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Fueling the future: Craig grad leaves Virent sitting sweet

Photo

Photo by Mark Hoffman

Virent Energy Systems CEO Eric Apfelbach stands near a pilot plant that converts plant sugars into gasoline. The 1979 Janesville Craig graduate is leaving Virent to pursue other entrepreneurial interests.

MADISON — Eric Apfelbach left Janesville Craig in 1979 with an interest in chemistry and biology.

Five years later, he left UW-Madison with a degree in chemical engineering.

Now, he's leaving Virent Energy Systems, a Madison-based biofuels company that Gov. Jim Doyle said earlier this year could become the next Google or Microsoft.

After helping get the fledgling company off the ground in 2004, Apfelbach is ending his run as the company's president and chief executive officer on his terms.

"In the five years I been here, we've become a fuel company," Apfelbach said. "Our goal is to become a billion-dollar company, and my background is not in the fuel business.

"We need a big time oil guy who can be a heavyweight on Wall Street."

Wall Street might not be all that far away for Virent, which is developing technologies to produce renewable gasoline, diesel, jet fuel and other hydrocarbons from biomass.

The company—which started with three employees and now has 80 on a payroll that averages $72,000—is developing gasoline derived from plant sugars. The product is virtually the same as gas made from crude oil and has often been cited as a replacement for conventional gas because it blends easily and uses the same delivery systems.

"The core technology is to start with sugars and use a solid-state catalyst to turn it into gasoline," Apfelbach said. "It's just a matter of breaking down plant material; we're doing the same thing as nature but saving 16 million years."

Virent's green gas is similar to gas made from crude oil in that it produces carbon dioxide when burned. With Virent's gas, however, there's virtually no net impact because the carbon dioxide released comes from carbon dioxide absorbed from the atmosphere when the plant was growing.

Apfelbach said Virent's green gas is important because it reduces CO2 emissions and comes from a renewable source.

"We import something like 70 percent, now, which is a failure of our country's policy," he said. "We have to get it down to something like 30 percent."

Virent's green gas is not ethanol, which Apfelbach and others have said has driven up food prices, has distribution problems and has a limited potential to replace fossil fuels.

"Ethanol has become a lost issue as a fuel, a lost issue as a process and people don't like the end product," Apfelbach said. "Corn ethanol is a political solution, and our system is much more efficient."

Virent has partnered with Shell, Cargill and Honda and is scaling up its technology in pilot plants in a new building addition.

"Right now, we're doing about a gallon a day, and we'll be able to do 25 to 50 in our new building," Apfelbach said. "Our volume isn't as important as answering the question about whether it can be scaled for full production."

Virent's process looks like a miniature oil refinery. Production plants probably would have up to a million-gallon capacity and would need to be within 50 miles of the food stocks that support them.

Building production plants is probably beyond the means of the privately held Virent, but that's where the company's partners and Wall Street may enter the picture, he said.

"If we build a plant before we go public, it means that our partners have signed off and think we're good to go," Apfelbach said. "We have total intellectual property control, and everybody wants the product.

"The market is virtually insatiable, but when it comes to full production, we would be capital constrained. I think we would be a good growth story in the public market."

Virent has revenues of about $10 million, primarily from licensing agreements, research and development and government projects.

"We're still losing money, but you try to minimize the losses until you get to that key point," Apfelbach said.

If it gets to market, the gas Virent's technology produces will compete with gas made from crude oil. Crude oil and gas prices have been falling, but Apfelbach and Virent's partners believe it eventually will settle at $150 a barrel.

Crude oil at $60 a barrel is where Virent has pegged its competitive break-even point.

"If you've got green gas that's 10 cents more a gallon, people will buy straight gas every time, except for those people who we refer to as the rich green guys."