(Updates with comments from executive in third paragraph.)
Dec. 9 (Bloomberg) -- Valero Energy Corp., an independent U.S. oil refiner that owns ten corn-based ethanol plants, agreed to provide the majority of financing for a Mascoma Corp. plant in Michigan that will convert wood to ethanol.
Mascoma expects construction on the the $232 million plant to begin within six months and to be complete by the end of 2013, the Lebanon, New Hampshire-based biofuel company said today in a statement.
The agreement follows Valero’s May deal to finance a plant in Louisiana that will convert animal fats and cooking oil into fuel. The company is seeking technologies that may have applications at its corn ethanol factories, said Bill Day, a spokesman for the San Antonio-based oil company.
The Mascoma “project is appealing to Valero because it will be the first, or one of the first, commercial-scale cellulosic ethanol plants,” Day said today in an e-mail. “We will look at the possibility of adding cellulosic production to our existing corn-ethanol plants.”
The Mascoma plant, in Kinross on Michigan’s upper peninsula, also is funded by about $50 million in grants from the U.S. Department of Energy and the state of Michigan. It will initially produce 20 million gallons (76 million liters) of fuel a year and may eventually double that.
Valero is planning to incorporate genetically modified yeasts that Mascoma developed into its ethanol production, Mascoma said today in a filing. Valero’s plants represent about 8 percent of U.S. ethanol production capacity.
Mascoma’s modified yeasts create enzymes needed to break down plant-based sugars and also ferment them into ethanol. This combines two biological processes into one and eliminates the need to buy enzymes for ethanol production, cutting production costs in a laboratory test by 1 cent to 2 cents a gallon, according to the filing.
Valero may partner with Mascoma to develop additional cellulosic ethanol plants, including its next commercial facility planned for Alberta, Canada, and has an option to expand production in Kinross to 80 million gallons a year, according to the statement.
Valero will build and operate the Kinross plant and sell the fuel produced there. Mascoma will receive royalties.
Mascoma announced Sept. 16 plans to raise as much as $100 million in an initial share sale.
--Editors: Will Wade, Charles Siler
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