March 11, 2017

Rentech's Wood Saw Hits a Knot

by Debra Fiakas CFA

Last week Rentech, Inc. (RTK:  NYSE) revealed plans to idle its wood pellet production facility in Wawa, Ontario Canada.  To operate efficiently the plant requires additional repairs and upgrades beyond the replacement of conveyors that was completed in Fall 2016.  Beside the fact that the additional repairs were not included in the regular capital budget, Rentech management has apparently determined the expenditure is not economic given profits from Wawa.  When Rentech reports financial results for the fourth quarter ending December 2016, shareholders will be treated to an asset impairment charge for the Wawa facility.

Doors Close, Windows Open (then shut again)

The demise of Wawa is symptomatic of broader issues at Rentech, which has had to reinvent itself several times as the renewable energy industry has evolved.  Rentech got its start well over a decade ago pursuing synthetic gas technologies.  The company’s Rentech Process for producing synthetic fuel was thought capable of producing synthetic fuel by gasifying coal.  In 2004, Rentech bought a natural-gas fed nitrogen fertilizer plant in East Dubuque, Illinois and laid out plans to convert it for coal feedstock.  However, by October 2011, fuel projects in Rialto, California and Natchez had to be scrapped.  The company had planned to produce drop-in synthetic fuel from landfill waste at Rialto using Rentech’s proprietary application of Fischer-Tropsch technology.  Just a few months later in March 2012, Rentech abandoned its coal-to-liquid plant and later sold its land holdings in Natchez, Mississippi.

In March 2013, Rentech shuttered its product demonstration unit located in Commerce City, Colorado and terminated research and development on advanced biofuels.  With the syngas effort behind it, Rentech quickly moved on other opportunities.  In May 2013, the company acquired Fulghum Fibres, a processor wood fiber with 32 wood chipping mills strung out across the U.S. and South America.  Rentech had its eye on the market for wood pellets to be used as a low-carbon alternative to coal feedstock in power generation plants.  Unfortunately by 2015, the company was forced to begin writing down the value of its wood pellet inventory as the realizable fell under question under evolving demand and pricing conditions.  Now those economic conditions have forced the shutdown of the Wawa wood pellet operation.

Retribution

Some of Rentech’s early strategic moves have eventually proved fortuitous.  By 2011, all the company’s revenue was from sales of fertilizer products made from natural gas at the East Dubuque, Illinois facility.   In November 2011, 39% of the fertilizer operation, the Rentech Nitrogen Partners, was sold through a public offering of its common units.  The company received $276 million net of costs that was promptly used to retire term loan.  Then in early April 2016, another fertilizer producer, CVR Partners (UAN:  NYSE) acquired all the common units for $2.67 per share, retiring the units Rentech Nitrogen Partners from public trading.  Rentech received $59.8 million in cash and 24.2 million CVR common units valued at approximately $142 million in the bargain.  Again Rentech promptly distributed cash and some of the securities to repurchase $100 million in preferred stock and retire $41.7 million in debt obligations.  Altogether Rentech received $477 million for its interests in Rentech Nitrogen Partners.  Considering that the company paid $63 million for the business in 2004, the returns have been impressive.

After all the deal making, acquisitions and divestitures, at the end of September 2016, the last balance sheet disclosed by the company, Rentech had total equity of $278.1 million.  The company has taken in $533.2 million in equity altogether, but losses over the years have accumulated to $255.1 million.  The company has used leverage over the years, but long-term debt has been reduced to $125.9 million.  The debt-to-equity ratio is now a relatively placid 0.45.

While Rentech has improved its balance sheet, its assets appear to go underutilized.  Return on assets and return on equity are both negative based on recent financial performance.  The net loss was $127.7 million or $10.42 per share on $287 million in total wood pellet sales in the twelve months ending September 2016.  Even excluding discontinued operations, net results were negative.  Indeed, positive returns from its renewable fuel operations have eluded Rentech. Only when the company was producing fertilizer did Rentech generate profits.

