Can This Company Finally Make Ethanol Competitive?!!
This may make your stomach burn a bit if you’re offended by subsidies. But thanks to Uncle Sam, H-E-B stores in Texas are now selling E-85 at a $0.30 discount to regular unleaded gasoline.
(Despite a slight decrease in fuel efficiency with E-85, consumers are still coming out ahead with the $0.30 discount in place)
Now I’m not bringing this up to get into some big discussion about whether or not subsidies for renewable energy markets are a good idea. If you believe the renewables industry isn’t worth much unless it can compete without subsidies…even in its infancy – I’m not going to be able to change your mind.
And to be honest...I’m not sure I want to.
Certainly the renewable energy tax credits that consumers are taking advantage of today are helping the industry get the boost it needs to become competitive. However, those who consistently question the temporary financial assistance are, in a sense, doing the industry a favor.
They’re keeping tabs on it. Making sure that it doesn’t become complacent.
Of course, the market has a way of taking care of that too – as we’re seeing today with lower oil prices and the impact these prices are having on ethanol stocks.
The Future of Ethanol – Getting More for Less
It wasn’t long ago when the price of oil was running well over $70 a barrel – and ethanol producers were rolling around like pigs in slop.
But today, with oil going for about $61 a barrel…and consumers paying less at the pump, ethanol stocks are now feeling the chill of a cold shoulder.
Well, most ethanol stocks anyway.
You see, while a good portion of the ethanol stocks in the market right now continue to swim upstream against falling oil prices – a select few are actually coming out ahead, and continuing with the ethanol momentum we witnessed just six months ago.
The reason – these are the companies that are helping ethanol become more competitive with regular gasoline...and without the need for subsidies!
Take Ethanex Energy, Inc. (EHNX.OB) for example.
By utilizing a process known as fractionation, Ethanex can actually produce 17% more ethanol than conventional processes, while using less water and energy.
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In a nutshell, this technology puts a more concentrated feedstock into the plant, so the waste material is separated out before the process begins.
So what you’re looking at here is a technology that can quickly fatten the revenues of ethanol producers without adding a dime to feedstock, energy and water costs.
It’s no wonder the entire industry is foaming at the mouth over this thing!
And guess what...
Ethanex is the only publicly-traded ethanol company with this technology.
Now currently, Ethanex is on track to have three ethanol plants online by 2008, with a combined capacity of 300 million gallons per year. All three will employ fractionation technology to boost efficiency and minimize costs.
Of course, the value of this fractionation technology goes well beyond what Ethanex will produce at its own plants. And that’s why the company intends to market it to existing ethanol plants to lower their production costs – in exchange for an equity interest in those plants.
And this is huge.
What ethanol producer doesn’t want to increase production while lowering operational costs?
It’s a No-brainer
Look at like this:
The ethanol industry will produce over 4.2 billion gallons of ethanol this year. And with current prices at $2.40 per gallon or higher, that’s a minimum $10.08 billion.
Now, with the integration of Ethanex’s fractionation technology...that 4.2 billion gallons becomes 4.91 billion gallons – totaling $11.78 billion.
That’s an extra $1.7 billion Ethanex’s technology could’ve added to the bottom line for 2006!
But with the renewable fuel standard increasing ethanol production to at least 7.5 billion gallons – these numbers are just going to get bigger.
At 7.5 billion gallons, you’re looking at fractionation adding an extra 1.275 billion gallons to the mix.
That’s another $3.06 billion – all from this one technology which Ethanex controls.
Now Ethanex just went public. But it didn’t opt for the big PR push that we’ve seen with so many other ethanol producers.
It doesn’t need it!
Because those on the inside...those who understand the technology angle here, are already set to push this thing up.
In fact, they’ve already started.
We saw a nice jump in stock price last week after the company announced that it had entered into a joint venture with Star Ethanol, LLC for the construction and operation of an ethanol facility in Franklin County, Illinois that will incorporate Ethanex’s fractionation technology.
The joint venture will be 85% owned by Ethanex and 15% Star Ethanol.
You see, this is what I’m talking about.
Here we have an ethanol company that can enable nearly every ethanol producer on the planet to produce more ethanol without adding a dime to additional feedstock, energy or water costs.
The fact is, it’s this kind of forward-thinking...this kind of technological breakthrough that will help ethanol become more competitive. And that’s without additional assistance from the taxpayer.
As it is, we’re already paying enough in taxes to protect our shipping lanes that allow for our continued reliance on foreign oil!!!
Yes...just one more reason embracing cleaner, domestic energy sources is a necessity.
And don’t let the current price of oil fool you either. It’s nothing more than a brief manipulation with impeccable timing.
The fact is, the ethanol industry is continuing to move forward.
The U.S. government and Wall Street are seeing to that! And companies like Ethanex...and more importantly, investors smart enough to grab shares of this thing while the stock price is still so low, are taking full advantage.
I know Green Chip Stocks investors are. Just like we’ve been doing since day one.
Even with lower oil prices affecting many renewable stocks – our total Green Chip portfolio is still up 51%!
And Ethanex – well, that’s just one more we’ll be adding to the triple-digit column in no time!