It’s not just fish meal, it’s happy meal — for investors, we hear. As Calysta pivots towards methane-to-protein and supersizes its business plan, we visit with CEO Alan Shaw to find out who’s lovin’ it.
Calysta CEO Alan Shaw doesn’t have a whole heck of a lot in common with Sir Elton John excepting that they are both British and outspoken. But I can’t help thinking of the John/Taupin anthem “I’m Still Standing” whenever we have a chance to meet up.
After all, there aren’t too many CEOs from the The Future is Sugar biofuels gold rush era for the mid 2000s still around; occasionally when he enters the room, there’s the similar hush that was afforded in the late 1960s to the veteran members of the Arctic Club, the last of the old Yukon millionaires. Psst, look, over there. That’s Alan Shaw.
He’s been around so long now, and yet remains so youthful and energetic, that I’ve begun to consider the possibility that Alan Shaw is, in fact, immortal, and will get back to developing sugar-based bioeconomy ventures in 500 years or so. That is, when all the natural gas is gone and the few square miles of earth not yet underwater will be so hot and steamy that all the terrestrial world will be a sugarcane plantation.
For now, Alan’s gone over to methane; that’s Calysta’s feedstock of choice, and he’s arrived today at the Methane Bioengineering Summit in San Diego, organized by Infocast, to talk up the near-term potential of single-cell protein. And Calysta’s exciting position in the chase.”
What’s new, what endures in single-cell protein?
Single-cell protein, made from methane? Why, it’s the Strategy that Sunk the Soviet Union, of course — as we remembered not too long ago in this article. Then again, technologies change, as do markets. What’s different this time, we asked?
“Fish meal prices and natural gas prices have changed dramatically,” said Shaw, “and fish meal is expected to grow at a compounded 6.7 percent rate over the next 15 years. At the same time, natural gas discoveries are keeping the gas price below $3, although we can make money with gas below $10.”
It’s true. Natural gas prices are, famously, at extremely low levels and have been for a number of years. Meanwhile, a global shortage of fish meal has led to $1500 per ton prices, if you can hit the product spec. A number of algae companies are aimed at the same market. But, there’s the risk that they will end up with chicken-feed specs and chicken-feed prices, which are almost an order of magnitude lower.
Again, what’s different about Calysta?
“Companies have spent a tremendous effort raising organisms to make products that Nature never intended them too. The rewards can be fantastic, but the organism resists. There are real risks. So, it seemed to us, instead of training an organism to convert the energy in methane to make valuable liquid products, as we are — why not let it make what it really wants to make: more of itself; that is, protein?
“In our case, we bought the rights to a proven technology developed by DuPont and Statoil in a partnership in the 2000s. The technology was scaled-up; almost $400 million was invested. In all, 3000 tons of product was sold to EVO, one of the world’s largest pet food companies.”
So, what happened to that old technology?
“The economics were not right. Natural gas prices were high in Norway, where the technology was developed. And meal prices were much lower. In the end, the rights to the technology were assigned to three Norwegian academic institutions, before we acquired them.”
But gas prices are still high in Norway, we noted. “We’ll build the first plant where methane prices are low, as they are in the Middle East and the US.”
Prices are also low in Russia, but we don’t expect that Calysta will fall into partnership with Russian outfit guys. Expect a first deployment in the US.
Plant size? “40,000 metric tons per year,” said Shaw. “We expect to raise $50 million, on a 50/50 debt/equity basis for plant one.”
Interestingly, version 1.0 of the technology will not be the actual technology that Calysta is developing now, under Josh Silverman — rather, the old Statoil-DuPont technology.
“Josh’s concept is brilliant,” observed Shaw. “To use methanotrophs to unlock the hidden value in methane, and to establish a gas fermentation platform that can be used for an entire range of products, or even a range of feedstocks like carbon dioxide or carbon monoxide. It’s just brilliant, there’s no other way to describe it. But we need a product; otherwise we are going to be a technology platform company and its just hard to make money doing that; you end up making money for everyone else.”
Making money for everyone else, like, er, NatureWorks
We had to ask. Like, for example, NatureWorks, in its partnership with Calysta? “Yes,” said Shaw. “That partnership is going great, and NatureWorks is going to do great. That demonstrates that you can have a good company as a platform technology company, but you can’t really have a great company in terms of the financial terms. And fermentation is hard; it’s inherently difficult to scale, as we’ve seen time and again recently.
“Biocatalysis, which is what Codexis does, is very different. That’s about enzymes, not living complex micro-organism that you have to keep healthy. There. you get the benefits of biology but the stability of chemistry.
So, if you are going to take on the risks of fermentation, why not take on the rewards of a product company?
“Yes. But more than that, in this case we have an approved product; Statoil and DuPont’s investment took it all the way forward. So, we have a technology platform under Josh Silverman that will deliver for us in more and more markets — including future advances in this one. But we have a path to market, and a technology that’s proven to scale, now. Based on low-cost methane and high-volume fish meal markets.”
Your biggest worry, Mr. Shaw?
“Well, we passed that point. My biggest worry was that during the 12 months of shuttling on airplanes to make this deal that DuPont would step forward with an all-cash offer.”
No worries about the scads of companies chasing methane, we wondered? “They have to develop the whole technology, right through scale-up, with all that risk. This technology’s been scaled, and we’re ahead. We could be 10 full years ahead.”
So, fish meal, or rather, Happy Meal. Any chance of expanding rapidly to the livestock market? “For now, we’re totally focused on aquaculture. But as you know, Calysta Nutrition could have multiple markets in the long term, and Calysta Energy is focused on liquids.”
So, there you have it. You can sum up this company’s path-to-commercial in the two words of the old children’s card game: Go, Fish.