Green Hunter Energy: A Highly Speculative Stock Pick

I have a strong interest in the renewable energy sector and believe this is a strong growth area for the next 20-40 years as renewables increase their percentage of world wide energy consumption. Green Hunter Energy (GRH) flew across my radar a few months ago and I added it to my Watch List. A recent news item caused me to take a closer look at the company and what I found is quite appealing.

First a disclaimer: I usually look for stocks with strong earnings that are under-appreciated by the market. Green Hunter does not meet this criteria. This is a start-up company burning cash and may be some time away from generating profits. Also, I can find very little information about the company besides what is offered on the Green Hunter Energy’s website. I consider this a very, very speculative stock.

That said, let me outline the items about the company that draw my interest. Green Hunter Energy was started by an experienced oil executive, CEO Gary Evans, who made excellent profits for himself and stock holders building up and selling a conventional energy exploration company. He has entered the renewable energy sector by investing in several different forms of renewable energy with a goal to buy cheap and generate profits quickly. Currently GRH is pursuing opportunities in biofuels, biomass electricity generation and wind energy. At this point, the company has acquired several facilities or contracts that point towards significant future profitability. Here is an outline of these opportunities:

Biodiesel Processing: Green Hunter Energy has acquired a refinery on the Houston ship channel with the capability to produce 100 million gallons of biodiesel per year. The refinery will be able to produce biodiesel from almost any feedstock. The facility has the capability to process its own methane, required in the biodiesel refining process and will also produce high grade glycerin for an additional income stream. The facility also includes 700,000 barrels of storage.

The location and storage allow the company to ship biodiesel to international markets where prices are significantly higher than in the U.S. The refinery recently reached 50% of its production capacity and is producing biodiesel using animal fats as a feed stock. Recent comments by Mr. Evans indicate the company will make about 80¢ profit per gallon with animal fat feedstock and over $2.00 when the have access to Jatropha oil. See below.

Bio-Electric Power: Green Hunter has acquired a biomass fueled power plant in El Centro, California. After upgrade and refurbishment the plant will be able to produce 25MW on a $20 million investment. To build a similar plant from scratch would cost well over $100 million. The plant will be fueled by cattle manure and wood waste. The plant is scheduled to be up and running by mid 2009. California has mandated that 20% of electric power be from renewable sources by 2010, so this appears to be a timely investment.

Wind Power: Green Hunter energy is developing wind energy projects in Montana, California, Texas and New Mexico. It has signed a turbine supply agreement for 900 MW of 1.5 MW turbines with MingYang Wind Power Technology of China. MingYang will be building turbines of German design and is ramping up for large scale production. Green Hunter has exclusive rights to any turbines MingYang wishes to export through 2012 and MingYang is the only Chinese company licensed to export wind turbines. Current Chinese policy is for the retention of wind resources to grow domestic power production giving GRH exclusive rights to a valuable resource.

Biofuel Feedstock Production: Green Hunter Energy is in the process of acquiring land to grow Jatropha Curcas for its oil. Jatropha is considered the best option for a plant based oil source. It will grow on land not suitable for food crops and has high production as soon as one year after planting. GRH is developing plantations in Argentina, Paraguay, Mexico and China. Owning the source of the feedstock for its biodiesel production will significantly enhance the profitability of the company in the next 2 to 3 years.

You can see the company is putting the infrastructure in place to be a serious alternative energy provider. The next step is to start generating some significant revenues, followed by profits. With the biodiesel refinery reaching 50% production capacity, revenues should start showing soon. As noted above, I consider this a highly speculative stock until revenues are proven but I will be very interested if the stock falls to lower levels. At this time I am adding the stock to this site’s Special Opportunities Portfolio to help me keep an eye on the stock price.

Disclosure: None

Comments

[Rubberman:]

My thoughts are in-line with the author's. I have followed GRH since inception. It began reporting before trading and a friend told me it was Gary Evan's Company. I took a chance and called the corporate office and talked to Mr. Evan's. He said it would take a much much shorter time to create in GRH what he created Magnum Hunter, the Oil and Gas company that was started from nearly nothing and grew through Gary's smart leadership and shrewd management, into a $2.2 billion company. Yes, I agree until the company gives guidance of some kind, or a press release saying that it is shippin that bio-diesel and shipping it profitably, I would keep a speculative eye on it. However, I never wanted to miss the parade, so I got there early and am a shareholder. Doesn't matter how large or at what price. A shareholder is a shareholder. Kellogg is the Specialist...that was left out in the comments from the author. That doesn' make a deal special (pardon the pun), but that is the largest Specialist on AMEX and they don't get involved in crap...unless it is being used as alternative energy! Please excuse that last remark and for the synical, it was meant to be another pun regarding the bio-mass plant!

