Dr. Brian Baynes named CEO of combined company
In Massachusetts, Joule and Red Rock Biofuels said that they plan to merge. The transaction is expected to close during the coming 30 days. Terms were not disclosed.
In association with this merger, after a year of important service at a critical transition phase for the company, Joule also announced that CEO Serge Tchuruk, will return to his previous board role. Dr. Brian Baynes, a current board member of both Joule and Red Rock and partner at Flagship Ventures, will succeed Tchuruk and will lead Joule as it enters a commercial deployment phase.
It’s another November surprise for the Bedford-based Sultans of Stealth, who last November edged out longtime CEO Bill Sims for then-board member Serge Tchuruk, former CEO of Alcatel and Total. More on that 2014 transition here.
Meanwhile, it was just this past spring that Joule raised $40 million in an equity round and said it was targeting 2017 to begin construction of the company’s first commercial plant. The company won EPA sign-off for their Sunflow-D fuel in September.
Parent investor Flagship invested in Red Rock last March. At the time Flagship said it would “provide financial and strategic expertise as Red Rock moves toward construction of a commercial-scale refinery and secures additional partnerships, funding and customers.”
Turns out, just a little bit more as long-time Flagshipper Brain Baynes takes over as CEO, though the team of Terry Kulesa and Jeff Matternach will continue to develop the Red Rock project in Oregon.
Does Red Rock have its financing now in place — equity and debt?
“We need to close up more,” incoming CEO Brian Baynes told The Digest. “There’s lots of booked interest.\, bot on the equity and debt side. It won;t be shovel in the ground January 1, but we are still working towards a start in early 2016.”
Restructuring at Joule, some layoffs
As part of this merger and expansion of the commercial pathways, Joule has also restructured its business operations to streamline resources and focus on its two commercial pathways. There were some layoffs,” Baynes said, without commenting on specific numbers or roles. “In 2016 net net, we’re going to increase our spending 2-3 fold and it’s a very substantial expansion. But with that pivot towards commercialization, some of the things that we have been working towards as an R&D company no longer have the same strategic importance.”
Changes in Joule’s commercialization schedule?
At this stage, no changes in the Joule schedule. “Red Rock’s focus on diesel and jet gets us to market faster,” Baynes said. “For Joule’s initial plant, we’re most advanced in ethanol. These are independent paths, but there are some interesting synergies.”
Example? “Joule historically is a potent R&D company, so the question becomes ‘how do I complement that so I can do commercial project?’ Likewise, the Red Rock guys are not thinking about building a global company that’s patent-protected, and disruptive. They’re trying to get a project done. So we saw ways to complement each.
Two shots at goal
“It’s hard to raise money,” said Baynes, “and most people get one shot and your outcome is binary – if it doesn’t work. you’re either in bankruptcy or sucking wind. We can do better than that, if we we can put together companies. Because it is less binary, it is worth a lot more.
“It’s very difficult, with low oil prices, and several projects that went sideways or failed. Solazyme, Amyris and BioAmber have done great to get to the point of producing product, but it remains tough for the, for everyone.”
Red Rock adds a proven technology pathway to Joule’s own Helioculture technology and strengthens Joule’s platform for global supply of carbon neutral fuels.
Red Rock Biofuels leverages a commercially proven Fischer-Tropsch technology to convert sustainably harvested biomass residues from forests and sawmills into jet fuel and diesel products. The company is poised to begin construction of its first refinery located in Lakeview, Oregon in early 2016. The project is supported by a $70 million grant from the U.S. departments of Agriculture, Navy and Energy, and the company has entered into substantial offtake agreements with Southwest Airlines and FedEx for the fuel that will be produced.
The Digest’s Take
We see this as primarily a Red Rock play — that company has a more imminent date with destiny, scheduled to start construction early next year, and financing was not coming together. Joule provides access to a broader investor base, and an affiliation with a hugely ambitious play in low-carbon fuels. So, Joule brings a lot in the here and now to Red Rock, while Red Rock in turn provides a more proven pathway to revenue generation in the near-term for the low-carbon investor.