Tuesday, March 09, 2010

Money for Nothin'

Now look at them yo-yo’s
That’s the way you do it
You play the guitar on the MTV
That ain’t workin’
That’s the way you do it
Lemme tell ya them guys ain’t dumb

That’s the way you do it
Money for nothin’ and chicks for free

Dire Straits

The Department of Energy may not be arranging for any “chicks” but they seemed to be handing out money for free last December when they awarded millions in grants for renewable energy and chemical development.

Enerkem Corporation (subsidiary of Canada-based Enerkem, Inc.) was awarded $50.0 million, to which it must match at least $90.5 million of its own funds. Enerkem is building a waste-to-biofuel facility in Pontotock, Mississippi that is expected to process 300 tons of woody biomass from an existing municipal waste site operated by the Three Rivers Solid Waste Management Authority. Enerkem expects to be able to produce 10 million gallons per year. A planned second module could double production capacity.

The project has plenty of local support from Mississippi’s Congressional delegation and Governor. This is probably because Enerkem is promising to create over 130 new jobs at the facility.

Enerkem uses a gasification and catalytic synthesis technology platform that it has developed over the last several years. The company claims its process can convert one ton of raw material into 95 gallons of cellulosic ethanol. The Enerkem process is not too persnickety, accepting a variety of feed-stocks such as municipal solid waste, construction scrap, demolition wood, treated wood, agriculture waste and forest residue.

Waste Management, Inc. (WM: NYSE) recently made a strategic investment in the Enerkem parent. Emerkem raised CDN$54 million in an all institutional deal to support building a waste-to-biofuel plant near the City of Edmonton in Canada’s Alberta Province. Details of the financing were not provided.

Generous financial support from the U.S. DOE for the rest of Enerkem’s project pipeline was probably reassuring for the investors. However, Enerkem already has a track record with its waste-to-fuel process. Its commercial-scale demonstration facility in Westbury, Connecticut already reached 1,000 hours of operation by the end of 2009.

Let me tell you these guys at Enerkem are not dumb either. They are getting money for nearly nothing from the government, reducing the amount they need to raise in the private capital market.

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


Anonymous said...

Money for nothin, eh?

Enerkem isn't telling you or anybody else what it is that they are producing as new alternative fuels except using the guise of "lignocellulosic ethanol."

Simply wait and see their final results paid for c/o U.S. taxpayers to a Canadian outfit.

Alex Roberts

Digitei said...

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