GreenHunter Energy Wall Street Analyst Forum Presentation Transcript

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 |  About: GreenHunter Resources, Inc. (GRH)
by: SA Transcripts

GreenHunter Energy, Inc. (NYSEMKT:GRH)

Wall Street Analyst Forum Presentation

March 26, 2008 1:20 pm ET

Executives

Gary C. Evans – Chairman of the Board & Chief Executive Officer

Jack Zedlitz – Director of Corporate Communications

Facilitator

I’d like to introduce the next company in the alternative energy and clean technology program. It will be the last company. Their 40 minute presentation and Q&A session will take place here and for the most part we’ll try to keep a breakout session here so that we don’t have to move you to a breakout room because there’s no company immediately following this one so we’ll keep you here for the breakout session to be efficient.

So I’d like to introduce the next company, GreenHunter Energy traded on the American Stock Exchange, the symbol is GRH, a publicly traded portfolio company of renewable fuels and power businesses, their mission is to develop, acquire and manage profitable renewable power and fuel assets. Their primary assets include the country’s largest bio-diesel refinery in 105 million gallons per year, a 700,000 barrel bulk liquid terminal operation and a 200 million pound per year glycerin refinery all which are located at the renewable fuels campus on the Houston Ship Channel in Houston, Texas. Commercial operations are planned for early April, 2008. GreenHunter Energy currently has ownership interests in six wind energy projects under various forms of development located in the states of Montana, California and New Mexico.

Further GreenHunter executed the landmark master turbine technology agreement with the Chinese manufacturer of wind turbines, MingYang Wind Power Technologies. This agreement allows GreenHunter to potentially purchase more than 900 megawatts of new capacity for wind projects to be developed between years 2008 and 2012 in North America.

Finally GreenHunter Energy also owns an 18.5 megawatt biomass project located in the Imperial Valley of Southern California and has a 15 year power purchase agreement with Southern California Edison. GreenHunter Energy went public on the American Stock Exchange on January 2nd, 2008 at $12.00 per share and is up 50% to $18.00 per share since that listing.

Without any further introduction I’d like to introduce Gary Evans, Chairman and CEO and he is accompanied by Jack Zedlitz, Director of Corporate Communications.

Gary C. Evans

Thank you very much. Sorry for the few technical delays we’ve had. I would like to tell you the story about GreenHunter and we are a public company so we do have give the Safe Harbor ruling. We’ll be talking about some forward-looking statements. As all of you know there is a lot of rhetoric in Washington going on concerning renewable fuels area. For this first time in my business career I’ve had the government try and support something I’m doing rather than take it away so it’s been kind of nice. There’s definitely been a consumer mind change in renewables, a lot of Americans and consumers around the world want renewable and so with $100 oil today there’s no question that this is a new and vibrant industry and we’re trying to bring to this business tried and true knowledge of business in the energy sector and that’s what makes us quite a bit different than most the renewable companies in our industry today.

Last year investors flocked – actually this was 06, 07, I think this number was closer to $150 billion, significant investments have been going into this space all over the world and you’ve heard solar companies today a lot of that is also going into the wind business, the biodiesel business predominantly in Europe ethanol business obviously here in the United States and geothermal in the Western US as other parts of the world. So this is a sector that will continue to grow and there’s a lot of investor interest in it.

To give you a quick background about my industry experience. I was a banker in energy lending for about seven years with a couple commercial banks in Dallas. I started an oil and gas company at the ripe old age of 27, I ran that for 20 years. I sold that in June of 2005. We were on the New York Stock Exchange, we had an average annual shareholder return of 37% for the 15 years that we were public and that in itself gave us quite a bit of followings when I started this new company for investor capital. We sold that company to Symerex that is the bulk of that company today. This company has about a $4 billion market cap.

So as Yogi Berra said it’s like time to – it’s like déjà vu all over again and trying to use my energy experience in the industry to convert that into a new business. A lot of the management team has come over with me at GreenHunter, used to work for me at Magnum Hunter such as our General Counsel, CFO, head of IT, a lot of the clerical and accounting staff as well. So as we transition from traditional energy into the renewable space, when you look around the landscape in the United States today, it really is a very small component of our total energy mix, in reality less than 5%. So it is an area that has a lot of room for growth and there’s a lot of technology changes going into effect that allow this growth as well as government intervention. If you are a believer in world crude oil prices you have to be a believer in renewables. I made the decision to get in the renewable business about a year and a half, two years ago predominantly due to my travels to China. I go to China at least four times a year and when I saw the unsustainable growth of crude oil demand for transportation and electric needs through coal, I was convinced that the United States no longer was controlling world crude oil prices, Asia was. And so with that in mind knowing that the renewable sector did work over $40 to $50 crude oil price, it’s what gave me the real desire to enter this sector.

