Preparing for a world in which financing will be much more difficult to come by, I have been selling companies which are likely to need financing in the next couple of years. A listing of the companies I’ve discussed so far is at the end of this entry.
My sale of Nova Biosource Fuels (AMEX:NBF) continues my general moves out of biofuels, also discussed in my entries on Pacific Ethanol and Dynamotive Energy Systems. I have long argued that electric propulsion is a superior way to power ground transport than even "Second Generation" biofuels such as cellulosic ethanol. My forays into biofuels have therefore been attempts to find companies better positioned in the industry, rather than an attempt to get exposure to the whole industry, as I have tried to do with geothermal power. Even those picks have fared poorly, however, and my review of the cash flows and balance sheets of my holdings has led me to dispose of the majority of my biofuel investments.
Nova Biosource was brought to my attention by James Kingsdale at Energy Investment Strategies. Nova’s ability to handle a wider range of biodiesel feedstocks, should protect them somewhat from a commodity squeeze arising from expensive high grade oils and low prices for diesel fuel. However, protection from a commodity squeeze is not protection from lack of new sources of financing. As of the most recent quarter, Nova had a $15M operating cash outflow for three months, with only $17.6M in current assets and $8M in current liabilities. The company has been meeting its cash flow needs with short term borrowing. Any hiccough in terms of availability of funding could put Nova between a rock and a hard place.
Other entries in this series:
- Held: UQM Technologies
- Sold: Carmanah Technologies
- Sold: Pacific Ethanol
- Sold: Dynamotive Energy Systems
- Ten stocks to buy at the bottom.
DISCLOSURE: No position.
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