Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
the last post, I promised to close out this series on carbon dioxide capture
with a note on a third example of Department of Energy funding for innovations
in turning carbon dioxide (CO2) into a valuable raw material.Besides changing the chemistry of inorganic
compounds and feedstock for biofuel production, CO2 has some potential for
plastics.In 2010, the DOE placed a bet
of $18.4 million on Novomer, Inc., which is a
self-described sustainable chemicals developer.
bet appears to be paying off as Novomer and its partners go into production of polypropylene
carbonate (PPC) polyol using CO2 from industrial waste streams.So far Novomer has produced seven tons of
finished product containing more than 40% CO2 by weight.The polyol was produced using waste CO2 from a
processing plant owned by specialty chemical maker Albemarle Corp. (ALB:NYSE) in Orangeburg, South Carolina.Albemarle turns out active pharmaceutical
ingredients at the Orangeburg plant.
critical element in the process is Novomer’s proprietary enzyme that
enables CO2 to react with petrochemical epoxides, resulting in thermoplastic
polymers.The PPC polyol will replace
conventional petroleum-based polyether, polyester or polycarbonate polyols.According to Markets and Markets Research, the
global polyols market is expected to grow to $22.4 billion in annual sales by
2017. The growth is being driven by rapidly growing polyurethane plastics markets,
particularly in Asia, Eastern Europe and South America.
believes it has conjured a highly economic product.Novomer claims its polyols are stronger and
more durable.Accordingly, plastics
using these ‘CO2’ polyols are expected to have higher tensile and load bearing
capacity.Since the CO2 is a waste product of an
established manufacturing process, it is lower-cost than conventional
petroleum-based raw materials.Thus
Novomer believes its polyol manufacturing costs will compare favorably against
is a wonderful story, but for investors looking for a play environmentally
sustainable products, it is a tale of reduced expenses and not higher
revenue.The equity market rarely
rewards low-cost scenarios with lavish multiples.That said, lower cost producers, once they
get to scale are often in a position to capture market share and that might
make a difference for Novomer should it ever decide to go public.
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Cap Strategist web log, Crystal Equity
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