gabby

5 Must Read Articles in Oil and Alternative Energy

Hey thanks to all the comments here. I am not able to comment on solar, I had stopped following, not because i don't value/believe in it, but there is a limit to what I can effectively follow. FWIW, tonight on Fast Money (2/19 -5:20pm ET). Tim Seymour reco'ed Brazil - specifically CZZ as a way to play Castro retiring. The reco has more substance than you would think. Lula has established ties w/Castro, Cuba has a historic capability w/sugar production, CZZ has considered opening plants in the Caribbean. This is all a little too intellectual to translate to investment right now, but things look to be moving in a good direction. And i didn't sell any of my CZZ on the increase today.

Optiondragon, I look forward to checking out your site. In the meanwhile, your coal plays sound really good.

GLTA,
gabby

5 Must Read Articles in Oil and Alternative Energy

David,
Can't think of any links off hand. Like everyone else, I scour Bloomberg, Reuters, Financial Times and enjoy the InvestorVillage message board very much.

www1.investorvillage.c...?

CZZ is up today on the Bovespa -- 3% at this writing.

www.bloomberg.com/mark...

Last week, CZZ announced buying out a production mill in Brazil (expanding their capacity) and also that Credit Suisse has taken a 5.21% interest in CZZ. I'm not trying to pump CZZ -- just find it interesting and a sensible way to play ethanol with the added benefit that - If sugar prices go up they divert less product to ethanol & make "hay" on the sugar price. Disclosure -- I own some CZZ, bought KOL shortly after it debutted (got it under $40) and bought ACI on Friday. Also own some Xstrata (for about 18 months). I'm bullish coal for a number of reasons.

gabby

5 Must Read Articles in Oil and Alternative Energy

Oilsands,
The alternatives area is already super funded with subsidies. There is a 51 cent/gallon tax credit for US ethanol producers and a 54cent/gallon tariff on Brazilian ethanol. Gov. subsidized research and tax credits for cellulosic.... We actually need to encourage free market competition. That would be greatest and most efficient inducement. Diverting foodstuff, grains, vegetable oils isn't viable. I like your hydro power suggestion and I also like wind power. T.Boone Pickens is involved with wind.

Coal to chemicals maybe a very old story but the growth in China will be exponential.

gabby

5 Must Read Articles in Oil and Alternative Energy

David,
Nice analysis. GS downgraded the coal sector on Fri. 2/15, but the merits of that call has been viewed with great sceptisim -- especially by me. (Took it as a buying opportunity). WSJ had a very interesting article on Coal to Chemicals - China is at the forefront. Coal is being converted for the production of plastics, fertilizer and believe it or not -- pharmaceuticals.

Zulauf, has it wrong on sugar. Sugar futures are unbelieveably speculative. All the experts are divided as to whether sugar will be up or down. Buying sugar futures guarantees that you won't be sleeping at night. If you like sugar try DBA, which has a sugar component - along with wheat, corn & soybeans or RCI - Rogers Sugar Income Trust. I'm still very bullish on CZZ. Check out the price action today for CZZ on the Bovespa. In terms of ethanol, we will see an enormous capitulation on employing vital grains & foodstuff for ethanol. We are only starting to see food inflation, Asia has been especially hit with shortages. And, in the short term, cellulosic is not yet widely & cost effectively available. Sugar cane ethanol is well positioned.

Link follows on the Coal to Chemicals story -- GL, gabby

URL for this article:
online.wsj.com/article...

Cellulosic Ethanol: The Next Biofuel Boom?

The development of cellulosic ethanol is not "free", but perhaps you are suggesting the ingredients for it's creation are. Do you have a recommendation for what could be used in the interim as we await viable cellulosic alternatives? Hodges's article mentions commercial availability by 2012 -2015. Additionally, I don't understand why the US should be sibsidizing this industry when there are valid free market alternatives. Somewhat off topic, but the plug is being pulled on the FutureGen project (Coal Capture & Sequestration) because the project has ballooned to $2.8 billion, almost double the initial cost and the model has been determined to be seriously flawed by MIT. In this case, the government has realized that the free market & industry should be more involved and running these projects for effectiveness, accountability & efficiency. The quickest path to solutions is to encourage competition. Check out the story on Brazilian ethanol.

