Emerging Markets Law

Showing 15 posts from 2011.

Biomass Power Has Potential To Reduce Carbon Dioxide Emissions

Q:  If a tree falls in the woods and there is no one to hear it, does it still make a sound?

A: I don't know, but its decomposition will still create CO2.

That's one of the conclusions I reach from a new study reported by Biomass Power and Thermal.  The study examined the potential for biomass and carbon capture/sequestration technologies to reduce aggregate missions of CO2.  According to the report, combining the two could result in up to 10 gigatonnes of negative carbon dioxide across the globe annually.  Putting that in perspective, global energy-related carbon dioxide emissions in 2010 reached almost 31 gigatonnes.

Ceres Files for IPO

Posted In Industry

Ceres, Inc., who has lead research into feedstocks for biofuels and bioenergy, has filed an S1 registration statement with the SEC for an initial public offering. 

The company's filing claims that it develops "low input dedicated energy crops capable of producing high yields of biomass per acre using innovative plant breeding and trait biotechnology. By developing these types of crops, we enable the scalable, sustainable and economic production of bioenergy, or the energy derived from biomass."

The company notes that it has received "multiple competitive grants and collaborations, including a United States Agency for International Development, or USAID, grant and one of the U.S. Department of Energy’s first Advanced Research Project Agency for Energy, or ARPA-E, grants in 2009, as well as a $137 million multi-year collaboration with Monsanto Company signed in 2002." 

Like many of the current crop of biotech IPOS, the company has virtually no revenues (roughly $280,000 for the fiscal year ending August 31, 2010) and racked up a large loss in its most recent fiscal year (more than $22 million).  Investors will have to pin their hopes that future developments can drive revenues and eventually earnings. 

Background from Biomass Power and Thermal.

Myriant Corporation Files for IPO

Myriant Corporation has filed an S1 registration statement with the SEC, seeking to become publicly-traded. 

According to the filing:

We are an industrial biotechnology company focused on becoming a low-cost producer of high-value biochemicals that substitute for traditional petroleum-based industrial chemicals. We have developed a proprietary technology platform that we believe will enable us to manufacture a variety of “drop-in” chemicals and replacement chemicals for large and growing markets using a broad range of low-cost, renewable and readily available feedstocks. Our technology platform, which we have validated in our laboratories and third-party tolling facilities and commercialized with our licensee, Purac Biochem BV, or Purac, a wholly-owned subsidiary of CSM N.V., is based on a single-step anaerobic fermentation process that allows our microorganisms to grow and produce target products simultaneously, resulting in greater productivity and yield relative to other known bioproduction processes. We believe that we can produce our target high-value chemical intermediates at an average of half the cost of traditional petrochemical intermediates at a wide range of oil and industrial sugar prices without relying on government subsidies.

We have validated our proprietary technology as cost-competitive using commercial-scale unit operations and multiple feedstocks. Our technology platform combines proprietary microorganisms, or biocatalysts, and a fermentation process capable of using diverse industrial sugars to create various chemical intermediates, such as succinic acid (a $7.5 billion addressable market at current market prices), fumaric acid (a $1.7 billion addressable market at current market prices), acrylic acid (a $14.5 billion addressable market at current market prices) and lactic acid (forecast to eventually become a multi-billion pound market). We believe that our technology can efficiently produce biobased chemicals at high yields while consuming less feedstock by using an anaerobic process that consumes, rather than produces, carbon dioxide, resulting in a reduced carbon footprint and higher renewable content of the target product. Based on current commercial-scale cost metrics, we estimate that our production process for our initial product, biosuccinic acid, will be cost-competitive with petroleum-based processes down to $45 per barrel of oil.

Our biocatalysts are feedstock flexible and can consume sugars from a variety of sources, including glucose from corn and grain sorghum, sucrose from sugarcane, cellulosic sugars from waste biomass and glycerol. Our biocatalysts can consume both pentose (C5s such as xylose) and hexose (C6s such as glucose) sugars, which we believe positions us to be a first mover when cellulosic feedstocks become more widely available. We plan to use the most cost-effective regional feedstocks or a combination of feedstocks in our future plants.