Disappointing operating performance appears registered in the RTK price.  Rentech equity is valued at just $20 million and its enterprise value is near $106.2 million.  Some investors might argue that at a stock price less than $1.00 per share, RKT is a bargain against its total assets of $470.1 million.  Then there is that looming Wawa asset write-down and the possibility of additional charges to reflect the demise of yet another misstep in Rentech’s travels through the renewable energy market.

Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

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.

March 06, 2017

Juhl Energy Diversifies

by Debra Fiakas CFA

Renewable energy producer Juhl Wind filed to terminate registration of its common stock and cease filing financial reports with the Securities and Exchange Commission in September 2015, but the company was not withdrawing from the wind energy industry.  Instead Juhl expanded.  Now called Juhl Energy (JUHL:  OTC/PNK), the company’s corporate website boasts of its corporate headquarters in Minnesota powered exclusively by wind and solar energy.  The company also claims the successful development of over 350 megawatts of wind power generation capacity at 25 different wind projects.  Additionally, the company has dipped its corporate toe into biomass energy and natural gas systems.

After keeping a fairly low profile over the last two years, Juhl is making headlines again. The company is developing a mixed-source project in Red Lake Falls, Minnesota that is expected to be the first commercial solar-wind power generation source in the U.S.  When construction is complete in August 2017, there will be two 2.3 megawatt wind turbines and 1.0 megawatt solar conversion capacity.

Juhl is making small, community-based energy development like the Red Lake Falls project the focus of its business strategy.  The company recently sold several of its renewable energy assets to ConEdison Development, including three operating wind projects in Minnesota and Iowa with a total of 36 megawatts generating capacity and additional interests in various wind power projects with a total of 500 megawatts capacity.
Going forward Juhl plans to focus on renewable energy projects under 20 megawatts.  The company’s standard design for mixed-source power generation from wind and solar is expected to be a key offering.  The company sees demand for smaller projects in the 5 megawatt size from rural communities, small municipalities, industrial complexes and commercial campuses.

At the time of the asset sales, management expressed optimism about the ability of the company to grow with this new, more focused strategy, as proceeds of the asset sales could be used to pay down long-term debt.  However, no details have been made public.  Investors are left to guess about Juhl’s balance sheet.  The company has not filed financial statements for two years.  The last balance sheet filed in August 2015, indicated Juhl held $1.6 million in cash and had $15.9 million in long-term and non-recourse debt.

Juhl is not entirely cut off from investors.  Besides entertaining questions from the public, until recently the company accepted investments in preferred stock in a subsidiary called Juhl Renewable Assets.  The preferred stock gave investors a stake in Juhl’s solar and wind power projects.  Those preferred shares were redeemed at par when the assets were sold to ConEdison Development.

Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

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.

March 03, 2017

Can Panasonic Produce High Efficiency Solar Modules at Tesla's Gigafactory 2 in 2017?

EDITOR'S NOTE: Yesterday, Tesla (NASD:TSLA) announced that it has no intention of using Silevo's technology at "Gigafactory 2," the former Silevo facility in Western New York, now owned by Tesla through its acquisition of SolarCity.  This makes some background on Panasonic (Whose technology Tesla plans to rely on instead) in this month's Solar Flare particularly relevant.

Panasonic recently announced that the New York Facility would be operated under the name Panasonic Eco Solutions Solar New York America (PESSNYCA?) and that equipment will be installed and production will begin by summer 2017.

In 2014 SolarCity acquired Silevo and broke ground on its New York Giga-factory promising that it would begin high volume production as early as 2016. This was an announcement doomed to retraction from the outset given that breaking ground and construction are not synonymous.

In 2015 SolarCity announced that it would produce modules in its New York facility by 2017 that would be 30% more efficient than the modules it was currently producing even though it was not producing any modules at the New York facility and Silevo was operating as a module assembler in China. Also in 2015 SolarCity leased the former Solyndra manufacturing facility in Fremont a move that at least finally (finally) got rid of the Solyndra sign and the constant reminder of this fiasco.

In 2016 SolarCity announced that the champion modules produced in Fremont by Silevo had reached 22% conversion efficiency. Note, champion efficiency and commercial efficiency are not the same thing. Given the 2015 announcement that it would increase its nonexistent module efficiency by 30%, did SolarCity mean that in 2017 it would produce modules of >28% efficiency in New York using the Silevo technology? This is both unlikely and, well, it’s more than unlikely. And now SolarCity/Tesla and Panasonic have announced that Panasonic will produce high efficiency cells and modules in New York by mid-2017. This is also unlikely.

