SOUTH SAN FRANCISCO, Calif. -- Midland-based Dow Chemical Co. will buy renewable and biodegradable insulating fluids, made from algae, from a California company under a deal announced Wednesday.
Dow (NYSE: DOW) announced a "contingent offtake agreement" with South San Francisco, Calif.-based Solazyme Inc. (Nasdaq: SZYM) under which Dow will buy all of its requirements of "non-vegetable, microbe-based oils for use in dielectric fluids" through 2015 from Solazyme, provided Solazyme can supply the amounts Dow requires and meet Dow's specifications.
Dow says the new bio-based dielectric insulating fluids offer increased fire safety because they have higher flash points. And they provide other advantages that may improve the efficiency and operating life of transformers.
Dow and Solazyme also announced a "Phase 2 Joint Development Agreement," an exclusive, multi-year extension of the current joint development agreement including accelerated commercialization timelines based on Solazyme's rapid progress in the production of tailored oils from algae.
The new agreement enables additional application development work to be conducted by Dow, due to Solazyme's accelerated ability to scale up their tailored algal oil feedstocks.
Consumption of Solazyme's algal oil feedstocks is expected to significantly exceed the minimum estimated volumes of 8.5 million gallons (29,000 metric tons) starting in the second half of 2013 and through 2015. The offtake agreement says final pricing for the oil will be linked, among other things, to Solazyme's sugar-based feedstock costs.
"Solazyme's unique biotechnology-based oils platform has created a new market opportunity to develop and produce the next-generation of safe, renewable, dielectric insulating fluids that provide increased performance benefits," said Jonathan Wolfson, CEO of Solazyme. "We have continued to reach technological advancements ahead of schedule with Dow, enabling us to further progress our commercial relationship."
"Solazyme is a leading company in the industrial biotechnology space and its renewable oil technology platform provides a unique opportunity to significantly accelerate the development of next-generation, bio-based, non-vegetable dielectric insulating fluids," said Tim Laughlin, general manager of Dow Electrical & Telecommunications. "In the fast-growing space of bio-based dielectric insulating fluids, Solazyme's tailored algal oils will serve as a technology platform for our continued efforts to bring innovative solutions to the power industry. Advanced field trials in transformers will be initiated to further prove the technology and value proposition of these new products in the near term. Based on the application work we have already completed to date, we are confident we are positioned to commercialize these oils in timelines consistent with Solazyme's planned ability to manufacture the quantities we need."
More at www.dow.com/electrical.
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