Seeking Alpha

Debra Fiakas, CFA's  Instablog

Debra Fiakas, CFA
Send Message
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
View Debra Fiakas, CFA's Instablogs on:
  • Money for Nothin'

    Now look at them yo-yo’s

    That’s the way you do it

    You play the guitar on the MTV

    That ain’t workin’

    That’s the way you do it

    Lemme tell ya them guys ain’t dumb

     

    That’s the way you do it

    Money for nothin’ and chicks for free

     

    Dire Straits

     

     

    The Department of Energy may not be arranging for any “chicks” but they seemed to be handing out money for free last December when they awarded millions in grants for renewable energy and chemical development.

     

    Enerkem Corporation (subsidiary of Canada-based Enerkem, Inc.) was awarded $50.0 million, to which it must match at least $90.5 million of its own funds.  Enerkem is building a waste-to-biofuel facility in Pontotock, Mississippi that is expected to process 300 tons of woody biomax from an existing municipal waste site operated by the Three Rivers Solid Waste Management Authority.  Enerkem expects to be able to produce 10 million gallons per year.  A planned second module could double production capacity.

     

    The project has plenty of local support from Mississippi’s Congressional delegation and Governor.  This is probably because Enerkem is promising to create over 130 new jobs at the facility.

     

    Enerkem uses a gasification and catalytic synthesis technology platform that it has developed over the last several years.  The company claims its process can convert one ton of raw material into 95 gallons of cellulosic ethanol.  The Enerkem process is not too persnickety, accepting a variety of feed-stocks such as municipal solid waste, construction scrap, demolition wood, treated wood, agriculture waste and forest residue.

     

    Waste Management, Inc. (WM: NYSE) recently made a strategic investment in the Enerkem parent.  Emerkem raised CDN$54 million in an all institutional deal to support building a waste-to-biofuel plant near the City of Edmonton in Canada’s Alberta Province.  Details of the financing were not provided.

     

    Generous financial support from the U.S. DOE for the rest of Enerkem’s project pipeline was probably reassuring for the investors.  However, Enerkem already has a track record with its waste-to-fuel process.  Its commercial-scale demonstration facility in Westbury, Connecticut already reached 1,000 hours of operation by the end of 2009.

     

    Let me tell you these guys at Enerkem are not dumb either.  They are getting money for nearly nothing from the government, reducing the amount they need to raise in the private capital market.

     

     

    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. 

    $WM

     

     



    Disclosure: None
    Tags: WM
    Aug 24 6:40 PM | Link | Comment!
  • A Better Mouse Trap

    You would be wrong, if you thought after over a dozen posts in this series on the Department of Energy grants for renewable fuels projects that the DOE would eventually get its fill of ethanol.  The DOE spread some of the “green” joy in to ZeaChem, Inc., a private ethanol producer in Boardman, Oregon.  The DOE offered a $25.0 million grant, which must be matched by $48.4 million from Zeachem.

     

    The company plans to build a cellulosic-based “biorefinery” to turn hybrid poplar trees into fuel-grade ethanol.  They will test some agriculture residues and other energy crops.

     

    Before getting too critical of yet another ethanol project on public welfare, it is worthwhile looking at the technology that underlies ZeaChem’s proprietary platform.  It is a dual process that puts the feedstock through both biochemical and thermochemical steps. 

     

    In the biochemical step, instead of using yeast to induce fermentation, ZeaChem uses a microorganism called acetogen that generates acetate in its natural anaerobic or no oxygen respiration.  The acetogens are content to work in harsh environments (it freezes in Oregon) and produce no carbon dioxide.  That alone should get investors holding shares of corn-based ethanol producers to sit up and take notice.  

     

    In the ZeaChem biorefinery platform the acetogens produce acetic acid and have been achieving 50% higher fermentation yields than corn-based process.  Investors could even stand and applaud if that claim is fulfilled. Acetogens are so successful compared to yeast used in the fermentation process because acetogens can ferment xylose.  This is why most other cellulosic ethanol platforms have a step to convert the xylose (wood sugar) in cellulosic feedstocks like corncobs and straw.

     

    This high efficiency rate is part of what is allowing ZeaChem to use the unlikely poplar tree as feedstock.  Of course, these are not just any poplar.  ZeaChem plans to use a hybrid poplar that is planted especially for use in renewable fuel.  A leading tree producer GreenWood Resources has been contracted to supply residual fibers from its tree crop.

     

    Given the localized nature of renewable fuel production, having a viable non-fossil fuel source in the northwest U.S. makes a great deal of sense.  Oregon’s climate is not friendly for corn, sugar cane or jatropha.  A few years ago Oregon State University published its economic analysis for biofuel production in the state and warned that under current technologies the net energy of biofuel produced in Oregon might be expensive.  The report recommended wood cellulose could produce the greatest net energy after fuel product and transport costs were considered.

     

    No investment is possible here even for accredited investors as it seems ZeaChem is generously supported by a group of hedge funds and Valero Energy (VLO:  NYSE).  That said, with success in this project, it seems a public offering is a likely exit strategy.  As a company that appears to have come up with a better mouse trap  -  or is it a better mouse?  -  Zeachem is a company worth watching.

     

     

     

    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: VLO, Energy
    Aug 19 1:49 PM | Link | Comment!
  • Pot Luck

    Honeywell’s UOP subsidiary (HON:  NYSE) is leaving nothing up for question in its project to produce green gasoline, diesel and jet fuel.  UOP plans to use all manner of feedstock from agricultural residue to dedication agriculture crops, from woody biomass to algae.  UOP received a $25.0 million grant from the Department of Energy to build a demonstration plant in Hawaii.  The plant will be located at a refinery owned by Tesoro (TSO:  NYSE) near Kapolei, Hawaii.

     

    A pyrolysis variation licensed from Ensyn Corp. will be used in the demonstration.  The idea is to rapidly heat whatever biomass is used to generate liquid oil.  The pryolysis oil product is then upgraded using Honeywell’s proprietary process. 

     

    UOP already has a licensee for its Ecofining process for green diesel fuel in Eni S.p.A. a refiner based in Italy.  Eni plans to start up its facility this year in Livomo, Italy.  The Ecofining process deoxygenates biofeedstocks by adding hydrogen to produce a highly-stable green diesel.  Green diesel has similar energy content to fossil fuel diesel, but produces less NOx emissions. 

     

    Honeywell is not valued on its renewable energy initiatives, so HON shares are not an energy play.  Nonetheless, in our view Honeywell is a company to watch in the renewable segment.  Its worldwide profile puts Honeywell in a good position to achieve commercial success even if its products or technology are mediocre in comparison to those of an innovative, but less resourceful start-up.

     

     

    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
    Aug 10 6:00 PM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Most Commented
  1. Texas Green Gold (2 Comments)
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.