BP and Verenium announce significant partnership to accelerate the commercialization of cellulosic ethanol

08-08-2008: BP and Verenium Corporation announced the creation of a strategic partnership to accelerate the development and commercialization of cellulosic ethanol. The partnership combines a broad technology platform and operational capabilities in an effort to advance the development of a portfolio of low-cost, environmentally-sound cellulosic ethanol production facilities in the United States, and potentially throughout the world. Under the initial phase of the strategic alliance, Verenium is to receive $90 million in total funding from BP over the next 18 months for rights to current and future technology held within the partnership.

The initial phase of the strategic alliance utilizes Verenium's technology for cellulosic ethanol production as the platform for a joint development effort between BP and Verenium. The companies have formed a Special Purpose Entity (SPE) that is equally owned by BP and Verenium and will license existing intellectual property from each company and own jointly-developed intellectual property in the field of cellulosic ethanol production. All intellectual property owned prior to the formation of the SPE will be retained by each respective company. Further, the SPE will serve as the licensing entity to enable all cellulosic ethanol production projects.

The financial terms of this initial phase of the strategic alliance include:

- $45 million, payable in three installments over the next twelve months, for broad access to Verenium's cellulosic ethanol technology platform, production facilities, and employee scientific knowledge and expertise. At closing, Verenium will receive the first $24.5M of this amount.

- $2.5 million per month to co-fund Verenium's various scientific and technical initiatives within the cellulosic ethanol field. The companies' joint efforts in the field will be directed by a Joint Development Agreement the initial term of which is 18 months.

Beyond the initial phase of this alliance, the companies expect to negotiate a second phase of the relationship focused on the development of a Joint Venture (JV) to accelerate the commercial deployment of the technologies from the SPE into commercial-scale cellulosic ethanol production facilities. While the primary and initial focus of the JV will be on facilities jointly-owned by BP and Verenium in the United States, the SPE technologies may also be licensable to third-party commercial projects. It is the companies' intention to negotiate and finalize this second phase of the strategic alliance, including incremental financial terms for co-funding the JV.