Cellulosic Ethanol: The Next Biofuel Boom?

Investment in cellulosic ethanol producers is contingent on continued government subsidies and protection. Currently ethanol producers receive a 51 cent a gallon tax credit and imported ethanol from Brazil has a 54 cent/gallon tariff. Later in '09 the US government will be addressing whether to let the tariff expire, which would open the door to more energy efficient, lower cost Brazilian sugar cane ethanol. Cosan (CZZ) is one of Brazil's largest cane ethanol producers and is already powering some of the ethanol production equipment with cellulosic ethanol made from the left over parts of the cane plant - leaves, etc. Europe is re-evaluating their stance on imported ethanol and is considering a ratings system which will take into account the energy efficiency of specific ethanol product production. Cane based ethanol is 6-8x more efficient than other crop base ethanol and doesn't impact vital food supply. Betting on US cellulosic ethanol right now assumes continued US government support via subsidies and tariffs while sugar cane ethanol powers ahead on both the established and experimental (cellulosic) aspects. Hampering free trade could provide temporary investment support for nascent US cellulosic producers but runs the risk of not being competitive in the rest of world and could miss out inestimable demand in China & India. Reuter's story below discusses ethanol tariff & 2009 budget. Note that the Renewable Fuels Assoc. (ethanol producers) are lobbying to keep the tariffs in place to "encourage investment" in US cellulosic development. Never a good sign, if you need a gov. assist for your investment $$$.

gabby
Disclosure: I hold CZZ

Bush budget doesn't alter ethanol import tariff
Mon Feb 4, 2008 4:44pm EST
By Tom Doggett

WASHINGTON (Reuters) - The Bush administration did not propose any changes to the expiring U.S. ethanol import tariff in its new 2009 government budget that was sent to Congress on Monday, an Energy Department spokeswoman said.

The spokesperson said while the 54-cent-a-gallon tariff is set to expire at the end of December during the 2009 budget year, which begins this October 1, the administration will have discussions with lawmakers later this year on what should be done with the tariff.

The tariff is designed to protect U.S. corn-based ethanol makers from cheaper imports, mainly from Brazil which makes its ethanol from sugar.

Energy Secretary Sam Bodman had hinted last week while speaking at the U.S. Chamber of Commerce that he favored eliminating or cutting back the tariff and that the administration would address the issue in its new 2009 budget.

"I would just say I think that there are advantages to having had the kind of both subsidies and tariffs that have helped protect this industry. I believe that, the best I can tell, this industry is pretty close to being able to stand on its own," Bodman said at the time.

U.S. ethanol blenders get a separate 51-cent-a-gallon tax credit that runs through 2010.

"I think it's very important that we pursue a policy which gives the U.S. industry appropriate time and protection to develop," Deputy Energy Secretary Clay Sell told reporters at a briefing on the Energy Department's new budget.

"We'll look forward to having those discussions with the Congress, as we always do, as the appropriate policy when the tariff expires," he said.

Brazil's sugar cane sector was disappointed the administration did not use the new budget to modify the U.S. ethanol import tariff.

"The continuing ethanol tariff runs counter to America's open and fair trade rhetoric," said Marcos Jank, president of the Brazilian Cane Sugar Industry.

"It is shocking that developed countries such as the United States continue to tax renewable biofuels from reliable democratic partners while encouraging tariff-free imports of petroleum from unstable regions of the world," he said.

However, the Renewable Fuels Association, which represents U.S. ethanol producers, said the import tariff is needed to encourage investment in the U.S. to develop cellulosic ethanol made from wood chips, switchgrass and other farm and forest waste.