Well, it’s more than unlikely.

Comment: Panasonic’s cost structure is not a good fit for manufacturing in the US. Given the crash dive in prices and the forces holding prices down it is difficult to see the new announcement in a positive light.

Lesson: This latest announcement may end up to be no more than an announcement but it will be repeated as progress before PESSNYCA turns out even one module. The lesson is not to put too much credence in announcements or in long company names that cry out to be acronym-ized.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here.
This article was originally published in SPV Reaserch's monthly newsletter, the Solar Flare, and is republished with permission.

February 27, 2017

Will Trump Bump, Thump, Or Dump The Renewable Fuel Pump?

Jim Lane 

Trump Reiterates Support for Ethanol, RFS” is the major headline to come out of the National Ethanol Conference in San Diego, which is the Renewable Fuels Association’s annual conflab and as usual produced a flurry of studies, keynotes and statements on the viability and importance of US ethanol to everything from American jobs to advanced American manufacturing.

The Trump headline came out of a letter sent to the delegates to the event by President Trump — which itself is a hopeful sign of support.

But did the President really offer support for the Renewable Fuel Standard? Let’s look at the letter behind the headlines.

“Rest assured that your president and this administration values the importance of renewable fuels to America’s economy and to our energy independence. As I emphasized throughout my campaign, renewable fuels are essential to America’s energy strategy,” Trump wrote.

“As important as ethanol and the Renewable Fuel Standard are to rural economies, I also know that your industry has suffered from overzealous, job-killing regulation. I am committed to reducing the regulatory burden on all businesses, and my team is looking forward to working with the Renewable Fuels Association, and many others, to identify and reform those regulations that impede growth, increase consumer costs, and eliminate good-paying jobs without providing sufficient environmental or public health benefit,” Trump added.

Hmm. There’s support for renewable fuels in there. President Trump reiterates that “renewable fuels are essential to America’s energy strategy,” but when it comes to the RFS itself, the President notes the importance of the Renewable Fuel Standard to rural communities — and then quickly pivots to a theme of identifying and reforming “those regulations that impede growth, increase consumer costs, and eliminate good-paying jobs without providing sufficient environmental or public health benefit.”

Now, the President could have written a letter to the Affordable Healthcare Society attending at the National Conference to Save Obamacare with the following:

“As important as Obamacare is to low-income people, I also know that your industry has suffered from overzealous, job-killing regulation. I am committed to reducing the regulatory burden on all businesses, and my team is looking forward to working with the Affordable Healthcare Society, and many others, to identify and reform those regulations that impede growth, increase consumer costs, and eliminate good-paying jobs without providing sufficient environmental or public health benefit.”

It sounds very supportive, but it’s a long way from a pledge to defend Obamacare. And we’ve changed nothing in the structure, just the names.

Nevertheless, the Renewable Fuels Association was grateful.

“We thank President Trump for reaffirming his support for the domestic biofuels industry and the RFS,” said RFA President and CEO Bob Dinneen. “The RFS has cleaned the air, reduced our dependence on foreign oil and boosted local economies. Donald Trump understands all this. Consumers benefit from this national policy and our industry looks forward to continuing to be the lowest cost, highest octane fuel in the world.”

Here’s the letter, below.

Trump Renewable Fuel Letter

 $42B in market impact

The RFA debuted a new study by ABF Economics. which found that the U.S. ethanol industry added $42.1 billion to the nation’s gross domestic product and supported nearly 340,000 jobs in 2016.

According to the analysis, the production and use of 15.25 billion gallons of ethanol last year also:

•contributed nearly $14.4 billion to the U.S. economy from manufacturing;

•added more than $22.5 billion in income for American households;

•generated an estimated $4.9 billion in tax revenue to the Federal Treasury and $3.6 billion in revenue to state and local governments;

•displaced 510 million barrels of imported oil, keeping $20.1 billion in the U.S. economy;

Record sales for ethanol producers

In all, it’s been a strong year for ethanol. Dinneen said in his keynote that 2016 was “a record year for production, a record year for net exports, a record year for domestic demand, and a record year for E15 sales and infrastructure build-out. It was, in short, a pretty darn good year,” said Dinneen.

