Friday, June 17, 2011

IPOs Running on Biofuel

Honeywell International (HON:  NYSE) landed itself nimbly on the tarmac at the Paris Air Show this week, making a big impression at what is arguably the premier aviation event in the world.  The industrial controls giant aspires as a player in the business jet market with its Green Jet Fuel, a proprietary biofuel made from camelina, a non-food feedstock.  A blend of fossil and bio-fuel powered one of the Gulfstream G450 jet engines.

Honeywells’ feat comes in the wake of a major breakthrough in the aviation fuel.  A standards setting body ASTM International recently approved the use of renewable fuel in jet engines, paving the way for Honeywell’s Green Jet Fuel and others. It follows that the market for biofuels in general could improve on both the standards change and Honeywell’s bold move.

Investors will have a chance to weigh in the coming months as a growing list of renewable-related companies comes to the capital markets with initial public offerings.  Kior, Inc. bills itself as a producer of renewable crude oil.  The company just filed for a $210 million IPO, proposing to sell 10 million shares at $19 to $21 share.  Fast on it’s heals are several more players in the biofuel arena.  Ceres, Inc. is a producer of grasses and calls itself an “energy crop” company.  Myriant Technologies is a producer of bio-based succinic acid, a vital specialty chemical that has heretofore been petroleum-based.  Petroalgae, Inc. (PALG:  OTC/PK) is also planning what is actually a follow-on offering to support its algae-based biofuel and animal protein business.

There have been several recent IPOs in the sector.  Gevo, Inc. (GEVO:  Nasdaq), Amyris, Inc. (AMRS:  Nasdaq) and Codexis, Inc. (CDXS:  Nasdaq) have given investors reason to cheer even in the recent difficult period in the U.S. equity markets.

In the next several posts, we will be looking more closely all these names.  Several have been featured in previous posts  -  Honeywell, Amyris, Codexis, PetroAlage, Myriant.  We will catch up on how these companies have faired since we last visited them. Where is the value?  Can all these technologies survive in the long-term?  Just how diversified can the renewable energy industry remain in the next five years, ten years, fifty years?  Where is there likely to be the greatest scale?

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.  All companies named above are included in Crystal Equity Research’s Beach Boys Index.

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