BioAmber and CJ CheilJedang Plan China JV
US renewable materials company BioAmber and South Korea-based CJ CheilJedang Corporation (CJCJ) have signed a non-binding letter of intent (LOI) to establish a joint venture in China that would produce up to 36,000 t/y of bio-succinic acid annually for the Asian market. The companies said the goal is to competitively produce bio-succinic acid on a cost-efficient basis and quickly penetrate the world’s largest succinic acid market. Production is slated to begin in Q1 2018.
CJCJ would own 65% of the jv and BioAmber 35%. The production company would pay Minnesota-based BioAmber a technology royalty for access to its bio-succinic acid technology and CJCJ would receive a tolling fee for producing bio-succinic acid. Each partner would take a share of the profits equal to its respective equity ownership position.
The proposed production venture is subject to technical and commercial due diligence, with a definitive agreement expected to be signed by July 2017. Under the LOI, BioAmber plans to sell CJCJ bio-succinic acid manufactured at its Sarnia, Ontario, plant, so that the Korean company can begin market development in China and South Korea from the first half of 2017.
To realize the plans rapidly, cost effectively and with limited capital investment, the two players said they will retrofit an existing CJCJ fermentation facility with BioAmber’s succinic acid technology. CJCJ will bear all capital costs for the retrofitting, including the capital needed during plant commissioning and start-up.
If market demand were to subsequently exceed production capacity, the jv could expand output through debottlenecking and/or additional investment, the partners said. BioAmber would also have a mutual right-of-first-refusal to retrofit additional CJCJ fermentation facilities globally.
While the company remains focused on ramping up its Sarnia plant and building a second plant in North America, BioAmber CEO Jean-Francois Huc said the joint venture with the Korean firm is an opportunity to accelerate the deployment of its bio-succinic acid technology on a global scale without significant capital investment.
Huc said the joint venture would allow the US company to quickly penetrate the Chinese and broader Asian market and accelerate its cash flow and earnings as well as serving as a blueprint for the build-out of additional cost competitive bio-succinic acid production. Fabrice Orecchioni, BioAmber’s COO, added that both partners are confident the Chinese plant can be reconfigured to quickly produce bio-succinic acid “for a fraction of what it cost us to build the Sarnia facility.”
For CJ CheilJedang BIO, company chief Hang Duk Roh, the joint venture is an “opportunity for us to leverage BioAmber’s unique, low pH yeast technology and utilize our existing fermentation assets more effectively in order to competitively supply the growing market for bio-succinic acid in Asia.”