So as we transition to renewable energy sources, you start looking at the various components, you have wind, you have solar, obviously the vegetation which grows all the biofuels, the animal byproducts that can be used such as animal fat from [talloid] and of course geothermal. When you look around the world, there’s plenty of clean resources that are plentiful in this area and different countries have different areas that they’re more concentrated in. If you look in Europe today, countries like Germany and Spain are 20% electric supply coming from wind. United States is not even 1% yet. So there’s a lot of growth coming here in the US. The Europeans are flocking over here, their companies are buying up a lot of the wind assets here, moving that sector into this area. The biodiesel business in Europe is probably 10 years more mature than here in the US. The oil business in Brazil is at least 35 years ahead of the United States. The solar business in other parts of the world is way ahead of the United States. So we have been fortunate as Americans to have plentiful energy supplies from fossil fuels and so the first time in our lives we’re actually now having to see the effects of high fuel prices. If you’ve traveled to Europe in the last 15 years, you know how much higher they pay for gasoline than we pay. So Americans are finally saying, hey there is an alternative to the fossil fuels and you’re seeing it coming in space here in the United States.

So the United States could produce alternative energy in the equivalent of almost 8 million barrels of oil per day by year 2050, that’s more than 50% of our current total usage. Do I believe that renewables are going to replace fossil fuels? Absolutely not. We’re only one segment of the energy pod, but there is lots of room for growth in this business that can be done very profitably. So we formed 300 and we’re basically divided up in two divisions, we have a power division and we have a fuels division. I’ve hired experts from other companies to run these different divisions. Today we’re involved in three areas predominantly, biodiesel, biomass and wind. We also own biodiesel electric generation. We also own terminal operations. We also are building a glycerin refinery and we also are vertically integrating into food crops. We believe that if you’re going to be in the biofuels arena you cannot compete with food. Food will always win out over fuel. And so our business is designed to not compete with the food crop.

So our business model is very much like was at Magnum Hunter that I ran for 20 years as we buy existing assets. It’s very rare that we’ll build something from ground up. I like being called the garbage dealer. I buy everybody else’s junk and try to turn it into something. So the main assets today of this company are a refinery we bought in Houston in April of last year, it was a waste oil chemical refinery we bought for $11 million and the sellers had no idea why we wanted it. Because it had existing infrastructure of being on the water, had land, had access to gas lines and all the tankage we needed, about 60 to 70% of that existing facility we’re utilizing as we convert it into a biodiesel refinery. We also own a biomass plant in Southern California, it’s over in the Imperial Valley. We bought that at a bankruptcy, it cost $68 million to build it in 1985. We bought it for $7 million. So we like buying existing assets and the second, third owner and convert them over. In the wind area, we will be building new wind farms, predominantly with turbines coming from China which I’ll talk about later.

So the concept with GreenHunter is to be the first publicly traded renewable company that has a portfolio of assets so that as a shareholder you have the benefit of having more than just one renewable asset to look upon. So our asset base today is this refinery in Houston. We also have a 700,000 barrel terminal facility that we have built there. We have a 45,000 barrel a month methanol distillations tower, the second being the biomass project and the third being our wind leases. So let’s talk about biodiesel for a second. This is used for basically any form of transportation, cars, on road trucks, off road vehicles, cruise ships, oceangoing vessels, railroad locomotives, power plants and home heating oil. Biodiesel can be transported, unlike ethanol, through existing infrastructure. You don’t need new pipelines, you don’t need new tanks, you don’t need new terminals. You can use all the existing infrastructure that’s in place here in the United States.

And that’s one reason we very much like biodiesel as opposed to ethanol. Also when you look at the energy content of biodiesel, you get 3.5 units of energy out versus 1 in. If you look at ethanol, it’s barely a 1 to 1 coverage ratio. So when you look around the United States, there are 171 plants that produce biodiesel. Unfortunately, today only about 30% of those are running predominantly because of those 171 plants there’s only four of them that are refineries. We are one of the four. If you’re a biodiesel plant in the Midwestern United States using soy beans as your only source of feedstock, you are losing money and that’s why you’re not running today and so building any kind of business with one feedstock in mind is totally ludicrous in our opinion. So we built a refinery on the Houston Ship Channel where we can access feed stocks from anywhere in the world and we can play them off one another. We built 700,000 barrels of storage so we can bring as much of that in as we can by shipload and we can have other business lines associated with that, that I can discuss here.

When you look at the US biodiesel demand, you can see it’s growing dramatically. We haven’t even begun to touch the surface. If you look in Europe, biodiesel demand is significantly greater than in the United States predominantly because the US is really one of the few economies in the world that’s a gasoline economy. If you go to any parts of the world, you’ll see most vehicles are run on diesel. That’s changing though. 2010 there will be more vehicles coming out of Detroit that are diesel powered than gasoline. So we are changing. This economy is going to a diesel economy. And why? It’s more efficient and it’s cheaper. So you look at the biodiesel growth in the United States, this is the projections by the EIA, 24% annual growth rate for the next 10 years. So plenty of demand here.

This is our campus down in Houston, all those tanks that are brown and white are brand new, we just built those, that’s our 700,000 barrels of storage. The methanol distillation tower is up and running and this refinery starts up operation in the month of April. So we’ll be running, it’ll take us about 30 days to kind of get all the kinks out and we are already buying product from around the world and getting ready to process in the refinery. This is the largest refinery in the United States for biodiesel.

