Danimer will invest big in PHA

In response to a surge in demand, Danimer Scientific says it will spend $700 million to build a new plant for the biobased polymer polyhydroxyalkanoate (PHA) in its hometown of Bainbridge, Georgia.

Danimer is one of several small, green chemistry firms that have gone public by merging with special-purpose acquisition companies, or SPACs, using the cash they raised to fund grandiose projects. The polypropylene recycling company PureCycle Technologies recently completed a SPAC merger that values it at $1.2 billion. And Origin Materials, which makes chemical feedstocks from lignocellulose, inked a $1.8 billion SPAC deal in February.

Danimer’s deal, completed in December, valued it at $890 million. It now has nearly $380 million in cash on its balance sheet that it will put toward expansion.

The company argues that market forces are opportune for PHA, which biodegrades in the ambient environment, including the ocean. Most other biobased polymers have to be composted. The company makes PHA by feeding canola or soybean oil to bacteria.

And Danimer has nabbed big-name customers recently. It signed a 2-year partnership in March with Mars Wrigley, which plans to launch Skittles packaged in PHA by early next year. The company also has been collaborating with the distiller Bacardi.

“We are even more bullish now about PHA than we were a few months ago,” Steve Croskrey, Danimer’s CEO, told analysts on a conference call.

The company completed its first commercial-scale plant, with 9,000 metric tons (t) per year of capacity, in Winchester, Kentucky, in March 2020. Ramp up of that plant increased its 2020 sales by about 46%, to $47 million. An expansion will bring the plant’s capacity to 30,000 t by 2022.

The new plant in Bainbridge was originally slated to have 57,000 t of annual capacity. Due to additional demand, it will now have 114,000 t of capacity to be added in two phases, in 2023 and 2024.

Danimer says it forecasts that the Bainbridge plant’s capacity will be sold out. However, on the analyst call, the company acknowledged that only about 10% of its output is under contract so far.

In a note to clients, the Jefferies stock analyst Laurence Alexander wrote that market signals suggest a “seismic shift in appetite for bio-based and biodegradable products.” Alexander predicts global PHA capacity to reach more than 1.1 million t per year by 2023. But he also expects that at least two, and as many as 8, competitors will enter the market by that time.

Indeed, Kaneka has already built a small PHA plant in Japan. And the start-up RWDC is planning a facility in the US.