By Jennifer Kho

Imperium Renewables on Wednesday announced it has raised $214 million, including $113 million in private equity, to build more biodiesel plants.

The company said it believes the second-round funding to be the largest private-equity investment in a United States biodiesel company so far. While the $113 million falls short of the $120 million that ethanol firm Altra hauled in last year, Imperium says it’s one of the top five investments in a renewable energy company ever  (see Altra Hauls in $120M).

Altra Hauls in $120M

“The raise is one of the largest and most significant financings in the history of the cleantech sector,” said Ira Ehrenpreis, a general partner with Technology Partners.

The funding is also further evidence that investors are willing to bet big on biofuels.

The question of whether biofuels investments fit into the venture-capital model has been an open one. In a speech Tuesday afternoon at the Cleantech Venture Forum in San Francisco, Neel Kashari, senior advisor to U.S. Department of Treasury Secretary Hank Paulson, said there’s a gap between equity financing and debt financing that some biofuels companies fall through.

San Francisco

“I don’t believe it’s as black and white as just debt financing or equity financing,” Mr. Kashari said. “I believe someone smart in the room can come up with a hybrid to bridge this gap.”

Venture capitalists also have said some biofuels companies can’t get debt funding because they haven’t proven the technology at a large-enough scale, but can’t rely only on equity funding because the rounds are generally too small to build the larger projects that would prove the technology.

some biofuels companies can’t get debt funding because they haven’t proven the technology at a large-enough scale, but can’t rely only on equity funding because the rounds are generally too small to build the larger projects that would prove the technology.

Mr. Ehrenpreis said the investment shows that the model works for early-stage biofuels companies. VCs can invest in promising early-stage biofuels companies, and then count on other growth capital to help the company grow, he said.

“VCs have always been capable of early-stage risk capital when there’s a value proposition that supports the technology,” he said. “This is an example of a company that raised initial technology-venture funding involved in the technology-risk phase, then got growth capital.”

Investors in Imperium’s second round include Technology Partners and Nth Power, which both also participated in the company’s $7.5-million first round of funding last year, as well as ArdsleyPartners, Attractor Investment Management, BlackRock Investment Management, Capricorn Management, Ecofin, Robeco, Silver PointCapital, Southport Energy Alternatives, Stark Biodiesel Investments, and TreatyOak Capital Management.

Société Générale Corporate & Investment Banking is arranging the $101 million in debt financing.