So what are the advantages of this location? We will never be involved in a biodiesel facility, I don’t believe, that’s not on the water. Having access to water is crucial, especially if you’ve designed a refinery like we have that can run off any kind of feedstock, palm oil from Indonesia to ditropa from India, canola from Canada, ray seed from Ukraine, soy beans from Brazil, animal fats from Arkansas, talloid from West Texas. That refinery can take those products and run them interchangeably, no other refinery in the United States has that capability. We filed patents on our process. It’s not new technology, it’s new ways of configuring the refinery. So we believe that having the ability to go around the world, we are building a team of traders in Houston, that are not on the phone calling [Seebock] to find out what soy beans are doing today, they’re on a plane going to the Ukraine talking to the growers of the feedstock. We aren’t’ dealing with brokers, we’re doing right to the grower. So we are going and accessing our feed stocks directly from where they’re grown and bringing them in shiploads to Houston and refining them. That gives us a tremendous ability to play the market. We’re the only company that has the kind of storage capabilities on the Gulf Coast. If you were to go down the Gulf Coast from Tampa, Florida all the way to Harleton, Texas there is not any storage available for feedstock. We have 700,000 barrels. That gives us the ability to bring an entire shipload of ray seed from the Ukraine and unload it. That gives us a tremendous buying advantage and we can turn around and sell excess product to other biodiesel companies but that’s not our goal.

You can imagine if you have eight different types of feed stocks around the world that you can play against, there’s tremendous basis differentials. You might have a bumper crop of palm oil in Indonesia because of rain and therefore palm oil is a lot cheaper than soy beans. So it allows us to play those markets worldwide so it’s going to become a trading operation. We’re going to turn around and sell the final product that we produce most likely to Europe. Biodiesel prices in Europe are $5.61 to $5.71 a gallon, much higher than the United States and the government has given me a $1.00 tax credit to do that. So God Bless America. So anyway, we will bring the feedstock, we’ll process it here and most likely go to Europe. Now long term, we want to build a US terminal operation. We want to be in control of not only the feedstock but also the distribution side. So we’re negotiating buying terminals throughout the United States and we’ll be distributing our own product. Having the ability to be on the water and access that feedstock is absolutely crucial and we are not going to be competing with those food stocks that are something you can eat.

So performance advantages we will be making B100 which is a 100% biodiesel but most likely selling what’s called B20, 20% biodiesel, 80% diesel. So that’s a billion gallons a year of product so it won’t take you long to figure out revenue growth is going to be dramatic. We’re projecting revenues over the next 12 months beginning in April, probably in the $250 million range. The following 12 months, over a billion dollars. We started out going to build 300,000 barrels, went to 500,000 barrels, now 700,000 barrels and we’re getting ready to add another 1,000,000 barrels. We have got people lined out the door trying to lease this tank storage. We’re not in the business of building tank storage to lease it out, but we are in the business of taking other people’s product that we can manage. So we have already leased out two of our tanks and we’ll probably lease out more. We are building these tanks about 40% below the cost to market. How do we do that? Went to China, bought the steel, rolled it ourselves, brought welders from Dallas, things you do in a good business. We’re not hiring the typical welders on the Houston Ship Channel that do this stuff. We’re pretty excited about the storage side of this business.

When we bought this refinery, this methanol tower was sitting on location some third party, it was a Internet guy, made a bunch of money, thought he’d get in the methanol business and ate his lunch. Well this was sitting down there so we bought it from him for $700,000. We put about $1,500,000 in it, we got right around $2.2 million in it, and we started up in September. We’re the largest biodiesel refinery in the United States and we can only use 20% of its capacity. So what are we doing? We’re bringing in all this all spec methanol from ships around the world, they’re coming into our refinery, we’re trying to sell the all spec methanol to other biodiesel producers. Methanol is a necessary ingredient for biodiesel so if you’re a biodiesel refinery anywhere in the world, you’ve got to have this stuff. Obviously we’ve got a huge advantage in cost in having our own methanol distillation tower. When you look at the refinery we’re not just a refinery, we are a terminal operator, we’re a methanol tower and we’re also going to be building a glycerin refinery. Glycerin is a product that’s in almost everything in this room and biochemicals are a real new wave in the business today and glycerin is a byproduct of a biodiesel refinery and we’ll talk a whole lot more about that later.

We believe in trying to expand our revenue sources in a number of different areas. So what are our advantages? Significant cost savings, $0.50 a gallon installed for this refinery, the next biggest competitor of ours is a company called Imperium out of Seattle. It costs them $1.25 a gallon to build their refinery. We’re quite a bit cheaper than that. BT just announced they’re building a biodiesel refinery in England, same size as ours for $400 million. We’re significantly below the market. Speed, I bought the thing in April and it fires up in April. One year. Most of these things take two to three years to build. Clear cost advantage on our people, smaller business running the company and we believe that because of the business model that we’ve got there’s going to be kinds of other avenues for revenue in this area of Houston.

