DuPont, Danisco unit to make cellulosic ethanol

NEW YORK (Reuters) - U.S. chemical maker DuPont Co (DD.N) and Genencor, a unit of Denmark's Danisco (DCO.CO), on Wednesday said they plan to form DuPont Danisco Cellulosic Ethanol LLC, a 50-50 joint venture to develop and commercialize low-cost technology for producing cellulosic ethanol.

Corn prices in the U.S. have been hovering at record levels, as more and more corn is pumped toward production of ethanol for fuel in the United States.

However, the cost of producing cellulosic ethanol is still much higher than the cost of produce an equivalent amount of corn-based ethanol and many U.S. companies are exploring ways to make cellulosic ethanol more cost effective.

Cellulosic ethanol has the same properties as corn-based ethanol but can be derived from the nonedible parts of a corn plant, rather than the corn kernels that are the traditional source of domestic ethanol production.

Moreover, sugar cane bagasse, wood shavings, switch grass and other such materials can also be harnessed to produce ethanol.

The partners plan an initial three-year investment of $140 million, which will initially target corn stover and sugar cane bagasse as raw materials. The companies plans to use other forms of cellulosic raw materials further down the line.

"By integrating our companies' strengths and expertise in this new venture, we are significantly increasing the potential to make cellulosic ethanol from multiple non-food sources," said DuPont's Chief Executive Charles Holliday, in a statement.

Both DuPont and Danisco will license their combined existing intellectual property and patents related to cellulosic ethanol.

The global joint venture expects its first pilot plant to be operational in the United States in 2009, and its first commercial-scale demonstration facility to be operational within the next three years.

The companies expect to enable production of commercial volumes of cellulosic ethanol by 2012.

The joint venture would be headquartered in the United States and would be formed after receipt of required regulatory approvals.

(Reporting by Euan Rocha, editing by Gerald E. McCormick)