Tuesday, January 05, 2010

Texas Green Gold

Algenol Biofuels, Inc. (Private), a Florida-based developer of biofuel technology is another recipient of the Department of Energy grants aimed at promoting both the economy and alternative energy. Algenol will receive $25.0 million from the DOE to match its own $33.9 million in capital to support a project to produce ethanol from carbon dioxide and seawater using algae. The planned ethanol plant is to be located in Freeport, Texas and is planned to produce as much as 100,000 gallons of ethanol per year.

Algae present an attractive workhorse for biofuel production in as much as there are few special interest groups championing their freedom. There are thousands of species of algae available for drafting into fuel production, most of which reproduce and grow rapidly. They are highly efficient photosynthesis machines. Furthermore, they have large sugar storage capacity. After all, in the switch from fossil fuels we are really looking at an alternative, quick fix for the storage and compression of the suns energy, i.e. photosynthesis.

Algenol is using algae technology developed at the University of Toronto in the late 1990s. Since then the company claims to have made advances that has rendered the algae more tolerant to high heat and high salt and alcohol content. They are using blue-green algae that have been metabolically enhanced. Algenol claims their algae can produce ethanol at a rate of 6,000 gallons per acre per year. The goal is to reach 20,000 gallons. This compares to 500 gallons per acre per year from corn

Algenol is still in a developmental stage, limiting investment opportunities. So far the company has been “privately funded” and management has been somewhat circumspect about its financial supporters. The company has had no difficulty in forming strong partnerships with such strong players as Linde Group in Germany and Dow Chemical.

We view Algenol as a company to watch for a future IPO. The DOE grant may prove to be a key enabler of this compellingly elegant science story.

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

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