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Debra Fiakas, CFA's  Instablog

Debra Fiakas, CFA
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Ms. Fiakas is a seasoned, credentialed investment professional with a diversified and successful track record as a research analyst and as an investment banker. Her career includes experience in all aspects of the equity capital markets with particular emphasis on emerging growth companies... More
My company:
Crystal Equity Research
My blog:
Small Cap Strategist
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  • High Pressure

    It is a vexing problem.  Coal is abundant, but a messy source of heat and power.  In addressing the problems of carbon dioxide and other toxic emission that cause global warming most scientists are trying to figure out a cost-effective alternative to coal. 

     

    Unfortunately, in countries like the U.S. and China, where coal supplies are abundant, leaving it in the ground is not an affordable option.  Thus any time someone comes along with an idea for making coal less messy, an investor needs to take note. 

     

    ThermoEnergy Corp. (TMEN:  OTC/BB) is really a wastewater reclamation company.  Based in Little Rock, AR the company provides solutions for municipalities and industrial producers to recycle water.  However, its engineers have been tinkering in the backroom with boilers  -  operational center of coal-fired power plants  -   to figure out how to burn organic matter (coal, natural gas, oil, renewable diesel, garbage) with lower emissions.

     

    ThermoEnergy has made a breakthrough with what they are calling ZEBS Technology (Zero Emissions Boiler System).  A boiler is a fairly simply apparatus  -  a large, closed tank usually made of steel called a “pressure vessel.”  Tubes or plates inside help distributed and vaporize water inside the boiler that can then be used in a steam turbine for electricity generation or sent through pipes throughout a building for heat. 

     

    Boilers are typically operated under atmospheric pressure  -  14.7 pounds per square inch (NYSEARCA:PSI) at sea level.  However, ThermoEnergy engineers decided to tweak their system with pressure  -  700 PSI to 1300 PSI.  The concept of pressurized oxycombustion is not new, but it is rarely discuss beyond the confines of places like the Massachusetts Institute of Technology.  ThermoEnergy engineers estimate that pressurized oxycombustion can increase power plant efficiency by as much as 5% over atmospheric combustion.

     

    That efficiency is not what sparks our attention in ThermoEnergy’s ZEBS technology.  The real draw is that pressurized oxycombustion produces virtually zero air emissions no matter which fuel is used in the process  -  coal, oil, municipal waste.  There are by-products that can be recovered for further use in the form of liquid carbon dioxide, ash and mercury.  The high pressure apparently allows the use of gas-to-liquid “steam hydroscrubbing” to remove the pollutants including carbon dioxide in a liquid form.

     

    To commercialize its technology, ThermoEnergy has formed a joint venture with Babcock Power, Inc., a supplier of heat exchangers, steam generators and other equipment for the power industry.    In our view, the Babcock affiliation is a smart move.  Babcock’s highly visible position in the power generation industry is expected to give ThermoEnergy a boost in selling its ZEBS technology to plant owners.  

     

    It will require a well thought out sales pitch.  To achieve the goal of zero emissions, power plant operators will need to switch out boilers and use a boiler specially designed for pressurized oxycombustion.  The walls of the boiler must be thicker to handle the high pressure.  The good news is that the special boilers are approximately one-tenth the size of conventional boilers and that will be a significant cost savings.   Lower capital spending and zero emissions are two benefits that should be well received.

     

    Shares of ThermoEnergy are priced below a dollar and trading volume is thin.  Investors should regard the stock as highly speculative.   The company has yet to report a net profit and is still burning cash to support operations  -  $4.4 million in the first nine months of 2010.  Its balance sheet is fortified with $5.7 million in cash, but at the end of September 2010 ThermoEnergy was in default on $5.3 million of its total $8.2 million in convertible debt.  The accumulated deficit is near $90 million.

     

    We will be watching for that first sale of a ZEBS boiler.  U.S. power plant operators form a small community and they influence each other’s strategic decisions.  We expect adoption by one to pave the way for penetration of the entire sector.

