WASHINGTON (Reuters) - Poet, the largest U.S. ethanol maker, said on Monday it will decline $105 million in loan aid from the Department of Energy because a joint venture will help it reach its advanced biofuel goals.
Poet said earlier on Monday it will partner with Royal DSM, a life sciences company, to commercially demonstrate and license cellulosic ethanol.
"The loan guarantee commitment from the DOE was an important milestone in our quest to commercialize cellulosic ethanol, and we are appreciative of the work they put into the due diligence process," Jeff Broin, the chief executive of privately owned Poet, said in a release.
"We believe that the joint venture with DSM positions us well to meet our ambitious cellulosic ethanol production goals, and thus the loan guarantee has become unnecessary."
The DOE had offered Poet the loan aid in September.
Companies hope to make cellulosic ethanol from grasses, trees and crop waste as a cleaner alternative to corn-based ethanol, which has been blamed for raising food prices.
The joint venture, called Poet-DSM Advanced Biofuels, LLC, hopes to make cellulosic from crop waste treated with a process called enzymatic hydrolysis. The joint venture hopes to begin production at Project Liberty, which Poet has been building at a plant in Iowa, by the second half of 2013.
Eventually the venture hopes to bring the technology to 26 other ethanol plants.
Late last year the Obama administration came under fire from Republicans who said it missed key warning signs before the Department of Energy issued more than $500 million in loan aid for the start-up solar company Solyndra. The company later went bankrupt.
(Reporting By Timothy Gardner; Editing by Lisa Shumaker)