Overall, he noted that the industry produced a record 15.3 billion gallons of ethanol in 2016, while supporting 74,420 direct jobs and 264,756 indirect and induced jobs across the country.

Dinneen also predicted that the Trump Administration would “stand up for American trade, and fight back against any trade distorting tariffs, such as those recently imposed by the Chinese on U.S. ethanol and dried distillers grain exports.”

The 2017 US Ethanol Outlook

How much U.S. ethanol was produced last year? What were the top U.S. ethanol export markets? What are ethanol’s environmental and octane benefits? How many states offer E15 (15 percent ethanol) blends and how many automakers warranty their vehicles for higher ethanol blends? The answer to these questions and many more is simple, says the RFA — it’s in the 2017 Ethanol Industry Outlook, and that’s here.

Shifting the Point of Obligation

One of the issues in the mix for the ethanol industry right now is a fight over “the point of obligation” in the Renewable Fuel Standard. Right now, that’s oil refineries. Carl Icahn and others have been urging the White House to shift the point of obligation to retailers and fuel distributors— and a coalition of independent oil marketers, convenience store chains, travel plazas and truckstops, and ethanol producers has assembled to fight the change.

NATSO, representing more than 1,500 travel plazas and truckstops nationwide, opined: “changing the point of obligation would hinder the program’s objective of displacing traditional fuel and replacing it with renewable substitutes to promote stable supply and prices, and inject such massive disruption and uncertainty into fuels markets that retail fuel prices will inevitably skyrocket and the incentive for fuel marketers to integrate renewable fuels into their product lines will dissipate. This will crush the very constituencies whose interests President Trump promised protect in order to benefit a narrow segment of the refining industry.”

Growth Energy delivered an economic analysis commissioned from Edgeworth Economics that identifies numerous problems associated with changing the Renewable Fuel Standard (RFS) point of obligation. Growth Energy strongly supports EPA’s proposed denial to move the point of obligation.

“Changing the point of obligation would have a disastrous impact on the industry, retailers, and consumers,” Growth Energy CEO Emily Skor said.

Shifting the burden of proof on high-ethanol blends

Also appearing this week from the The Urban Air Initiative and several partners were filed comments with the Environmental Protection Agency (EPA) that disrupts the agency’s current rationale for controlling ethanol blends under the Clean Air Act, in response to the proposed Renewables Enhancement Growth Support Rule (REGS Rule).

The proposed rule would codify EPA’s position that fuel blends with more than 15% ethanol (E16-E83) may only be used in Flex Fuel Vehicles (FFVs). UAI argues that the Clean Air Act does not forbid the use of midlevel gasoline-ethanol blends in conventional vehicles.

UAI points out that under the Clean Air Act, EPA bears the burden of showing that ethanol contributes to harmful emissions before it may limit the concentration of ethanol in fuel. The proposed rule reverses this burden of proof and subverts the intent of Congress by requiring fuel manufacturers to show that higher levels of ethanol would not harm emissions control systems.

In its comments, UAI takes on EPA’s longstanding assumption that the Clean Air Act’s “substantially similar” (sub-sim) law allows the agency to control the concentration of ethanol in gasoline. UAI argues that EPA’s interpretation of the sub-sim law is inconsistent with the clear language of the law and must change.

“We believe these comments can be potentially game changing in the way the EPA regulates clean burning ethanol,” said UAI President Dave Vander Griend.

Several other organizations joined UAI’s comments. They include the Energy Future Coalition, Clean Fuels Development Coalition, Glacial Lakes Energy, Siouxland Ethanol, ICM Inc., Nebraska Ethanol Board, National Farmers Union, South Dakota Farmers Union, Minnesota Farmers Union, Montana Farmers Union, North Dakota Farmers Union, and Wisconsin Farmers Union.