     

     

    Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.  TMEN is a new addition to Crystal Equity Research’s The Mothers of Invention Index.

     

     



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Feb 03 6:13 PM | Link | Comment!
  • Old Crop Goes Synthetic

    In December 2009, the Department of Energy awarded Amyris Biotechnologies, Inc. (private) a $25.0 million grant to build a pilot plant that will produce diesel and petrochemical substitutes through the fermentation of sweet sorghum.  It is not likely to be difficult to come up with the required $10.5 million in matching funds.  At the end of March 2010, Temasek Holdings invested $47.8 million into Amyris. 

     

    The verdict is still out on whether Amyris is good at producing renewable anything, but the Company appears to be fairly adept at raising money.  One of the Company’s most recent press releases brags that Amyris has raised $244 million over the last seven years from the likes of Kleiner Perkins, Khosla Ventures, and the Stratus Group. 

     

    Amyris is a self-described “renewable products” company and claims they can have products for sale in the marketplace by 2011.  One plus for Amyris is that its process produces a stable liquid that can be distributed under cold temperature conditions.  However, as some of the major oil and gas producers such as BP (BP:  NYSE) and Valero (VLO:  NYSE) increasingly make deals for "drop-in" biofuel, this becomes less an edge over competing technologies.

     

    Amyris “made its bones” far from the renewable fuel market.  The Company previously developed an anti-malarial treatment called artemisinin.  Early molecular research on artemisinin paved the way for the so-called “synthetic biology” that under pins Amyris’ renewable fuel processes.

     

    With serious venture capital behind it, Amyris is likely on a path to a public IPO.  That said, do not expect a registration statement any time soon.  Its goal to launch a commercial product in 2011 notwithstanding, Amyris appears to be at a very early stage.

     

     

     

    Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. 

     



    Disclosure: None
    Tags: Energy
    Sep 28 1:31 PM | Link | Comment!
  • Big Whopper

    A little known private joint venture is the biggest winner in the Department of Energy’s renewable fuel grant bonanza.  INEOS New Planet BioEnergy, LLC was awarded a $50 million grant to produce ethanol and electricity from wood and vegetative residue and demolition materials through a combination of biomass gasification and fermentation processes.  The plan is to produce as much as 8 million gallons of ethanol and 2 megawatts of electricity per year beginning in 2012.  INEOS must match the grant with their own $50 million.

     

    INEOS plans to begin construction on a commercial-scale plant in Indian River County in Florida beginning this summer and finish it in time to be operation by late 2011.  The joint venture promised 120 construction jobs over the next two years and between 40 and 50 full-time jobs once the plant is in operation.

     

    Besides job creation, INEOS management claims its plant will reduce waste going to landfills, relies on non-food feedstock for its ethanol output, and proves agriculture and municipal waste  -  two sustainable, consistent feedstock sources  -  are also economically viable energy sources.

     

    An anaerobic fermentation step is central to the INEOS Bio process, which will be used in the plant.  The bacteria will convert gases from a variety of biomass, including forestry, agriculture, construction and municipal waste.  INEOS believes its process gives waste owners flexibility to locate a plant anyway a feedstock is available. 

     

    INEOS has patented its bacteria  -  bacteria smart enough to convert carbon monoxide and hydrogen gases to ethanol.  The company maintains its bacteria approach is advantageous over other chemical catalysts that require high temperatures and pressures that add to production costs. 

     

    The INEOS process produces the gases through a controlled, partially oxygenated environment, which converts the feedstock to carbon monoxide.  It is this step that enables the use of a variety of feedstock, any one of which can be converted to carbon monoxide.

     

    New Planet Energy, LLC is bringing the business know-how to the joint venture.  The company does not appear to have any other projects underway.  Perhaps this project will be New Planet’s first Big Whopper.

     

     

    Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

     

     



    Disclosure: None
    Tags: Energy
    Aug 30 5:57 PM | Link | Comment!
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