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Verenium continues to struggle for financial stability.

The company sold an extra $12.3 million of stock in recent months to raise badly needed money and floated 5.5 percent convertible notes to pay off debt. It also exchanged 1 new share for 12 old ones in a reverse split to strengthen its stock price.

Verenium struggles financially and as loan guarantee negotiations with the Energy Department continue

Yet significant opportunities face the Cambridge, Ma, company as it forges a path in the fickle biofuels market. Verenium is by some measures the U.S. company closest to producing ethanol in large scale commercial plants.

However, the challenges of building a business are monstrous – especially as quarterly losses continue ($2.3 million in the third quarter on revenue that rose an uninspiring 13 percent to $18.6 million). On a conference call Monday explaining the financial results, CEO Carlos Riva said the company remains in negotiations with the Department of Energy on a loan guarantee for its Highlands County, Fl, plant, its first commercial facility.

Those negotiations could end up with a deal being signed in the first quarter. Still, production at the plant isn’t slated to begin until 2012.

The company continues to hunt for land along the Gulf Coast for a second plant.

Wood pulp and paper mill residue could become the source of billions of gallons of biofuel, says Verenium

Despite the challenges, Riva was upbeat about the possibilities for biofuels, especially fuels derived from wood pulp and paper mill residue. Paper manufacturing is an established industry and its low-cost wastes are available enough can produce 1.5 billion to 2 billion gallons of biofuel a year, he said.

Verenium is just now beginning to test the materials at its demonstration sites. And while Riva didn’t predict the cost of the fuel he might make, he did say Verenium targets biofuel at an attractive $2.10 a gallon from its Highlands County plant.

“We believe there is a significant opportunity in the future to drive down that number,” he added. If so, the financial struggles may begin to ease in three years.