Reminders of the tough economic climate for getting projects
financed are everywhere. Another hammer came down early this month as one of
the giant players in the industry announced plans to shutter all research and
development towards developing a synthetic fuel from biomass.
Eleven months ago we wrote about Rentech’s moves to scale
back spending for development of its patented Rentech Fischer-Tropsch Process,
designed to produce synthetic jet and diesel fuel. The parent company of
fertilizer giant Rentech Nitrogen had been buying up technologies and land for a
variety of projects and was now being squeezed by shareholders for a return on
those investments. Last year the company abandoned projects in Port St. Joe,
Fla. and Natchez, Miss. and begin looking for a new outlet for the rights to
the 1.3 million tons of timber it purchased from the Province of Ontario.
Further austerity measures were recently taken when Rentech
announced it would cease operations on its production demonstration unit in
Commerce City, Colo., cutting 65 jobs and effectively halting any efforts to
continue developing synthetic renewable jet and diesel fuel.
“While our elimination of these positions is a difficult
decision, today’s actions will further position Rentech to drive value for
shareholders by cutting R&D spending and focusing on businesses that
generate strong returns, with ready markets and certainty of revenue,” CEO Hunt
Ramsbottom said in a statement on Feb. 28th.
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| Rentech's Product Demonstration Unit in Commerce City. Courtesy: Rentech, Inc. |
Rentech looked like it was poised for success in 2010 when
United Airlines successfully flew an A319 Airbus, which was powered in part by
RenJet, the synthetic fuel produced at the Commerce City facility, out of
Denver International Airport. Forecasts for how this development could change
the industry were good but economics kept the drop-in fuel from becoming a
staple in the industry.
Reports say that Rentech would need more than $1 billion to
bring the technology to a large enough scale to make the process economic and
potential customers haven’t been willing to agree to long-term contacts to make
financing easier. Rentech will attempt to sell the five-year old facility it
built in Commerce City for $85 million as well as the 450 acres of land it still
owns in Natchez, Miss.
The company expects to cut its R&D budget from $21
million in 2012 to $10 million in 2013. It has no plans to spend any money
beyond maintaining intellectual property in 2014.
Better BTU Take: We
were skeptical of Rentech’s chances for success from the beginning, noting in
our first
blog that the company seemed to be throwing large amounts of money around
hoping to hit the target and strike it rich. Although the company may have been
able to prove its technology, it wasn’t able to bring it to large-scale
production due to cost and that is one of the reasons we support building the
industry on smaller scale projects.
Rentech
to Close Product Demonstration Unit – Rentech Press Release, Feb. 28, 2013
Rentech
to Shutter Research Plant in Commerce City, Cutting 65 Jobs – By Aldo Svaldi,
The Denver Post, Feb. 28, 2013
Rentech
in Reverse – Better BTU Technology Blog, Apr. 24, 2012
Jet
Fuel's Future on the Front Burner – By Ann Schrader, The Denver Post, Aug. 1, 2010.
