In this edition of the Green Molecules™ Newsletter, we delve into the recent mergers and acquisitions (M&A) activity within the venture-backed carbon capture, sequestration, and utilization (CCSU) industry. At Energy Capital Ventures® we are big believers in the role of CCSU to decarbonize large chunks of the economy while leveraging existing infrastructure to do so. As explored in this interview by Moji Karimi, CEO and co-founder of ECV portfolio company Cemvita, just a few years ago CCSU was a niche topic focused only on underground carbon sequestration and Enhanced Oil Recovery (EOR). Recently however, the CCSU market has seen a significant uptick in investor interest driven by global sustainability goals and technological advancements, going beyond sequestration and EOR and into utilization, recycling and carbon management.
Today we will explore the journeys of LanzaTech, LanzaJet, Aker Carbon Capture, and Carbon Engineering, highlighting the growing investor interest and potential shifts in the CCSU landscape.
LanzaTech, founded in 2005, is a biotechnology company that has developed a technology to convert industrial waste gases into sustainable fuels and chemicals. Their process is centered around gas fermentation, using microorganisms to ferment carbon-rich waste gases (such as those from steel mills and chemical plants) into valuable chemicals and fuels. This process is similar to traditional fermentation, but instead of using sugars and yeasts, LanzaTech uses gases like carbon monoxide and carbon dioxide.
The primary products of LanzaTech's process include ethanol, which can be used as a fuel or chemical building block, and other chemicals that serve as inputs for synthetic biology applications, including the production of materials, chemicals, and fuels, under their “Carbon Smart” label. LanzaTech has secured partnerships with several industrial companies and has 6 active commercial projects worldwide.
In March of 2022, LanzaTech announced a SPAC deal valuing the company at $2.2B and raising $275M in the process. The transaction was consumed in February of 2023 and, while the stock has since given away a lot of its initial value, it was one of the first signs of investor interest in the CCSU as a contender in the global decarbonization race.
LanzaJet, a spinoff from LanzaTech, is taking the ethanol such as that produced by LanzaTech’s process one (or two!) steps forward by converting it into Sustainable Aviation Fuel (SAF). The company recently announced a $30M investment from Microsoft Climate Innovations and is seeking $100M to grow.
We may be biased but, while the success of LanzaTech and LanzaJet are undeniable, we think that our portfolio company Cemvita is even better positioned to decarbonize heavy industries. Cemvita’s bioengineered microbes leverage next generation computational biology to improve the efficiency of the system, unlocking the of use waste feedstocks such as CO2 (not CO!) and other sources that are otherwise “untouchable” as they would require too much energy and cost to upgrade into biochemicals and biofuels.
Aker Carbon Capture is a Norwegian company that has developed advanced solvent-based technology to capture CO2 from flue gases. The solvent absorbs the CO2 from the gas stream, and then the CO2 is separated from the solvent in a regeneration process, allowing the solvent to be reused.
Keys to their success have been their modular approach and design optimization. Their focus on a modular, 100,000 tons per annum design enabled them to design scalable carbon capture units that can be tailored to the needs of different industries such as cement, waste-to-energy, and oil & gas. These modules can be integrated into existing facilities, making it easier for industries to adopt carbon capture solutions, lowering costs and reducing the scale needed by traditional amine systems to be cost-effective. By focusing on a “one-design” approach, key elements of the process can be optimized to reduce the energy - and therefore the cost - required for solvent regeneration. Typical amine systems have energy efficiencies of 2.5 - 3.5 GJ/ton of CO2 captured, while Aker’s design optimizes heat recovery to reach 1.6 GJ/ton. At ECV we are big believers in technologies that can reduce the energy penalty of adding a carbon capture system to a facility, as this is directly related to OpEx and incremental emissions (yes, even all-electric CCS systems have an emission profile).
Schlumberger has recently announced that it will acquire 80% of Aker Carbon Capture for $400M, with the option to buy the remainder 20% in 3 years at a price range based on Aker’s performance. The company has 1 unit in operation and 6 under construction, including 1 larger unit that for a total of 1 Million Tons per annum contracted.
Carbon Engineering is a Canadian-based clean energy company specializing in Direct Air Capture (DAC) technology that removes carbon dioxide directly from the atmosphere. Their DAC technology captures atmospheric CO2, which can then be either stored underground or utilized to produce synthetic fuels, thereby helping to reduce greenhouse gas emissions and combat climate change.
1PointFive, a subsidiary of Occidental Petroleum, was specifically formed to finance and deploy carbon capture technology. Carbon Engineering has partnered with 1PointFive to develop large-scale carbon capture facilities using their DAC technology. This partnership aims to build facilities that can each capture up to one million tons of CO2 per year. These projects are designed to scale up the technology and demonstrate its viability on a commercial level, contributing significantly to carbon removal efforts.
On November of 2023, Oxy announced the acquisition of Carbon Engineering for $1.1B, marking the largest acquisition in the DAC space. Oxy brought its expertise and balance sheet strength to effectively create a future for a technology that would have otherwise struggled to attract enough capital to scale. Oxy - and 1PointFive - incredible scale-up know-how enabled them to announce a 500,000 tons per annum DAC facility, project STRATOS, that attracted $550M in investment from finance giant BlackRock. The STRATOS facility in Texas is expected to reach operational status in mid-2025 and will be the largest - by an order of magnitude - DAC facility in the World. This would have not been possible without the expertise, capital and vision of a progressive oil and gas giant.
The recent M&A activities signal a maturing CCSU market with a clear trajectory towards larger-scale deployments and integration into traditional industries. These strategic acquisitions not only provide the necessary capital but also the industrial expertise to scale operations and navigate regulatory landscapes effectively.
In conclusion, the M&A activity in the CCSU sector is a testament to the critical role these technologies play in our transition to a low-carbon economy. As the technology matures and the market expands, we can expect to see more acquisitions, with larger industry players seeking to integrate these innovative solutions into their portfolios.
At ECV we look forward to updates into this rapidly evolving field that enables the flourishing of a robust Green Molecules™ ecosystem to provide clean, reliable, cost-effective energy for all!
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