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Tristan R. Brown  

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  • Gevo's 'Starving Time' Is Unlikely To End Well For Its Investors [View article]
    Thanks for the comment. I should point out, however, that this sentiment is very similar to that expressed by the company's longs in response to my bearish articles from 2013 (and, as you point out, they haven't fared well). I don't see how Gevo's situation has improved in the interim given that it is still struggling to produce its isobutanol with even a fraction of its capacity.
    Apr 2, 2015. 06:58 AM | Likes Like |Link to Comment
  • Gevo's 'Starving Time' Is Unlikely To End Well For Its Investors [View article]
    Under normal circumstances I would agree with you. In this case, however, the firm's post-IPO investors have incurred paper losses of 99% or more, and selling at this point would cause them to lose most or all of their remaining value to the transaction fee. Their individual risk-reward dynamic is quite different as a result.
    Apr 2, 2015. 06:56 AM | Likes Like |Link to Comment
  • Amyris: The Trek Through The Commercialization Valley Of Death Continues [View article]
    Maxx:

    Thanks for the questions. Regarding the ability of production costs to fall further, there is a widely-acknowledged trend for unit costs to fall very rapidly as production is scaled up from lab to pilot to demo to commercial-scale, at which point lower unit costs are driven more by input cost volatility than improved efficiencies and facility learning. This isn't to say that additional reductions can't be achieved via the latter, I just don't expect them to be anywhere near the magnitude of the reduction experienced to date. Brotas is a relatively small facility compared to other bioenergy (let alone fossil energy) facilities so I would expect the unit cost to resume falling were production to occur at a larger facility due to economies of scale, but Brotas is nearing the end of the reductions predicted by standard learning curves (which, admittedly, weren't produced from facilities employing next-gen yeast strains, but have proven to be fairly uniform across sectors).

    Regarding your second question, I am wary of announced potential dilution at unprofitable firms simply because it provides potential investors with a reason to wait to purchase shares until after the dilution and existing investors with an incentive to sell now and repurchase after the dilution. This can have the effect of keeping the share price low, reducing the cash brought in by the offering and further hurting the company's prospects. That's not to say that it's the wrong decision in this case, as the alternative (insufficient cash to cover its costs this year and no plans to bring in additional capital) would likely push the share price down even more. Dilution isn't as big of a concern for existing, long-term investors that expect milestone achievements to more than offset the negative impact of an additional offering, of course. Companies at this stage of the commercialization trek still face long odds, however, so the balance of probabilities is that the dilution will simply create paper losses on the way to further reductions to the share price. That certainly isn't a knock against Amyris - it has stood out from the crowd just by making it to commercial-scale production. Rather, it's a recognition that the company's financial position is still precarious enough that a single bad quarter, even one unrelated to its technology, could result in bankruptcy. 'Tis the nature of the beast that is the advanced bioproduct industry. Of course, there's something to be said for no guts, no glory - if Amyris beats the odds then its current shareholders will achieve very outsized gains. Such a result just isn't probable at this stage in the game, however.
    Mar 26, 2015. 06:19 PM | 1 Like Like |Link to Comment
  • Amyris: The Trek Through The Commercialization Valley Of Death Continues [View article]
    Thanks for the question. I can't speak to the currency used by Amyris to buy sugar, although I suspect it is in reais. The problem with a stronger dollar is that the earnings of U.S. firms that derive profits in foreign currencies but report in dollars do not appear to be as substantial as they would were the dollar weaker.
    Mar 26, 2015. 05:52 PM | Likes Like |Link to Comment
  • Amyris: The Trek Through The Commercialization Valley Of Death Continues [View article]
    One founder attended MIT, the other attended UCLA, and they met at UC Berkeley.
    Mar 24, 2015. 05:22 PM | Likes Like |Link to Comment
  • More Evidence That A GOP President Won't End The Biofuels Mandate [View article]
    French fries? No. Freedom fries, on the other hand...
    Mar 23, 2015. 04:57 PM | Likes Like |Link to Comment
  • FutureFuel Faces A Tough Operating Environment In 2015 [View article]
    The main development that would reverse my bearish view of the biodiesel market would be a return of the biodiesel price premium. The continued existence of a discount will limit producer earnings even in the event that petroleum prices stage a modest rebound.

