Tuesday, April 13, 2010

Pot Luck Renewables

Honeywell’s UOP subsidiary (HON: NYSE) is leaving nothing up for question in its project to produce green gasoline, diesel and jet fuel. UOP plans to use a pot luck menu of feedstock from agricultural residue to dedication agriculture crops, from woody biomass to algae. UOP received a $25.0 million grant from the Department of Energy to build a demonstration plant in Hawaii. The plant will be located at a refinery owned by Tesoro (TSO: NYSE) near Kapolei, Hawaii.

A pyrolysis variation licensed from Ensyn Corp. will be used in the demonstration. The idea is to rapidly heat whatever biomass is used to generate liquid oil. The pryolysis oil product is then upgraded using Honeywell’s proprietary process.

UOP already has a licensee for its Ecofining process for green diesel fuel in Eni S.p.A. a refiner based in Italy. Eni plans to start up its facility this year in Livomo, Italy. The Ecofining process deoxygenates biofeedstocks by adding hydrogen to produce a highly-stable green diesel. Green diesel has similar energy content to fossil fuel diesel, but produces less NOx emissions.

Honeywell is not valued on its renewable energy initiatives, so HON shares are not an energy play. Nonetheless, in our view Honeywell is a company to watch in the renewable segment. Its worldwide profile puts Honeywell in a good position to achieve commercial success even if its products or technology are mediocre in comparison to those of an innovative, but less resourceful start-up.

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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