So let’s jump from biodiesel for a second now to our second leg, which is wind. Wind is the world’s fastest growing energy source, it’s not too complicated to put a wind turbine and generate electricity and you can sell it. As I said earlier Europe is light years ahead of the United States with respect to the wind business. In fact, most of your wind companies are European. They’re coming here in flocks mainly because we’re fertile ground, wind is a very new business here in the United States, but also to have the Euro versus the dollar, their money is worth a whole lot more coming here.

Unidentified Analyst

Are you talking manufacturers or European [inaudible – no microphone]

Gary C. Evans

Both manufacturers and developers. Lots of big manufacturers like Gamesa are also developers, they’re the second largest developer in the world. And I’ll talk about Gamesa in a minute because I’ve hired all their people.

If you look at the evolution of the US wind business, if you’re out in Palm Desert in Southern California, you saw wind turbines out there and what’s happened is the turbines are getting bigger, they’re getting more efficient. Therefore, their capacity factor is going up and that’s going to continue to change. No different than the solar business, the wafer boards and all that’s going on in the solar space, the same thing is happening in the wind space, nanotechnology on the blades. There are now turbines being developed at five megawatts, huge turbines predominantly in the offshore environment. We believe that the wind business is going to be a great business, especially here in the United States and in China. You look at the wind statistics today, it grew last year at a 29% growth rate. The 2007 growth rate that’s the state of Texas. The state of Texas grew about 45% last year. Wind power though it’s still 1% of our total US power. Globally there is 20,000 megawatts added in 2007, estimated cost about $36 billion. It’s a big area and could be the potential 20% of our nation’s electric supply by 2030.

If you look at Texas surpassed California last year and here we are the state of Texas, the oil and gas province, how does that make sense? Texas today is 3% of our electric supply now coming from wind and that’s expected to go up to 5% in the next two years. Wind has become a really big energy resource for the state of Texas. What are doing in the wind area? We have six projects located in Montana, New Mexico, California. We also have new ones in Texas that we’re just in the process of leasing so we haven’t really disclosed where they are. We have over 1,000 megawatts of wind potential. All our sites have had meth powers up for at least a year and a half to two years. You have to have these meth towers to collect the wind data so that you can go get your bank financing. I’ve been hired a team of wind experts, the first guy I hired his name is Steven Wiley, he ran the US division of Gamesa. Gamesa is the biggest wind developer in the world. I’ve now hired four of their top management. I know a guy just resigned yesterday.

We are really focused on the wind area as being a high growth area for GreenHunter this year. The biggest problem in the wind business is you go to any manufacturer and say I need turbines, whether it’s GE, Vestas, Gamesa, Suzlon, Mitsubishi, they look at you and say four years, maybe five years and you’ve got to order at least 200 megawatts and why don’t you put a deposit of about $25 million down. Well thank you very much but that’s not the way I like to run a business. I got on the plane, went to China, found the only Chinese company that has the ability to export turbines internationally, a company called MingYang and we cut a deal. I put $10 million of capital into the company, we own 6.3% of MingYang and we are bringing turbines from China. We’re the only company in the world that has this ability. Our first turbines start arriving in 90 days. When I was over there, I got a call from the Dow Jones Wall Street reporter who head what I was doing, she says now aren’t you a little worried about bringing Chinese turbines to the United States? I said, look as long as they don’t have lead paint like toys, I’ll be all right. Hey, you’ve got to take some chances. What do we do to make sure that these turbines were of quality? We met with the engineering firm out of Germany called Aerodyne. Aerodyne designed this turbine and we met their German engineers in China, we went out to the East China Sea to see the turbines up and running, took a 12 hour ride in a minivan that was a killer.

But we did all our homework. We believe these turbines were probably 15% more efficient than the GE 1.5 megawatt turbine. It’s a very high quality turbine, but like anything you don’t know until it’s up and running. We have two turbines coming in the next 90 days. We’re going to put them up in Montana at a site called Valley County and we’re going to test them for probably three to six months to make sure everything is working. MingYang is putting a whole staff of OEM engineers in our offices in Dallas and the fact that we are shareholders is also beneficial and we are also working on wind projects in China as well. Our goal over the next two years is to bring in a couple hundred turbines from MingYang and own our projects. What we love about these turbines is they’re designed for low temperature and they’re designed for typhoon type winds. On the East China Sea they have a lot of typhoons and so –

Unidentified Analyst

What is their current annual production of turbines now?

Gary C. Evans

They’re just starting. They have over 1,000 megawatts ordered in China. They’re predominantly going to be a Chinese manufacturer. They have four manufacturing facilities under construction in China. Today they’re more of a component gatherer of different manufacturers with a goal to manufacture everything themselves.

Unidentified Analyst

[inaudible – no microphone]

Gary C. Evans

This year we have an order to 72 turbines. Most likely it’s probably going to be 25 to 35. Everything is running a little behind. They need us as bad as we need them.

Unidentified Analyst

[inaudible – no microphone]

Gary C. Evans

It’s coming from China, it’s a Chinese manufacturer.

Unidentified Analyst

Making gearboxes?