"By removing the tariff ... you will cool the kind of investment you have seen in the industry," said RFA spokesman Matt Hartwig.

(Reporting by Tom Doggett; Editing by Russell Blinch and Christian Wiessner)

Cramer: "Ethanol Is a Fuel That Doesn't Work"

Cut the US subsidies to the US sugar growers, eliminate the 54 cent/gallon tariff on Brazilian sugar cane ethanol, increase the ethanol % in fuel. Sugar cane based ethanol is 6-8x more fuel efficient to create. Promoting usage of cane ethanol would preclude diverting vital food crops like corn and wheat for fuel. The world is going to need those crops for food. CZZ (Cosan) is a Brazilian company at the fore front of cane ethanol. Brazil is expected to increase their cane consumption by 64% and in Europe a five fold increase is expected.

GL,
gabby

2 Bloomberg stories follow:

Brazil's Sugar, Ethanol Output May Rise This Year (Update1)
By Thomas Kutty Abraham

Feb. 4 (Bloomberg) -- Sugar-cane production in Brazil, the world's biggest producer of sugar, may rise this year as growers plant more to benefit from soaring demand for biofuels, research company Datagro Ltd. said.

Brazil may harvest as much as 45 million tons more cane than in the previous year, Plinio Nastari, head of the Sao Paulo-based company, said. The amount of sugar produced from the crop in the year starting May 2008 may be between 30 million tons and 31.5 million tons, compared with 30.6 million in 2007-08, he said in an interview at a conference in Dubai today.

Higher Brazilian sugar output may add to a global surplus and stem a rally in prices of sugar, the best performer in the UBS Bloomberg Constant Maturity Commodity Index this year. Sugar jumped 14 percent in January and reached a 17-month high of 13.09 cents a pound on Jan. 17.

``Brazilian output is certainly going to rise this year,'' Nastari said. ``Price equilibrium is going to be dictated next year more by Brazil than India.''

Mills may use as much as 59 percent of the cane produced in Brazil's Center-South region to make ethanol, up from 56 percent last year, he said.

Demand for ethanol in blending with gasoline to run vehicles in Brazil will rise by 2.9 billion liters this year from 16.7 billion last year as more and more people buy so-called Flexi cars, Nastari said.

``Brazil is adding more than 2 million Flexi vehicles every year and that's going to push up local demand for ethanol,'' said Marcos Jank, president of Brazil's Sugar Cane Industry Association, also known as Unica, said. ``Brazil is looking at the local market to grow its ethanol industry.''

Soros

Investors including billionaire George Soros are pouring 30 billion reais ($17 billion) into Brazil to develop 80 new mills, according to Maurilio Biagi Filho, a producer whose family accounts for about 10 percent of sugar output in Brazil.

Ethanol exports from Brazil may decline marginally to 3.46 billion liters next year compared with 3.84 billion liters last year as the U.S. government was expected to introduce quotas to save its local bio-fuel makers, Nastari said.

``I don't expect the U.S. to remove the duty on imports of ethanol,'' he said. The U.S. government may introduce a quota system so that local producers' interests are protected.''

Datagro expects sugar to trade between 12.5 cents to 14 cents a pound in the next four months as investors scale down a global surplus to as low as 6 million tons from 11 million tons a month earlier, Nastari said.

Surplus

The global sugar surplus may disappear in the year to September 2009 as growers switch to other crops in India and excessive rains hamper planting in Brazil, he said.

``Heavy rains in recent days have denied standing crops the light and warmth required to mature and planting of the new crop for 2009 has also been hit.''

Sugar for March delivery rose 0.2 percent to 12.38 cents a pound on ICE Futures U.S., formerly the New York Board of Trade, at 9:33 a.m. London time. Sugar, which has gained 14.5 percent this year, reached a 17-month high of 13.09 cents on Jan. 17.

White sugar for March delivery was 0.1 percent lower at $344 a ton as of 12:14 p.m. on the Liffe exchange in London today.