We have entered into or intend to enter into strategic relationships with leading international companies to accelerate the global commercialization of our products and development of our biochemical production capabilities. For example, we have signed a non-binding memorandum of understanding to enter into a definitive joint development agreement with Johnson Matthey PLC’s subsidiary Davy Process Technology Limited, or Davy, a leading developer and licensor of advanced process technologies. Under that agreement, Davy would, after engineering and successful testing of our biobased succinic acid, or biosuccinic acid, guarantee to its butanediol process licensees that they could use our biosuccinic acid in their butanediol process in place of petroleum-derived maleic anhydride, or MAN, without significant additional capital expenditures. Davy believes that its butanediol process is the lowest-cost process in the industry and accounts for approximately 1.2 billion pounds or 27% of total global capacity, and 50% of plant capacity installed since 1992. We have also signed exclusive alliance agreements with ThyssenKrupp’s subsidiary Uhde GmbH, or Uhde, a leading chemical plant engineering company, and its U.S. subsidiary, under which Uhde will integrate our fermentation technology with its separation technology in the plant design and, on a project-by-project basis provide process and performance guarantees for our future plants on mutually agreeable terms,

The timing of the IPO is unusual.  Investors have placed a premium on equities with significant earnings in the past year, reasoning that profitable companies will be better-situated to weather any future storms. 

Myriant is still a pre-revenue company, generating only $258,000 in gross revenues for the year ending 12/31/2010, according to its registration statement.  The company racked-up a net loss of more than $16 million for the year.

While there’s plenty of reason to be optimistic about the future biofuels and bioproducts, Myriant is unlikely to generate a profit for years to come, making an investment in that company fairly speculative for the time being.

Coverage in Biofuels Digest   

Valero Energy Signals Interest in Cellulosic Ethanol

Posted In Industry

Valero Energy Corp. (NYSE: VLO) recently announced its role in a $60 million financing for Montreal-based Enerkem, Inc. along with existing Enerkem investors Waste Management, Rho Ventures, Braemar Energy Ventures and Cycle Capital.

Valero spokesman Bill Day says that the Enerkem deal is just one of several investments Valero has made in renewable fuels and biofuels. “Valero itself does not do a lot of research or development into renewable fuels,” he said. “We prefer to do investments in companies that are doing that research, or in some cases, just buy the research itself. With a company like Enerkem, which is doing a lot of innovative stuff with biofuels, it’s a good partnership for a company like Valero.” He said Valero thinks Enerkem’s project is one of the more viable and practical of the emerging biofuel technologies.

The investment is more than just a financing for corn-based ethanol, however, signaling an interest by Valero in cellulosic ethanol. “Valero owns 10 corn ethanol plants in the Midwest, but we are also looking at cellulosic ethanol,” Day said. “Once there is some sort of emerging technology for the production for cellulosic ethanol, what we would like to do is add that technology to our existing corn ethanol plants so they could do both corn and cellulosic.” There is also potential for Valero to form an off-take agreement for cellulosic ethanol produced by Enerkerm, he said.

Earlier in 2010 Valero made a similar investment in cellulosic ethanol producer Mascoma, also entering into a ethanol offtake agreement.

Mascoma, Valero, and Mascoma’s operating subsidiary, Frontier Renewable Resources, (jointly owned with J.M. Longyear) signed a non-binding letter of intent to support the construction of Mascoma’s 40 million gallon cellulosic ethanol plant in Kinross, Michigan. Groundbreaking on the project is slated for later this year.

According to Biofuels Digest, under the terms of the letter of intent, Valero would potentially invest up to $50 million of the equity required to finance the project through Frontier Kinross LLC, a subsidiary of Frontier, and would enter into an off-take agreement for the project’s ethanol production. As further support of the project, Valero will provide project development and construction oversight services.

“Valero’s proposed investment in our first commercial-scale production facility proves the economic practicality of Mascoma’s technology for the conversion of woody biomass into ethanol,” said Bill Brady, Chief Executive Officer of Mascoma. “We are also thrilled to have Valero as a shareholder in Mascoma Corporation as there are many synergies even beyond the Kinross facility, where the technologies we have developed could be helpful to Valero’s business.”

Valero, which is publicly-traded on the New York Stock Exchange (NYSE: VLO) derives a little more than 10% of its revenue from sales of ethanol, according to its most recently-published financial statement.

Senate to Vote on Killing Ethanol Tax Credits

Posted In Government

The Senate on Tuesday will hold a procedural vote on an amendment that would eliminate about $6 billion in tax credits provided annually to subsidize blenders of ethanol.  (Tip: Josiah Ryan). 

