Shell to Raise Investment in Biofuel Firm Codexis

By RUSSELL GOLD

Royal Dutch Shell PLC said it would increase its stake in biofuels company Codexis Inc. to help it speed development of enzymes that turn plants into fuel.

The deal comes after Codexis withdrew its planned initial public offering in September, citing adverse market conditions. Since then, renewable-energy companies have struggled to find funding to pursue research as both stock markets and banks have tightened cash for all but the most credit-worthy companies.
But the funding freeze is creating opportunities for oil companies, such as Shell, that still have strong balance sheets and credit ratings. Shell and BP PLC have made numerous investments in biofuels recently, investigating the potential for these fuels as future oil supplies continue to appear constrained and governments have mandated the use of more fuels made from plants.
"In this economic climate, being able to raise finance is an achievement in itself," said Alan Shaw, president and chief executive of Codexis. He said Shell's investment "allows us to accelerate our research-and-development program." Neither company would disclose how much Shell is paying to increase its stake.
Bloomberg News/Landov
Shell fuel trucks sit at Coryton Refinery in Essex, U.K. Shell is increasing its stake in biofuels company Codexis.
Shell pays the salaries of more than 50 Codexis researchers and has agreed to roughly double that number, said Mr. Shaw. Shell also gets a second seat on the Codexis board. It received its first seat after making a $33 million investment that secured it a 13% stake in the company, according to U.S. Securities and Exchange Commission filings last year. The investment this week is comparable in size, said Mr. Shaw.
The deal provides a venue for Codexis's enzymes to be tested in a commercial-scale biorefinery, since Codexis, of Redwood City, Calif., isn't interested in building a facility of its own. The company will work with a joint venture between privately held Canadian biofuels firm Iogen Corp. and Shell to develop cellulosic ethanol from inedible plants such as wheat straw. Iogen operates a facility in Ottawa and is considering building more biorefineries. This so-called next-generation biofuel is attempting to overcome the problems that have plagued corn-based ethanol, which include accusations that it has driven up food prices.
Write to Russell Gold at russell.gold@wsj.com