To contact the reporter on this story: Thomas Kutty Abraham in Dubai at [e-mail]... .

Last Updated: February 4, 2008 07:18 EST

Sugar May Gain on Rising Consumption, Ethanol Demand, ISO Says
By Marianne Stigset

Feb. 4 (Bloomberg) -- Sugar, one of the worst-performing commodities in 2007, may gain on rising consumption, including for ethanol made from the crop, said Peter Baron, executive director of the International Sugar Organization.

``A great deal of optimism is justified,'' for the sugar market, Barron told a conference in Dubai today. ``There's a big untapped consumption for sugar.''

Raw sugar declined 7.9 percent last year, making it the fourth-worst performer on the UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials, on concerns about a swelling supply glut. Sugar production is forecast to exceed demand by 11.1 million metric tons this season, according to the ISO.

Emerging markets such as China are set to consume more as incomes rise, Barron said, citing average Chinese per capita consumption of 10 kilograms a year, compared with a world average of 25 kilograms.

Ethanol consumption from sugar will rise 64 percent to 23 billion liters in Brazil, and more than fivefold in the European Union to 10 billion liters, between 2006 and 2010, Barron said.

``There's a finite availability of crude oil,'' Barron said. ``Soaring oil prices and increasing environmental concerns'' are boosting demand for ethanol.

Raw sugar futures for March delivery rose 0.06 cent, or 0.5 percent, to 12.41 cents a pound on ICE Futures U.S. at 9:04 a.m. London time today.

To contact the reporter on this story: Marianne Stigset in London at [e-mail]

Last Updated: February 4, 2008 04:08 EST

5 Must-Read Stories in Oil and Alternative Energy

Willy,

Coincidence, but I just received this story that mentions Verenium. I think it might be worth doing some DD on CZZ instead.

GL - gabby

Associated Press
Sector Snap: Ethanol Shares Mostly Fall
Associated Press 01.18.08, 1:05 PM ET

NEW YORK -
Ethanol stocks mostly fell Friday after BioFuel Energy Corp. reported delays in the start up of its first two ethanol plants and investors remained concerned about the sector's near-term outlook.

Profits at producers of corn-based ethanol have come under stress, as commodity costs surged and ethanol prices became depressed because the sector expanded production too rapidly. Margins have increased recently as ethanol prices improved, though there are still concerns that tight corn supplies will support prices for the alternative fuel's main feedstock.

BioFuel's stock fell 24 cents, or 3.6 percent, to $6.42 after the company said late Thursday that construction problems would delay its plant startups by about three months.

Citigroup (nyse: C - news - people ) analyst David Driscoll said the delay does not have a material effect on his outlook for the company. He reiterated a "Buy" rating on BioFuel's shares in a note Thursday.

"Our positive thesis on BioFuel Energy (nasdaq: BIOF - news - people ) remains intact as ethanol industry profitability has begun to improve over the past three months on the back of strengthening industry fundamentals," he wrote.

Brazil-based Cosan Ltd. bucked the sell-off, after Bear Stearns (nyse: BSC - news - people ) analyst Marc McCarthy initiated coverage of the sugarcane ethanol maker's shares at "Outperform."

"Cosan, having bounced from its lows, is unmatched in size, liquidity, management strength, and corporate structure," McCarthy wrote in a note Friday. Its shares rose 12 cents to $13.29 in afternoon trading. They have risen fairly steadily since reaching a 52-week low of $9.53 in November.

Elsewhere in the sector, Verasun Energy Corp. rose 9 cents to $10.11 after receiving an upgrade from Broadpoint Capital analyst Ron Oster to "Neutral" from "Underperform." Oster cited the stock's "attractive valuation" following a recent sell-off, as well as moderate risk due to its scale.

Shares of Verenium Corp. (nasdaq: VRNM - news - people ), which makes ethanol from plant matter rather than corn, fell 11 cents, or 2.8 percent, to $3.83 in afternoon trading.

