LanzaTech narrows annual loss in 2016; wary of petrol prices, comercialising tech

LanzaTech the New Zealand-founded, taxpayer-backed carbon recycling company that decamped to the US, reported a slightly narrower annual loss and while the directors signalled a number of risks they concluded it has sufficient funds to continue operating for the foreseeable future.

The US-based company reported a net loss of US$37.4 million in calendar 2016 versus a loss of $38.3m in the prior year, according to its annual report. Revenues were $4.1 million versus $3.95 million in the prior year and were generated by $2.4 million in government grants and $1.7 million from commercial contracts. Its accumulated losses now stand at $204.2 million.

LanzaTech turns waste gas from steels mills into ethanol and other high-value fuels and chemicals using microbes through a gas fermentation process. It was founded in New Zealand more than a decade ago and while headquarters have shifted to Illinois and it reports in US dollars, the parent company remains New Zealand-registered.

It is currently in the research and development phase of taking its technology, products and services to the global commercial marketplace and "as a consequence has a higher degree of business and continuity risk than other more established businesses," the directors said.

Regarding specific risks, the directors noted "if petroleum prices were to deteriorate significantly, projects at the planning stage may be re-assessed due to the less attractive returns."

They also signalled technology validation as a risk factor. According to the report, its technology has been proven at laboratory, pilot and demonstration scales and it is now in the process of completing the construction of its first commercial unit. "Unforeseen factors may arise in the course of the forthcoming development steps that could impact the group's capacity to commercialise its proprietary technology at expected yields or at all," they noted.

Low commodity prices were also noted as a risk, given its technology is linked to carbon-rich waste gases and many of its current and potential customers are companies operating steel mills, ferroalloy plants and refineries.

The deployment of its technology requires significant capital expenditure by the operators "who many not have the capacity nor the desire to make such investment during adverse commodity cycles," the directors said.

The availability of affordable financing is a risk given the company is "structurally in the red" in its current pre-revenue stage. "Any tightening in global financial markets may prevent the group from having access to affordable financing," it said. It also noted weak or unsupportive legislation and competition for global talent are other risks.

The directors noted the group has experienced and expected to continue experiencing net losses from operations in the near term and there is uncertainty around the timing and amount of cash to be received from existing and expected contracts. However, they concluded that there will be sufficient funds to enable the group to continue operations at existing levels for the foreseeable future and not less than 12 months. The funds are available from net current cash balances, its capital raising, a loan facility entered in 2016 and existing and projected contracts.

The company accounts show the group had net operating cash outflows for the year of US$31 million versus $31.4 million in the prior year while research and development expenses for the group rose to US$21 million from US$19 million the prior year. No tax was paid. The company had cash and equivalents of US$9.9 million as at Dec. 31.

LanzaTech has raised more than US$200 million from a variety of leading venture capital firms and strategic partners, including Silicon Valley-based Khosla Ventures, Japan's Mitsui & Co and the New Zealand Superannuation Fund.

(BusinessDesk)