Gary C. Evans

Yes, making gearboxes for them.

Unidentified Analyst

Their design?

Gary C. Evans

Their design, Aerodyne design.

We had an analyst from Think Equity go over to China to look at MingYang after we made our investment. Our $10 million investment was based on a pre-money $133 million value and he came back saying he thinks the company is worth $700 million. So, we’ll see. They’re going to go public in about a year. And as you know, wind manufacturers where they are have been trading at significant multiples. When we had our little signing ceremony that was quite an ordeal in New York. Mr. Wang, the Chairman of MingYang.

As I said we believe China is going to be a great place to be in the renewable business and we are working on a project right now in Shanghai and we hope to be – GreenHunter will be not only a US renewable company but a global renewable company.

Let’s jump to our third leg on the stool which is biomass and biopower. United States has lots of wood waste, lots of farming, it can meet up to 10% of our US transportation needs, it’s going to take a while. We started out with our first project being in the Imperial Valley, Southern California. We have a new 15 year contract with SoCal Edison to sell the power through an existing interconnect agreement in place. This facility was designed to run on cow manure and wood waste. There is 500,000 head of cattle in this area and that stuff is stacking up. They’re anxious for us to fire this thing up. The fuel source we believe is probably 25% below market. We decided to expand the size of this facility from 18.5 megawatts to 25 megawatts. We’re in the process of beginning to refurbish and should be done by the end of the year. We believe by the end of 08, of course our refinery starts here in less than three weeks, our wind projects we’ll have hopefully a couple up by the end of the year and then our biomass. All three of our revenue sources should begin this year.

This is what this thing looks like. It looks like something from Star Wars landed out there in the desert. You can imagine the amount of steel. $7 million I paid for this thing, I was offered $38 million a week after I closed. We’re pretty excited about this. We believe that Southern California is not – there is probably not a better place to be for renewables. Think about it. California has got the highest electric rates of any place in the United States, they’ve got the highest renewable fuel standards for utilities and this part of Southern California is a desert oasis. The sugar beets that are grown in Imperial Valley have the highest sugar content of any where in the world. We’ve got a wind project 10 miles away called Ocotillo. So you could do sugarcane based ethanol, there’s geothermal in the Imperial Valley, there’s solar, there’s wind, there’s biomass. We really like this area and are going to probably concentrate a lot of our efforts here.

I’m going to jump to something that you need to listen to. If you don’t know this plant called ditropa you should learn it because there is literally billions of dollars being spent around the world planting this plant and there’s a good reason for it. We have five plantations going on around the world planting this plant. This is the future of the biofuels business. There’s not another plant that extracts as much oil content as ditropa. This is almost four times more than soy bean. So some quick facts, it is a tree not a plant. It needs very little rain, 15 to 20 inches a year so it can grow in arid environments. Over 1,000 trees can be planted per acre. It does not compete with food. If you eat this you’re either going to get real sick or die, it’s poisonous to animals and to humans. Great for any soil erosion and can survive on – the one thing it can’t do is it can’t freeze. It can survive a little bit of cold weather, but it doesn’t like frost. Yields typically begin about a year and half to two years after planting. So we have projects right now going on in China, Brazil, Argentina, Paraguay and Mexico. And we believe in the next three years you’ll see huge quantities of this oil coming to market which will drive down feedstock costs for people like myself making biofuels which means spreads are going to expand. That’s what’s going to happen.

We felt like we needed to be a part owner, we’re not 100% owners in any of these projects, but we need to be an owner in them to be able to control our future feedstock costs. This is ditropa belt worldwide.

Unidentified Analyst

Does that mean it’s growing there or could grow there?

Gary C. Evans

Could grow there. Countries that you hear this going on a lot in right now are China, India, Africa, Mexico, Central America.

Unidentified Analyst

[inaudible – no microphone]

Gary C. Evans

We’re in China, Paraguay, Argentina, Brazil and Mexico.

Unidentified Analyst

[inaudible – no microphone]

Gary C. Evans

Where they’re growing this stuff, there’s nothing being grown. For third world countries it’s like a major cash crop.

Unidentified Analyst

[inaudible – no microphone]

Gary C. Evans

No, you’re putting in areas where nothing else grows. It’s like a Godsend to countries. You can imagine the money being – Some of the major oil companies, they don’t talk about it, are putting huge amounts of money in growing ditropa.

Unidentified Analyst

[inaudible – no microphone]

Gary C. Evans

They already know it works. Now there’s 58 strains of this plant, there’s been no genetic engineering done. The Chinese have put a seed up into space on one of their spaceships, that daggum thing is big as a watermelon, but they can grow it on zero gravity. There’s all kinds of research going on worldwide to try to further improve the yield. The yield already surpasses everything by huge margins but no genetic engineering has been done. So you’re seeing universities in all these countries working on ditropa. Google it, you’ll get all kinds of information.

