Fulcrum Holds Advantage Over A Host Of Competitors

| About: Fulcrum Bioenergy (FLCM)

Fulcrum Bioenergy (FLCM) appears to be readying for its initial public offering as the company filed its Form S-1 back in September 2011. The company appears to be entering a market uncertain by the recent performance of biofuel-related companies. Peer companies such as Amyris (AMRS), Gevo (GEVO), KiOR (KIOR), and Renewable Energy Group (REGI) all continue to trade at severe discounts to their initial public offering prices. Additionally, some have endured serious setbacks that have raised questions over the industry's progress as a whole.

However, as so appears to be the case in many of these aforementioned companies, Fulcrum offers a unique technology and approach to the biofuel question. The company has a larger emphasis on the cost-effective creation of biofuel from garbage, a plan made from the dreams of an efficiency guru. By utilizing municipal solid waste, the company offers a disruptive business model that converts this feedstock into ethanol. The following offers a few key points derived from the company's filing:

  1. The company expects to produce 10 million gallons per year.
  2. The company expects an unsubsidized cash operating cost of less than $1.30/gallon, net of the sale of co-products (ie. renewable energy credits). It believes that it is possible to reduce this cost down to $0.90 on a full-scale commercial facility.
  3. The company has entered into long-term, zero-cost contracts for municipal solid waste sourcing to provide 700 million gallons of ethanol per year.
  4. The company expects to generate its own electricity, also adding an additional revenue stream through state-level energy credits.
  5. The company believes its first facility will cost $180 million.

Whereby KiOR uses wood chips, Amyris uses sugarcane, REG uses animal fat, and Gevo uses corn as a feedstock. One thing that truly stands out about Fulcrum is the fact that the company utilizes municipal solid waste. Not only does the company gain the advantage of using a zero-cost feedstock, but it also is able to exploit the efficient infrastructure system already in place. By presenting a solution to two problems (growing trash reserves and dwindling fuel sources), Fulcrum effectively positions itself to exploit the wide spectrum of subsidies and credits available, which in turn can jump start the company in an expedited manner.

Disclosure: I am long AMRS, REG.