Tuesday, March 06, 2007

Biofuel Mania

Over thirty companies are now represented in the Crystal Equity Research Biofuel Index, which was published this week in a new paper entitled “Biofuel Mania.” The report is available without subscription and includes a collection of recent weblog commentary on biofuel issues.

Market data reveals the group is diverse in terms of size and character. Of course,
Archer Daniels Midland (ADM: NYSE), with $39 billion in annual sales looms over the rest of the group, several of which have yet to produce their first dollar in sales. U.S. Bioenergy, Inc. (USBE: Nasdaq) is the most recent addition to the roster of public companies. Unlike many of the early stage ethanol producers, US Bioenergy recorded over $20 million in sales its most recently reported trailing months.

Also included among the public companies is
Environmental Power Group (EPG: AMEX), which was profiled in the November 2006 issue of the Small Cap SEARCH newsletter. Environmental Power is using cow manure to produce methane. Long-term purchase agreements with electric utilities have reduced the risk in the business model.

Evaluation of the investment opportunity is hampered by the fact several of the public companies do not files reports with the SEC. Shares of these companies are exchanged through the frequently derided Pink Sheets. Yet, Pink Sheet status can be misleading. At the top of the list is
Abengoa, S.A. (ABGOF: PK), a Spanish company with a well-established energy business in Europe. Abengoa has gained a foothold in the U.S. with a small operation devoted to cellulosic ethanol production, Abengoa Bioenergy.

A group of private companies has also caught our interest. We did not include the dozens of private ethanol producers. Instead we have concentrated on companies that are developing technologies which will improve biofuel processes. For example,
Range Fuels is developing anaerobic fermentation process for more efficient ethanol production from waste plants such as corn stover. GeoPlasma is developing technology for the conversion of municipal waste to energy.

The biofuel sector is among the most dynamic in the U.S. economy. We expect to update both public and private company lists as new players enter the biofuel market.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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