Mister C

Cellulosic Ethanol: The Next Biofuel Boom?

BlueFire Ethanol Inc uses Arkenol Inc patented process to convert post sorted municipal waste, wood waste, rice and wheat straws and other agricultural residues to produce ethanol.

Arkenol's process separates the biomass from waste into cellulose and hemi-cellulose (the main building blocks of plant life) and lignin (the "glue" that holds the building blocks together), converts the cellulose and hemi-cellulose to sugars, ferments them and purifies the fermentation liquids into ethanol and other end-products. This novel process has not been commercialized but has been tested in bio-refinery pilot plants in Japan and California. To this end BFRE has identified El Sobrante Landfill, located in California, where it intends to build its first bio-refinery. The commercial plant is expected to start producing ethanol in 2009 and the company is not expected turn any profits before then. Once BFRE opens its bio-refinery, its profitabilty will depend on the cost of inputs and price of ethanol produced conventionally from corn or sugar cane.

On the other hand, BFRE's licence with Arkenol allows for its CEO to have his cake and eat it. Arnold Klann, BFRE's CEO, is also the owner of Arkenol Inc. This relationship allows him to profit from BFRE even if it does not make any profits while he collects payments, royalties and fees associated with the commercialization and production of ethanol using Arkenol's technology. Although he has invested a lot of equity into both BFRE and Arkenol, he stands to gain the most from the exclusive licencing agreement between the two companies.

Thursday, May 31, 2007