Vertimass Taking Ethanol to the Blue Skies

It is well established that aviation is a major source of greenhouse gas emissions.  According to studies commissioned by the European Union, aviation accounts for 2% of global greenhouse gas emissions.  If the aviation industry were a country, it would be ranked among the top ten emitters in the world.  The real concern is not necessarily the magnitude of aviation’s current emissions status.  Rather it is the industry’s rapid advance toward becoming a polluter extraordinaire.  The International Civil Aviation Organization (ICAO) forecasts by 2050 greenhouse gas emissions from the aviation industry could grow by 300% to 700% from present levels. 

The gravity of the situation with aviation’s contribution to the climate crisis calls for action.  Privately-held Vertimass, LLC has answered the call.  The upstart is developing technologies that help convert ethanol to jet fuel and other chemicals.  It got a jump start from catalyst technology that was licensed from the Oak Ridge National Laboratory.  The company’s Catalyst Technology is aimed at capturing hydrocarbons from biomass and turning it into a transportation fuels such as diesel, gasoline and jet fuel.  Renewable chemicals are by-products of the conversion, including benzene and xylene.  The technology can be deployed at existing ethanol plants with minimal alteration of processes. 

Vertimass management believes its technology should be attractive to ethanol producers who are now held back by the ‘ethanol blend wall’, a regulated amount of renewable fuel required in petroleum-based fuels by the federal government and imposed on refiners.  Currently the U.S. ethanol industry has capacity to produce up to 16 billion gallons of ethanol per year, which exceeds the demand that is triggered by the current 10% renewable fuel blending requirement.  The ability to convert ethanol to jet fuel would open up new markets for ethanol production, soak up excess production capacity and even create opportunity to expand.  

Of course, the economics of the process are vital.  Can the Vertimass Catalyst Technology produce a sufficiently valuable product to justify the process cost?  The answer lies in how much of the energy in the ethanol is preserved in the jet fuel.  Vertimass claims its technology is more effective and less costly because it is a single step conversion process that results in high yields.  It could very well be less costly that some previous attempts at converting ethanol to jet fuel that require the introduction of hydrogen to the mix and costly energy sources to raise temperatures.  Furthermore the chemical by-products of the Vertimass technology all have excellent economic value.

In July 2019, Vertimass signed its first technology license agreement with Alliance BioEnergy Plus, Inc. (ALLMQ:  OTC/PK) a cellulosic ethanol producer.  Alliance has aspired to develop cellulosic bio-plastics, but had to declare bankruptcy in 2017.  The company just recently re-emerged from Chapter 11 bankruptcy in September 2019.  Alliance management plan to rebuild with ethanol production using their own fermentation process to produce ethanol and then using the Vertimass Catalyst Technology to process the ethanol further into renewable jet fuel.

Over the years Vertimass has raised over $85 million in capital to support its development activities.  It may not need to pass its hat again for a while.  In October 2019, the company received a $1.4 billion grant from the U.S. Department of Energy’s Biotechnology Office to optimize and commercialize its renewable jet fuel.  Even so, Vertimass is a company investors should watch.  If its commercial strategy pans out, it could head toward an initial public offering.  It is could also be an acquisition target.  If the winner is a public company, Vertimass would provide a compelling reason to take a stake in its acquirer.

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.