It's official. One man's trash really is another man's treasure.
And why wouldn't it be? Trash--in multiple forms--is now being converted into fuel and electricity, and sold at market value. It's like getting something from nothing. A free lunch, if you will.
In fact, a handful of companies now possess technologies that can make highly valued products, like cellulosic ethanol , renewable natural gas and steam to produce electricity, from a variety of waste products like manure, paper, construction waste and pretty much any other organic waste.
Even if you're not an energy or financial expert, it's easy to see the investment potential of this development. Imagine if you could reach into your trashcan and pull out a gemstone or even cold hard cash.
Well, you might not be able to do that just yet, but the waste to energy companies employing these technologies could prove to deliver the same results.
Cellulosic Ethanol from Waste
I've written a few times about investing in cellulosic ethanol, but I focused strictly on paper and wood companies and biotech companies that are engineering non-food crops to make the fuel.
Now, with advancements in waste conversion processes, there's a company poised to profit from the conversion of waste to cellulosic ethanol. And the company has been relatively unloved by the Wall Street community.
In the past year, BlueFire Ethanol Fuels Inc. (BFRE.OB) has fluctuated between $7.70 and $2.70 per share. And it's been on 46% slide for the past six months, moving from $6.50 to $3.50, where it's hovering now.
I can't say I blame the Street for shying away from this company thus far. After all, BlueFire is still a development stage operation and, according to its 10K, "has recognized minimal revenues to date."
But in June, the company filed for permits in Los Angeles County to construct California's first cellulose to ethanol production facility. That pilot plant will produce about 3 million gallons of cellulosic ethanol per year from green and wood waste.
And in October, BlueFire announced a cooperative agreement with the US Department of Energy (DOE) that will provide a grant totaling $40 million for its second cellulosic production facility, located adjacent to a landfill in Southern California.
According to CEO Arnold Klann, "The DOE funding will enable BlueFire Ethanol to build a facility that will convert post-sorted green waste and other cellulosic materials from the landfill into roughly 17 million gallons of fuel-grade ethanol per year."
All of the ethanol will be sold through a long-term contract to Petro-Diamond, Inc., a subsidiary of Mitsubishi Corp.
Plus, the company has also been awarded a $200 million loan guarantee from the DOE to build a 55 million gallon per year facility.
Bluefire holds an exclusive North American license to use conversion technology developed by Arkenol, Inc., a company also headed-up by Arnold Klann.
Klann is very optimistic about where the company is headed. "We are going commercial - these are not experimental plants. Our technology is ready for the marketplace."
Make sure to keep an eye on this company. You won't want to miss the run-up in stock price once the commercial facilities come online.
Waste Management Companies Also Set to Rise in the Waste To Energy Market
BlueFire isn't the only company trying to corner the waste to energy market. There are a few waste management companies trying to get into the game as well.
But these companies aren't interested in making ethanol. Instead, they're harvesting landfill gas--which is normally flared off--that can be burned to produce electricity.
You see, when garbage is stored in a landfill it starts to decompose. As it breaks down, a gas is released that, until recently, was thought to be useless. It was simply burned onsite. If you've ever ridden past a landfill and seen all the pipes sticking up out of the ground, you know exactly what I'm talking about.
Now, with energy prices commanding a premium, this gas is either being collected and sold or converted onsite into electricity.
Waste Management, Inc. (NYSE: WMI) already has 103 such conversion facilities and will be adding another 60 in the next five years. When the additional facilities are completed, Waste Management will be producing over 700 MW of clean electricity--enough to power about half a million homes.
With 425 landfill gas-to-electricity facilities already in the US and another 560 suitable sites, this is an industry that could easily double in the near future.
A company looking to capitalize on this coming growth is Casella Waste Systems, Inc. (NASDAQ: CWST). The company produced 91,000 MWh of clean electricity last year, and has plans to build six more facilities in the near future. Take a look at the chart below:
The company's stock is on a 37% run in the past three months, and shows no signs of slowing down. In September, they announced turning the corner to profitability, posting net income of $1.7 million and beating Wall Street estimates. Revenues were up 8% to $152.4 million.
Casella could just be the next big thing in waste to energy investment plays. Keep an eye on this one as well.
Until next time,