2008 Sep 01 08:36 AM

[Rubberman:]

Please accept my apologies to my learned readers of this comment. The grammatical errors and mis-spellings were awful in my comments and believe me...I know better. My mother would slap my face for those spelling mistakes.

2008 Sep 01 08:39 AM

[kharrin49:]

No offense taken bit of a breath of fresh air to get a little levity with on target analysis.keep publishing and continue to express your colorful commentary. I found all useful..

2008 Sep 01 09:18 AM

[nakedjaybird:]

Sep 01 04:37 PMuser211108 - i read the nyt aricle you mentioned. Basically, it just lists the roadblocks people keep thowing in the way of getting the right things done.

As I have said in other blogs, the grid needs to be beefed up and expanded, and also provide for solar and wind hook-up. And I grossly stated that high power transmission lines are probably within 25-50 miles of any future installation.

Take a look at where all the hydro installations are (Grand Coulee Dam in the middle of nowhere is the equivalent of 8 (eight) 1000 MWe nuc plants. No look at the rest of the hydro locations west/midwest/southeast... etc. As for nucs; we have over 100 1000 MWe plants scattered around the US - few states without - most state are less than 200 mi in one direction or another. Then there is the coal - everywhere??

So, the grid problem is just a bunch of roadblocks (policy/politics/regul... - we have the technology and wherewithall to improve it and expand it immediately. Report abuse
nakedjaybird
Sep 01 09:20 PMYou know, in the NYTimes article, a FERC member member is quoted saying we need an "INTERSTATE TRANSMISSION SUPERHIGHWAY SYSTEM" - he is so right.

And where they should run that grid is alongside/between/abov... the US Interstate hiway system that exists. And then, put the electrified ferries on steel-wheeled rails in the same space. Then we simply take the cargo off the diesel (biodiesel hybrid) trucks and ferry it electrically powered by solar and wind - that's a good role for solar and wind.

Centainly takes the wind out of the sails of the contras that continually talk about balancing the grid.

This idea solves two if not three problems at the same time. Since the Gov't steamrolled for the interstate highway system, let them steamroll for electrifying it. Simple. The right of way is there. Who's going to argure?. Yes, I know, someone will.

And what's the distance between interstate hiways? Do they go thru wind mill and solar land, and do they eventually move right into cities, and go thru where all the people are. DUH??

I hope someone in FERC reads this.

Help out, guys. I'm like solarPV on a native hut, with a microwave, color TV, cell phone, but connected to no one.


Report abuse
nakedjaybird
Sep 01 09:27 PMOh yes, and wireless internet!

But I'm as helpless as all the steers running around me and that just reminds me of Washington DC every time I look at them and feed them. And what do I get in return - about the same stuff - let me help you city folks, it's hot, wet, sort of like putty, and smells like shit. If it looks like, smells like, feels like, it probably is.........yup!

Happy Memorial Day to all the Vets and all those enjoying the freedom they have provided in the US and worldwide - regardless of the naysayers.

2008 Sep 01 09:36 PM

[Barry Robbins:]

I am very skeptical about biodiesel refiners. I lost alot of money on Nova Biosource (NBF), which has the exact same biodiesel concept (multiple feedstocks). Regarding wind energy, GRH does not have a producing wind farm. Why not just buy Canadian Hydro Developers (KHD). KHD already owns 5 operating wind farms, and they are in the process of building 2 more gigantic onces (Wolfe Island & Melancthon II).

2008 Sep 02 03:39 PM

[Big D:]

I too have been on board since the IPO in January. Somebody said they could not find out anything except on the website. I suget going to Yahoo Fianicial and reading the headlines after you look-up GRH. Talk about a perfect study in venture capitalism... When you analyze this outfit from an alternative energy systems perspective, it is fixing to take off. And like the Pickens Plan, it has the backing of both parties! Capitalism at its best with this outfit!

2008 Sep 04 09:56 PM

[Cosmologia:]

Nova BioSource Fuels made it to $6.30 and is today at $0.25 which is down 96% from the high. If this biodiesel startup experiences the same challenges (it probably will) you can expect a continuous, gradual decline in its share price. This will be exacerbated by a still further decline in crude price or mitigated by an increase in crude. Granted GRH has a step up with its renovation of an existing refinery which is more cost effective but the business is pretty much the same. NBF has a stellar management like GRH does. If you buy be prepared to hang on for the roller coaster ride... down, before the climb back up which is dependent on gov't tax credits (read "subsidy"). For my money I would wait until a likely bottom is defined.

2008 Sep 16 11:23 AM

[biodude:]

GreenHunter BioFuels is a landlocked (almost) useless biodiesel producer with 105million gallon capacity per year. Unless they can gain direct access to the Houston Ship Channel, this plant will never come near capacity. They did some things right but many things wrong, including a mid-west mentality in trying to enter the big time oil business. Management continually obfuscates these facts in order to confuse investors. A good one to stay away from.

Apr 28 10:12 AM