So let’s talk about the legislative landscape. As I said earlier when I started out my presentation, oil and gas business in 20 years, all the government did was take money away from me. Now they’re trying to give it to me. So this is our three candidates for President and their positions on renewable fuels and it’s all pretty daggum good. We are spending an inordinate amount of money in our company in Washington. I’ve never done this before but we’ve got Democratic and Republican lobbyists and I’m spending about $50,000 a month lobbying to make sure –

Unidentified Analyst

[inaudible – no microphone]

Gary C. Evans

There’s no question that the PTCs and the – All the credits will be extended. No doubt about it. They’re likely to extend it at least for a year but most likely two to three years. There’s nobody saying no to that. It’s just they’ve got to get their act together to do it. The longer it takes – actually we kind of lied because it creates instability in the market and we take advantage of it because capital stops flowing and people worry. The wind business, the biodiesel business, the ethanol business, none of it works today without credits and they know that. It’s been going on in Europe and the rest of the world. The reason those industries are so much bigger than ours is because the governments have been supporting them. We do not want to build a business on tax credits. We want to build a business on true fundamentals. Tax credits work if they get you jumpstarted to get going. A perfect case in point is a Section 29 tax credit for coal bed methane. When I was in the oil and gas business I came out, it was in the early 80’s, coal bed methane wasn’t even, nobody had even heard of it. Black Warrior based in Southern Alabama and they put that Section 29 tax credit in and today the credit no longer exists and coal bed methane represents 10% of our US gas supply. So there’s a credit that works. The same thing can happen here, no doubt.

So let’s talk a little bit about our capital formation. I personally put in a little over $5 million into the company. We did an initial $20 million raise back in I guess it was April of last year. One institution that was a big shareholder, Magnum, took 15 of that. Some CEOs of companies you are well aware of took other pieces as friends of mine. We did a convertible piece. This is a very company friendly convertible. When we decide to call it, it converts to the last 20 days of our trading stock price. No put or call provision. Stock is at 30, we convert at 30. It’s a great piece of paper for the company. Those are typically sold to retail investors. We did a little $2 million round at $10 and we raised $19.8 million at $24 a unit which is comprised of two common and one warrant at $12. That was right before we went public on Amex and this kind of is a summary of where we come from our initial rate. We’ve only been public going on three months and we had very limited float, that’s by design. That will change. We have at least seven research analysts writing reports on us right now.

Unidentified Analyst

[inaudible – no microphone]

Gary C. Evans

You’re looking at it.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

You’re looking at him. I’m the first company in US history to go public on a national exchange through a reverse merger that never traded on the OTC Bulletin Board or Pink Sheets.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

The specialist called me the morning we were suppose to trade and said, “Well, Gary what do we trade at?” I said, “Well, we just raised money at $12. I guess start it at $12.” That’s how it started. There’s been obviously some buying going on. Manager/Directors own 78% of the company so we’re highly motivated to make sure this thing works. What will cause liquidity? The private placing we did, remember Rule 144 changed so it’s a six month rule now not 12 so a lot of that stock is beginning to free up. That’s the whole idea behind getting all the analyst coverage so we have analyst support. We are most likely in the next 90 days going to do another private round, probably around $50 million. It’s going to be lead by a bank, we’ve already chosen them. We recognize that we have to have liquidity in the stock and that will continue to come. If you have an interest in the company today you can probably go out there and buy a 1,000 or 2,000 shares, you can’t get a big block. If you have a high degree of interest now contact Jack Zedlitz he’s our head of corporate communications, we know where the stock is, we can do a trade for you. If you want to wait until we do this $50 round let us know and we can probably get you into that. Those would be the three ways to get the stock. It is very thinly traded but again, it was by design.

Obviously, we’ve been in a horrible market since January and to be up this much is really people who know me, people who have followed us. Shareholders, you know they’re betting on the jockey instead of the horse. I want you to look at the horse don’t just bet on me. We’ve got some real tremendous assets here and we’re very, very excited about what we’ve got going. Also, look at our board of directors. I’ve put together a world class board. The former president of [Petra Bross] out of Brazil is on our board, the Ambassador to China is on our board James Sasser, a Senator from Tennessee. A guy named Ron Walker, he was the assistant to four Republican Presidents, he’s on our board. A guy named Bob Zahradnik, who has managed a $2 billion dollar fund for the Southern Ute Indian Tribe. Well, who is that? Well, it’s a $2 billion tribe, the only American Indian tribe with a AAA rating. When we did that raise of $19.2 million at $12 I was up here in New York in December, he was sitting in the audience like you guys are. I get through and he comes up and he says, “I’ll take $15 million of your deal.” That was the whole deal. We were only going to do $15 million, we raised it to $19.2. So he came on our board and they managed as I said $2 billion and he has introduced us to all the other American Indian Tribes who want to do renewable on their reservations.

We’ve got the leading Indian Tribe on our board and in our business who is introducing us to other Indian tribes around the nation. You can imagine all the land they own. We’ve been working with the Wind River Tribe up in Wyoming, they have wind, they have geothermal so a great connection there. We don’t really do many of these. This is a rare commodity that we’re out on the road. The other board member we have is the former head of BT Wilkinson, he was banker of ours at Deutsche Bank, he’s our financial expert. Again, we’re taking tried and true business and bringing it to the renewable sector. The competition to our business has been pretty light compared to what I was use to in the oil and gas business for 20 years. As I said in the beginning there’s two things that really make a business work. It’s people and access to capital and we have both. If we use our noggin right we can make some good money here.