The amendment’s sponsor, Sen. Tom Coburn (R-Okla.), recently produced the signatures of 16 senators to the Senate clerk and demanded that a vote to limit debate be placed on the schedule.

"If Congress can't cut a corporate welfare subsidy the corporations themselves don't want, what can we cut?" asked Coburn in March when he was attempting to attach the amendment to the Small Business Administration (SBA) funding bill. "Ethanol is a case study of how parochialism trumps progress in Congress. Sooner or later, the Senate will take a vote on this issue."

Coburn’s amendment would repeal the Volumetric Ethanol Excise Tax Credit, scratching the 45-cent blender tax credit for ethanol and the 54-cent tariff on imported ethanol.

Vermont Energy Act of 2011

Posted In Government

The Vermont Energy Act of 2011 is a cornucopia of new mandates and requirements for power companies and fuel companies in the State of Vermont.

Among other things, the 2011 Act:

  • Expands net metering requirements;
  • Expands the State's "SPEED" program and renewable portfolio standard;
  • Adopts a PACE - property assessed clean energy - financing program;
  • Requires that home heating oil include at least 3% biodiesel by 2012 and 7% biodiesel by 2016; and
  • Adopts other requirements aimed at encourage renewable energy and biofuels.

Podcast: 50-State Survey of Renewable Portfolio Standards

Posted In Podcast

The folks at LexisNexis have published our podcast on Renewable Portfolio Standards. The recording covers the highlights of the Renewable Energy Committee's Spring 2011 report which contained a comprehensive 50-state survey of state renewable portfolio standards.

Thanks to all of my colleagues from the Committee who participated in the recording and in writing and preparing the report.  

New Jersey Waste-to-Energy Plant on Drawing Board

Organic Diversion, a New-Jersey based composting company, has announced plans to build a waste-to-energy facility in Southern New Jersey.

Rocco D’Antonio, the founder of Organic Diversion LLC, said that the company is still seeking permits to build an anaerobic digestion facility to convert collected food waste into energy.  “For the past two years, we’ve been building our collection business,” he said. “We do operational analyses of commercial food waste generators and put together operation plans,” he said. “We bring in the appropriate containers, we conduct all the training and following training for the account, and with our own trucks we come in and collect the material as scheduled.”  

According to D'Antonio, the next step is to build the receiving facility to convert collected food waste into energy through an anaerobic digestion process. He plans to build a facility that would have the capacity to take in roughly 60,000 tons of organic waste per year, producing 2MW of power.  The plant would also capture and recycle waste heat.

D’Antonio said the company hasn’t decided yet what to do with the power it will produce, but plugging it into the grid is one possibility.

Preventing odor is a significant part of the planning process, as nuisance odors are often a concern in the permitting process.  “Odor management has been part of our operating plan and design from very early on, because there have been too many facilities shut down because of odors. We decided if we were going to do something in a very densely populated area like New Jersey, we had to make sure that we were very confident that we wouldn’t have an issue.”

Podcast - 50-State Survey of Renewable Portfolio Standards

Thanks to all of my colleagues from the Renewable Energy Committee of the ABA's Public Utility Section who participated with me last week in recording our podcast. The recording will trace over the highlights of the Committee's Spring 2011 report which contained a comprehensive 50-state survey of state renewable portfolio standards.

Steve Berstler and his crew at Lexis-Nexis should have the recording available in the Emerging Issues section of the Lexis-Nexis Communities website.

The Great PACE Controversy

Posted In Government

I co-authored an article in this month's issue of Probate and Property entitled, "The Great PACE Controversy," covering the ongoing litigation that has bogged down efforts to implement "Property Assessed Clean Energy" (or "PACE") financing programs. (Link to article requires ABA Section of Real Property membership).

PACE financing was intended to allow property owners to borrow money, at relatively low interest rates, secured by the equity in their property, for the purpose of purchasing energy efficiency or renewable energy improvements to the property. (The best background information is available from the PACENOW site.) Enabling legislation would allow municipal financing districts to issue bonds to fund the projects and the property owner would be obligated to repay the financing, with interest, through a super-priority tax lien on the property in favor of the financing district.

Although the program was endorsed by the Obama administration, the mortgage lending industry (especially Freddie Mac and Fannie Mae) objected, arguing that the PACE liens on real property would interfere with mortgages underwritten through their programs.

As the article describes, the nationwide implementation of PACE financing has largely stalled and is the subject of litigation in the State of California.

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