Aventine Renewable Energy Holdings (nyse: AVR - news - people ) Inc. fell 47 cents, or 5 percent, to $8.95, and Pacific Ethanol (nasdaq: PEIX - news - people ) Inc. fell 4 cents to $5.48. US BioEnergy Corp. (nasdaq: USBE - news - people ) rose 8 cents to $7.83.

Copyright 2007 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

5 Must-Read Stories in Oil and Alternative Energy

PS -- On page 2 of the article, there is discussion on the ethanol "pipeline".

5 Must-Read Stories in Oil and Alternative Energy

David, I have no idea on the plant building cost differences. Transportation, is however, the area that CZZ will be addressing and improving. Currently, the infrastruture, (railroads, etc.) is not in place, so the ethanol is transported via truck (least efficient method). In terms of shipping from port, the tankers that can be used for ethanol transport are smaller than those used for grains, so that is another inefficiency.

The following link from the story below has a good overview & strategy discussion w/the CZZ CCO.

ethanolstatistics.com/...

GL, gabby
(openPR) - Brazil’s largest ethanol producer Cosan is actively looking to start producing ethanol in the United States. That’s what Marcos Lutz, Chief Commercial Officer told Ethanol Statistics in a interview this week.

In September this year, Cosan’s Chief Financial Officer Paulo Diniz was quoted saying that Cosan would start taking its first international steps. At the time, three options were presented. The first would be to invest in an ethanol dehydration plant in the Caribbean, following in the steps of companies like Brazil's Crystalsev and U.S. giant Cargill. The second option would be to install a distillery in Mexico, which has free access to the U.S. market through NAFTA (North American Free Trade Agreement) from January 2008. The third and last option would be to invest directly in the United States.

Mr. Lutz confirms all three options as viable but doesn’t consider investments in CBI countries as Cosan’s first international step. “CBI is a minor investment, which involves about 10 million dollars. What were talking about is actually having a plant or two in the United States. To have domestic supply there as well”.

Mr. Lutz made his comments in an interview with Ethanol Statistics on the strategy of Cosan in the next few years. Besides Cosan’s plans to enter the U.S. market, Mr. Lutz also discussed the attractiveness of greenfields and brownfields versus acquisitions, its involvement in the construction of a dedicated ethanol pipeline and possible plans to expand to other regions than the United States.

The entire interview, titled ‘Cosan’s Strategy for Future Growth’, can be found on

ethanolstatistics.com/...

5 Must-Read Stories in Oil and Alternative Energy

David -- Sugar has been the commodity under performer. There has been a vast global sugar surplus which has held down costs. Brazil is the largest sugar producer but India is close to over- taking Brazil. Thailand has also ramped up production. CZZ's CEO - Lutz, announced that given 1 year notice they could export 10 billion litres of ethanol within 1 year. Currently the geographic planting area of CZZ's plantations equal the size of Germany. That said, lots of funds and speculators are betting on sugar increasing this year, ethanol could be a factor, decreased production, weather. Transport costs matter to both corn and sugar, but corn is needed for livestock as well as people. Sugar isn't as vital a foodstuff. Also corn has to be planted annually, while a sugar cane plant will re-generate for up to 10 years, so that's another efficiency. Within Brazil the introduction of flex fuel cars has been a resounding success and up to 20% of the fuel is ethanol. Brazil is booming, more people buying cars. FWIW, Goldman Sachs has a 17% stake in a Brazilian sugar co. - Santelisa.

GL,
gabby

5 Must-Read Stories in Oil and Alternative Energy

Cosan produces sugar based ethanol and is even running some of their production equipment on cellulosic ethanol made from the sugar cane leaves. Sugar base ethanol is much more efficient than corn base and unlike Coskata, CZZ's product is available right now. When CZZ IPO'ed on NYSE they listed as Bermuda based which also provides some advantage in terms of avoiding the 54 cent/gallon tariff on Brazilian ethanol imports to the US.