The Bottom Line

One thing you’ll note in the ethanol industry’s line of discussion — it remains the ethanol industry, only loosely allied with the renewable fuels industry as a whole. Further, we see a shift from RFA — and almost everyone else promoting renewable fuels on Capitol Hill – from discussing the greenhouse gas benefits of renewable fuels to the domestic jobs and energy security that flows from US-based fuel production.

But, that said, times are good and we’ll see about 2018.

Focal point ahead? For RFA, the focus is clearly on E15. There’s quite a bit of work to be done with engine manufacturers who might incorporate E30 blends in a new generation of engines designed to reach the 52MPG CAFE standards that are proposed for the 2020s and 2030s.

Those worthy goals are far more in the background as the ethanol industry continues to focus on a E15 tolerance that would boost the potential for ethanol blending well above 20 billion gallons.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

February 24, 2017

An In Depth Guide To Buying and Installing a Home Electric Vehicle Charging Station

Tom Konrad, Ph.D., CFA

Most plug-in vehicles (both pure electric and plug-in hybrids) come with a "level 1" charging station which allows the vehicle to be charged from a standard household outlet.  If your vehicle is a plug-in hybrid with limited electric range, or you don't drive much, this is likely all you will need.  Otherwise, you will want a "level 2" charging station. 

If you are a do-it-yourself-er and like to get into the nitty-gritty, you should read the whole article.  If you just want some quick advice about the best charging station for you, skip to the last section, "Putting It All Together."

What a Home Charging Station Does

Technically, a home charging station (also known as "Electric Vehicle Supply Equipment" or an EVSE) does not charge your car.  You car has an on-board charger which converts household alternating current to the direct current which is stored in its batteries. 

I personally just installed a charging station for my wife's new Prius Prime plug-in hybrid, and concurrently applied for a grant from New York state on behalf of the Town of Marbletown to install a commercial charging station at my town's Community Center.  This article is based on that experience and the responses a poll of 20 charging station owners I contacted through Facebook groups and PlugShare, an app that allows users to find and review charging stations, and connect with other plug-in owners.

Before You Begin

Here is the information you'll need to make your decision.

  1. Make/Model of the plug-in you want to charge.
  2. Location of the closest electric panel to your parking spot.
  3. Your vehicle's electric range (PHEVs) or the longest distance you expect to drive between charges on a regular basis (EVs)

The make and model of the plug-in let you know the capacity of the vehicle's on board charger, and the size of its battery pack.  You will need a charger powerful enough to fully recharge the battery between trips, and you will need an outlet or the charging station installed near the parking space that has the capacity to service that rate of charging.

How Fast Of A Charger Do You Need?

If you will only need to charge your car up overnight, you have a plug-in hybrid with limited electric range, or you will not drive very far between charges, you probably don't need a very fast charger.  Quick charging may only be something you need on long trips, when you can take advantage of the higher charging speeds available at most public charging stations.

Most plug-in hybrids (with the notable exception of the Volt) have limited electric range, meaning they can charge completely in less than 5 hours using the included level 1 (120V) charger plugged in to a standard household outlet.  Most owners of these vehicles will not need a level 2 charging station.

My wife's Prius Prime is a borderline example.  It has 25 miles of electric range, and can be charged completely in 5-6 hours with a level 1 charger.  I elected to install a level 2 charger for the convenience of being able to leave the factory level one charger stowed in the car at all times, and because there are times when we take the car out more than once in a day.  In this case, a quick charge between trips can make the difference between using gasoline and staying all-electric.  Plus I like gadgets.

The table below shows approximately how much electric range a typical EV that gets 3-4 miles per kWh can recover for charging stations with different capacities.  The number followed by the A is the rated current in amps, the number followed by V is the voltage.  Level 1 charging stations use 120V, while level 2 charging stations use 240V.