We think this is a very early stage of a company. It took me 20 years to build Magnum Hunter into a $2.5 billion enterprise. I think I can do it here in about two to three years. We’ll be constantly in the market raising capital but it will be at higher levels. Fortunately, all the banks that I dealt with in the energy sector they’re all flocking to us in the alternative energy sector. There’s not another company like us that has this kind of portfolio approach. And if you do a 300 megawatt wind project that’s $400 million so the banks they’re looking at us pretty hard. As Al Gore likes to say we face a genuine planetary emergency. We cannot just talk about it we have to act on it, we have to solve it urgently so going green is the theme.

Thank you very much. I welcome any other questions you might have.

Question-and-Answer Session

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

That’s a good question. Transmission is a big issue here in the United States and one thing we try to be certain of is when we lease lands transmissions is the first thing we look at. So, all of our wind projects are located next to transmissions or transmission we know is going to be built. To be leasing land in the middle of Timbuktu with no transmission is pretty idiotic so transmission is a major issue. And, one reason the wind business is so slow in getting going here in the US is unfortunately the best wind is not in the best cities, I mean they’re out in the country. So, you’ve got to get that wind out of – I was in Montana last week on spring break with my family and I had a chance to go see the governor for about three hours at his home and Montana is a wonderful wind province but there’s 800,000 people in the state and you’ve got to get it out of the state to make money. One of our projects is adjacent to a new line being built from Canada out of Alberta called [Maddle] that will take that wind into Alberta. So, we were talking about that.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

[Tape] wind? I can’t say. You know, it’s kind of funny you think – I know you’ve all had some problems up here in the northeast with some of the wind projects and the problems with people thinking they’re an eyesore. I had the same problem in Montana. I’m out in northeastern Montana, it looks like the dag gone moon out there, grass is about this tall, there’s nobody, eight people in the whole county and two environmentalist came after me because I was going to build a wind farm. We were going to do a 300 megawatt project that is now down to 50 megawatts because of two environmentalist over the Bitter Creek Wilderness Refuge. They’re afraid somebody would walk out there and see a turbine.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

I think they’re great, yeah.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

Yes.

Unidentified Analyst

How many acres are there [inaudible – no microphone]

Gary C. Evans

It’s obviously in various degrees. Where we’re really starting is we’re planting the jartropha in the nurseries, trying to get the seedlings going and different parts of the world, in different areas. We haven’t really kind of publically said how much acreage but it’s enough acreage that we could fuel 100% of our refinery with the oil. That’s the goal, is that we have enough of our own feed stock so we wouldn’t have to buy from anybody else. And, the way that we’ve cut our deals is our is cost plus it’s not market price for jartropha, that does us no good we can buy that from anybody. So, we’ve locked in on our percentage what our cost is going to be.

Unidentified Analyst

Do you own 100% of your refinery?

Gary C. Evans

Everything else is 100% owned.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

Say that again?

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

It’s being done in Europe. There’s just not enough biodiesel to pipe in the United States that’s why it’s not happening. We know there’s no issue at all in fact, there was just a report that came out a couple of days ago where they tested biodiesel in underground storage tanks, found no corrosion, no nothing. So, there’s no question in our minds that biodiesel can be pumped into a pipeline pitted right behind jet fuel, right behind number two unleaded, whatever.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

No.

Unidentified Analyst

What was the cost of the Houston refinery?

Gary C. Evans

$11 million and then we’ve got another $40 plus in it, around $50 million total.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

Yeah we have a project financing with West LB, for big German, for Noble Bank. This isn’t easy to do. Think about this, I’ve got a project financing for $42 million for that refinery with no feedstock agreements coming in and no agreements to sell my finished project going out. So, project financing non-recourse with no agreements on either side. That was not easy to do. Now, I’ve got a stack of consulting reports that this high from consultants that they hired, it cost me about $300,000 but we felt like the best business model was not to go contract anything. To build a refinery and be completed naked so we could go cut deals and that has proven to be – we are cutting some fat hogs out there right now. There’s so much disconnect in the business. All these soybean biodiesel plants are shut down so a lot of them had contracts they can’t fulfill so we’re able to take over their contracts. We just bought two days ago a biodiesel refinery went bankrupt, we bought all their feedstock, all their existing stuff for pennies on the dollar. We’re doing the same thing over in Europe. By being completed naked and having trading operations we’re able to play the market.

Unidentified Analyst

How much did you grow down by the West LB?

Gary C. Evans

I think there’s 23 down on 42 today. And we have another credit line that we’ve finished up that we haven’t announced yet, it’s a working capital credit line. So, as soon as we get that finished then we’ll go to the market with our equity.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

April. I mean, we have revenues now, they’re minimal from the methanol tower, the tank storage leasing but the real revenues start in April/May so we’re there.