    This ties into my long-term view of the biodiesel market, which is that future volumes largely depend on how the EPA sets the RFS2's volumetric mandates for 2015 and beyond. It originally proposed to keep the biodiesel volume flat despite the fact that it isn't affected by the ethanol blend wall. While its lack of a final rulemaking has prompted optimism among ethanol producers and caused the industry to fall back on the (higher) statutory volumes for ethanol, this has also hampered the biodiesel industry since the biomass-based diesel category's volumes are to be established each year rather than by the original statute. I am hopeful but not optimistic that the EPA will ultimately increase the biomass-based diesel mandate above its proposed volumes for 2015 and beyond.
    Mar 20, 2015. 10:06 AM | 1 Like Like |Link to Comment
  • FutureFuel Faces A Tough Operating Environment In 2015 [View article]
    Thanks for the comment. Cash and cash eq. is $124M; the $212M number includes $88M in short-term investments (which, admittedly, are still attractive). Biodiesel exports don't look very attractive at present due to the strong dollar. Finally, while the solvents market provides a potential floor that keeps me from considering the company to be overvalued, it isn't as attractive as the biodiesel market. The company's earnings in 2015 will be closely tied to the state of the biodiesel industry, which I am currently bearish on.
    Mar 20, 2015. 08:54 AM | Likes Like |Link to Comment
  • Pacific Ethanol Is No Longer Undervalued After Beating Estimates In Q4 [View article]
    To be fair, its share price is down 11% in the five trading days since the article was published.
    Mar 12, 2015. 07:28 PM | Likes Like |Link to Comment
  • Green Plains, Inc.: Conservative Investors Should Consider Taking Profits [View article]
    To expand on the discussion, let's take the following hypothetical as an example. Assume that market assumes as it did in 2014 that, because of a continued lack of EPA rulemaking, the statutory RVO of 15 billion gallons will apply in 2015. Furthermore, assume that fuel prices remain low and ethanol producers reduce production below an annualized rate of 15 billion gallons for the year. If RINs are incapable of affecting ethanol margins, as you suggest, then blenders will not be able to purchase sufficient gallons to meet their individual RVOs and obligated blenders will be faced with a penalty of infinite value, as provided by the underlying statute.

    This result is absurd, of course. Faced with such a scenario, blenders will simply pay more per gallon for ethanol so that they can continue generating separated RINs, pushing ethanol margins up until sufficient production occurs to provide the economy with enough ethanol to meet the blending mandate. Overproduction and underconsumption to date has prevented this result from being witnessed yet, as there was even sufficient production during the 2012 drought to prevent RIN prices from being affected. All that is needed for RIN prices to affect ethanol margins is underproduction relative to the RVO, and this basic fact is why I presented ethanol producers as an assymmetrical long investment opportunity back in January.
    Mar 12, 2015. 06:55 AM | Likes Like |Link to Comment
  • Green Plains, Inc.: Conservative Investors Should Consider Taking Profits [View article]
    Thanks for the comment. A couple of points:

    1. I am recommending that conservative investors take profits now that the share price has reached my conservative target. I recognize that not all investors have the same goals, which is why I am limiting that recommendation to conservative investors.

    2. Most of GPRE's share price increase came before the MLP announcement due to higher fuel prices in early February and Pacific Ethanol's big earnings beat in early March, both of which were outlined in my original thesis. The MLP announcement simply pushed the price above my conservative target, prompting this article.

    3. You are correct that D6 RIN prices have not affected ethanol operating margins in the 2 years that they have had value. It is myopic to say that this will prevent them from ever affecting future margins, however, given that (1) previous blending subsidies have positively affected operating margins and even farming margins, and (2) RINs were designed by economists and the policymakers that they advised to have the same affect under a specific set of circumstances (production falling short of the mandated volumes). I am providing investors with RIN information in its full complexity, not a simplistic version based on only the most recent data and operating conditions. To do anything else would be to "mislead" investors, as you put it.
    Mar 12, 2015. 06:10 AM | Likes Like |Link to Comment
  • Reduced Ethanol Production Doesn't Mean That The Biofuels Mandate Isn't Working [View article]
    Thanks for the comment. I should have stated that the decline is on a YoY basis.
    Mar 10, 2015. 11:03 AM | Likes Like |Link to Comment
  • Pacific Ethanol Is No Longer Undervalued After Beating Estimates In Q4 [View article]
    Thanks for the comment, Timothy. I agree that future WTI price volatility is the major factor to consider at present. I took profits in ethanol after WTI went above $50/bbl over the course of a few weeks. I think that the industry will do well long-term, but I think price volatility could provide a good re-entry opportunity first.
    Mar 7, 2015. 02:06 PM | Likes Like |Link to Comment
  • Hey, Trees Grow Back! Carbon Accounting And The Question Of 'Additionality' [View article]
    I suggest actually reading the ACS link, as it explains why CO2 emissions are of greater concern from an anthropogenic perspective than water vapor.
    Feb 24, 2015. 10:44 AM | 1 Like Like |Link to Comment
  • Hey, Trees Grow Back! Carbon Accounting And The Question Of 'Additionality' [View article]
    The American Chemical Society does a good job of explaining why we focus on CO2 instead of water vapor:

    http://bit.ly/1yLQWkH
    Feb 23, 2015. 07:35 PM | Likes Like |Link to Comment
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