Charging Current
1 hour
2 hours
4 hours
6 hours
10 hours
level 1 (12A 120V)
4-5 miles
9 miles
18 miles
27 miles
45 miles
level 2 (16A 240V) 10 miles
20 miles
40 miles
60 miles
100 miles
level 2 (30A 240V)
20 miles
40 miles
80 miles
120 miles
200 miles
level 2 (40A 240V) 30 miles
60 miles
120 miles
180 miles
300 miles

The rate at which a plug-in can charge is also limited by its on-board charger.  This charger's capacity is rated in kilowatts (kW.)  The vehicle's battery pack is rated in kilowatt-hours (kWh.) A vehicle's electric range is its efficiency (usually 3 to 4 miles/kWh times the size of its battery pack.)  So a 2016 Nissan Leaf's 30kWh battery pack and approximate efficiency of 3.5 miles/kWh give it a range of about 105 miles.  The Leaf has a 6.6 kWh on-board charger, giving it a maximum rate of charge of about 10 miles of range per hour, for a complete charge in 4-5 hours using a 30A 240V level 2 charging station. 

Most plug-in hybrids have smaller on-board chargers to match their smaller battery packs, as do some pure electric vehicles with smaller battery packs/lower electric range.  Much of the information available on-line says that the Leaf has 3.3kW on-board charger, but all 8 Leaf owners who responded to my survey reported charging times that could only be achieved with a faster on-board charger.

 Below is the charger capacity for the most plug-ins on the market today, along with the size of the charger needed to take full advantage of this capacity.  Additional charging capacity is available as an option on some models. 

Table 2: Charging Capacity of Various Plug-in Vehicle Models
Charging station required for fastest possible charge Minimum Recommended Circuit
On board charger capacity

Vehicle Models

40A -level 2
50A 240V
10kW
Tesla Model S. Tesla Model X. Mercedes B-Class Electric
32A -level 2
40A 240V
7.4kW
BMW i3
30A - level 2
40A 240V
6.6kW to 7.2kW
Nissan Leaf, Chevrolet Bolt,  Ford Focus Electric, VW e-Golf, Fiat 500e, Kia Soul EV, Hyundai Ioniq, Chrysler Pacifica Plug-in Hybrid
16A - level 2
20A 240V
3kW to 3.7kW
Chevy Volt, Audi A3 eTron, BMW X5 xdrive40e, Chevrolet Spark EV, Ford C-Max/Fusion Energi, Hyundai Sonata Plug-in Hybrid, Mercedes C350, S550, GLE550e Plug-in Hybrids, Mitsubishi i-MiEV, Porsche Cayenne/Panamera S E-Hybrid, Prius Prime, Smart Electic, Volvo XC90 T8, Porsche 918 Spyder, Nissan Leaf (some early models).
10A- level 2
15A 240V
2 kW
Prius Plugin

Circuit Size

The final factor which may limit the size of the charging station you need is the capacity of the electrical circuit you will be using.  If you try to charge a car at a rate equal to or greater than the capacity of your wiring, you will flip the circuit breaker.  Unless the circuit is rated for continuous use, you should limit the charging rate to 80% of the circuit's capacity. 

A second reason for charging at slower rates is efficiency.  The electricity lost (called line loss) is proportional to the square of the current (the A or amps number in the charging rate) and  inversely proportional to the capacity of the wiring.  Line losses also increase with temperature, and the lost energy becomes heat in the wiring, further reducing efficiency.  Line losses become more significant the longer the wiring between your main electrical panel and your charging station.  With properly sized wiring, these losses will usually be less than 2 percent of the electricity used.  But 2% can add up given the large electricity consumption of EVs.  35 miles of driving a day in a typical EV uses 3650 kWh over a year.  Two percent of that is 73kWh, or two to three days worth of a typical household's electricity usage.

Most charging stations can be set to limit charging speed to less than their maximum capacity.  Many plug-in vehicles also have the capacity to limit their charging rates and charging times.  This feature can be used both to keep actual charging rates within the capacity of the circuit, as well as to reduce charging rates further in order to reduce line losses.  Choosing specific charging times (either with your vehicle or some charging stations) can also save you money because of preferential rates from your utility.

If you have to install a new 240V circuit to service your charging station, I recommend installing at least a 50A, 240V circuit, or even a 100A, 240V subpanel for your garage if you can.  Reasonably affordable EVs with large battery packs and powerful on-board chargers such as Tesla Model 3 are likely to be widely available in the next few years.  You'll want the charging capacity to accommodate your new, long range EV.  If you have a two car household, you may also want the ability to charge two cars at the same time.