Unidentified Analyst

Then how much feedstock do you store relative to how you run the refinery?

Gary C. Evans

We only need probably about half of what our storage capability is.

Unidentified Analyst

So half. If you store, if you exhaust half of what [inaudible]. But, how long can you run your refinery?

Gary C. Evans

About a month.

Unidentified Analyst

You mentioned being able to use multiple feedstock. Is this your proprietary technology that allows you to do this? [Inaudible].

Gary C. Evans

That’s a good question. We didn’t know how smart we were until this West LB bank brought in all these consultants. All these consultants come in and start seeing what we’re doing and they go, “Man there’s nobody who’s done anything like this. You better go patent this.” So, we filed patents on our process technology. See, we didn’t use an EPC contractor, the Fagan and Lurgi, the ICNs of the world who do all the plants. We brought them in when we bought this refinery in April and said, “Hey bid on refurbishing this waste oil chemical refinery.” And, they came up with these outlandish bids and we could tell there was a good $10 to $15 million of padding in there. We said, “Listen we know when you turn on a biodiesel refinery, somewhere wherever you build around the world that they just don’t work. You have kinks, and there’s problems. Who’s the Maytag repairman for the biodiesel business?” They all pointed to one guy up in Indian, Illinois I should say and that’s who we hired. His name is Bruce [Balm] and he runs our refinery. We brought him down and he’s our Maytag repairman. He built the whole thing and it’s unbelievable what he’s done.

Unidentified Analyst

So are your patents filed?

Gary C. Evans

Yes the patents are filed, pending.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

But you know we don’t look at it as, “Hey we’re going to go sell our process.” We wouldn’t have even done it had the consultants not told us.

Unidentified Analyst

There are a couple of other groups that report to have similar kind of technology that allows them to [inaudible].

Gary C. Evans

Not interchangeably. Most of them they have to shut the thing down, bring in new feedstock and fire it back up. We can take it interchangeably so we can run it at the same time.

Unidentified Analyst

I don’t think you want to make that claim.

Gary C. Evans

Okay.

My question is, has this person got experience in making this happen? Or, is this just a concept?

Gary C. Evans

No, he’s done it. He’s done it in other places.

Unidentified Analyst

Okay.

Gary C. Evans

Not with this many multiple feedstock but say with soy and palm, or one or two. Remember, there’s 171 plants, if you’re a plant you’re a one feedstock source which is 99% soybean. There’s only four refiners, we’re only one of four. The refiners are the only ones that can take multiple feedstock, not the plant. The plant can’t do that, it doesn’t have the technology to do that.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

This one? 105 million gallons.

Unidentified Analyst

[Inaudible – no microphone]

Gary C. Evans

No, it’s one train. Now, that’s name plate, my guys are telling me it can probably do 125 to 135 million gallons but we’ll see. I’m not professing that yet. That’s not unusual lots of times a name plate is X and capacity is typically higher.

Unidentified Analyst

What’s the difference between diesel five, 10 and 20?

Gary C. Evans

It’s just 5% biodiesel 95% diesel, 10% biodiesel 90% diesel.

Unidentified Analyst

So what’s the automotive going to run?

Gary C. Evans

20.

Unidentified Analyst

And did you say that Detroit is going to be more than 50% diesel when?

Gary C. Evans

They’re talking about it, who knows. But, you’ll see in the next three years a lot more diesel powered vehicles coming out of Detroit. They’re claiming – the new fuel standards that were passed last year, they can’t get there without going to diesel.

Unidentified Analyst

Okay so this is overtime, nobody’s put any hard numbers on it?

Gary C. Evans

No. But, it’s coming. Now, one of the areas that we’re really concentrating on is the marine market. Being an oil guy, we use to have over 100 platforms in the Gulf of Mexico, we love southern Louisiana. Well, all those boats and all those rigs, they all run on diesel so we’re working on terminal operations along the Gulf coast to sell biodiesel offshore. I don’t know if you guys saw this or not, yesterday for the first in history in the US, a company decided to have their name associated with a wind farm and John Deere was building a little 10 megawatt project and Steel Case that makes the furniture they’re former CEO is a real environmentalist and wanted his name associated, he’s deceased I don’t think his estate did, associated with a wind farm. So now, their company is paying money to be branded associated with a wind farm. So, my ears went up as you can imagine that there’s a new revenue source. Just like the stadium.

Unidentified Analyst

Is it wind powered by Steel Case?

Gary C. Evans

No, they just wanted – they’re trying to claim that they’re going to be 100% renewable in the next three years and one way they’re doing it is buying wind energy. Now, they’re not necessarily getting their wind from this John Deere 10 megawatt project but they paid money to have their name, it’s called I can’t remember the CEO’s name but it’s his name wind farm.

Unidentified Analyst

What percentage of [inaudible – no microphone]

Gary C. Evans

It’s every changing as you can imagine but today biodiesel will be the bulk for 08. I think next year wind will be a big piece. Biomass will probably never be as much as biodiesel or wind, they’re projects are not that big so those two areas. Alright, if that’s it thank you very much.

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