with Vinmar International with a total 210 ktpa bio-succinic acid/bio-BDO supply for 15 years.

Under the new contract, Vinmar has committed to purchase 10 ktpa of bio-succinic acid from BioAmber Sarnia, a joint venture with Mitsui & Co. The succinic acid will come from BioAmber Sarnia’s 30 ktpa plant that is currently under construction in Sarnia, Canada.

BioAmber and Vinmar also broadened the scope of their previously announced 100,000 ton per year 1,4 butanediol (BDO) plant, which the parties currently plan to start up in late 2017, location in North America still undisclosed.  Under that agreement, following the financing, construction and commissioning of the BDO plant, Vinmar has committed to purchase and BioAmber has committed to sell 100% of the BDO produced for 15 years.

As part of the new succinic acid master off-take agreement, this second plant will be expanded to an annual capacity of 100 kt of bio-BDO and 70 kt of bio-succinic acid.  Vinmar plans to make a 10% or greater equity investment in the expanded plant and has committed to off-take and BioAmber has committed to sell a minimum of 50 ktpa of bio-succinic acid for 15 years following the plant’s start-up date.  Vinmar also has the option to secure additional bio-succinic acid tonnage under the take-or-pay contract if BioAmber has not committed the remaining volume at the time the plant’s financing is secured.

BioAmber also announced in the recent press release that it is planning to build its third bio-succinic acid plant with a capacity of 200 ktpa. Under the new take-or-pay contract, Vinmar is committed to off-take a minimum of 150 ktpa from this new, third plant following financing, construction and commissioning, which is expected by late 2020.  Vinmar plans to invest at least 10% of the equity in this third plant.

So, to summarize:

1st Facility: Sarnia, Ontario, Canada
Capacity: 30 ktpa bio-SA
Start-up: 2015
Vinmar offtake: 10 ktpa

2nd Facility: somewhere in North America
Capacity: 100 ktpa bio-BDO, 70 ktpa bio-SA
Start-up: 2017
Vinmar offtake: 100 ktpa bio-BDO, 50 ktpa bio-SA. Option for additional bio-SA supply if BioAmber has not committed the remaining volume.
Vinmar to make a 10% or greater equity investment

3rd Facility: To be Announced
Capacity: 200 ktpa bio-SA
Start-up: 2020
Vinmar offtake: 150 ktpa
Vinmar to invest at least 10% of the equity conditional upon the plant’s successful financing, construction and commissioning.

Pilot bio-BDO facility: US toll manufacturing
Capacity: 4 ktpa bio-BDO
Start-up: 2015
Vinmar offtake: 4 ktpa

For the 30 ktpa bio-succinic acid Sarnia plant, the Vinmar take-or-pay contract, together with the take-or-pay agreement signed in April 2014 with PTTMCC Biochem (a joint venture between Mitsubishi Chemical and PTT of Thailand), guarantees the sale of 50% of the plant’s capacity during the first three years of operation and 33% of plant capacity for the following 12 years.

In addition, BioAmber said it has signed 19 supply and distribution agreements and seven memorandum of understanding to date, and the cumulative volume of these contracts exceeds the available capacity for sale in Sarnia.

BioAmber said has been selling bio-based succinic acid for over four years and to date 38 customers have qualified the company as a succinic acid supplier and purchased product from the existing production facility in France.

Of course, before most of this will push through, BioAmber needs to raise a lot of money to start building the second and third bio-SA facilities (and bio-BDO facilities). There is also the financial risk of BioAmber being heavily reliant on Vinmar for a decade.

BioAmber recently announced a secondary public stock offering of 2.8million shares at $12/share. The underwriters will also have a 30-day option from July 15 to purchase up to an additional 420,000 shares.  BioAmber said it intends to use the net proceeds of the offering for working capital and other general corporate purposes.

On July 2, BioAmber also secured a CDN$7 million grant from the Sustainable Development Technology Canada (SDTC). The funds will be used to support the ongoing construction of the $125m Sarnia bio-succinic acid plant.

There was an article on SeekingAlpha.com of a recent analysis of BioAmber’s current financial status and risks. The full article can be viewed until August 14 unless you have prime membership to the site.