Higher capacity wiring will cost you more today, but the extra cost will be a fraction of the cost of the electrical work.  Upgrading your wiring at a later date later would involve doing everything over again.  Even if you never need a more powerful charging station, the reduced line losses will help defray the extra cost over time. 

Should You Oversize Your Charging Station?

You may find a charging station with the features you want but a higher capacity than you need.  If the rated power of your charging station exceeds 80% of the capacity of your circuit, make sure that you are buying one that has the ability to limit the charging current.

One good reason to oversize your charging station is durability, which my poll respondents felt was the single most important feature. Since no brands have a long history, it's hard to judge which brands are likely to be the most durable.  However, it is a good bet that a charging station rated to supply 40 amps of current is likely to last a long time if it is only used to charge cars at 15 amps.

Features

I included a question about features in my poll.  Here are the ones my respondents found most important:

ESVE features.png

Durability, a long charging cord, charging speed, cost, and being outdoor rated were among the most valued features.  One I neglected to ask about was the charging station having a plug as opposed to being hardwired.  Charging stations with plugs don't cost much more than those without, but even if they are too large to be truly portable, it makes them easier to take with you if you move. 

Some features may have gotten lower ratings in my poll because they are only useful to some users, even if they are essential to the users who want them. 

  • An outdoor rating will be essential if your parking space is outdoors, but it will be irrelevant if you park in a garage. 
  • The ability to control charging times will be important if your car does not have this feature itself- but only if your electrical utility gives rewards or preferential rates for avoiding charging during peak demand.  That said, utility rates for plug-ins are changing, and you may need this feature tomorrow even if it is superfluous today.

Safety Certification

Intertek and Underwriter's Laboratories are Nationally Recognized Testing Laboratories provide safety certification for EV charging stations.  If your charging station has one or both of these safety certifications (the ETL or UL logos, respectively), you can be assured that the product line has undergone rigorous (and expensive) safety testing.  One of these certifications will be required for a direct-wired EV Charging station to pass an electrical inspection.  However, and EV charging station with a plug will only require an electrical inspection for the wiring to the outlet.  Safety certification is also required by most government rebate programs for electric vehicle chargers.

Buying a charging station without such a safety certification does not mean it is unsafe.  In fact, charging stations are primarily safety devices to ensure that the vehicle's on-board charger can access household current safely.  I did an internet search, and only found two reports of fires that could possibly be linked to electric vehicle charging after trying several variations on my search terms.  In contrast, a search for "hoverboard fire" quickly produces reports of "half a million" fires and many videos. 

Of the two possible EV charging station fire reports I found, one could not be directly linked to the charging station in question (a UL listed Siemens model.)  The other fire started near a home charging station of unknown brand which had been installed by the owner.  Since we don't know the brand of the charging station, we can't know if it had a safety certification, but improper installation could easily have caused the fire.

Brands

While few people have more than a couple years experience using charging stations, my poll respondents had this to say about the following brands:

Top Recommended Brands:

  • ClipperCreek: Recommended by more respondents than any other brand.
  • JuiceBox:  Probably the best options in terms of power and features for the price.
  • ChargePoint Home
  • Bosch
  • Tesla
  • Siemens/Versicharge
  • GE Durastation

Mixed Reviews:

  • Aerovironment (some re-branded by Nissan): Expensive, but a good warranty. One (of four) had it break right before the warranty expired.  He was unimpressed with their customer service, but said he thought service had gotten better in recent years.
  • Audi: Expensive to install, but easy to use.

My Top Picks

  • Duosida 16A: $289 on Amazon
    A basic portable charging station with a long cord and a great price.  Not designed for wall mounting.  Not safety certified.
  • ClipperCreek 16A, 24A, 32A, and 40A: $402, $538, $601, and $895 on Amazon.
    A well-rated charging station with a long cord and a reputable brand.
  • GE DuraStation 30A: $397 on HomeDepot.com
    A powerful, no-frills charging station from a recognized brand. Maximum current can be adjusted to 30A, 24A, 16A, or 12A using a jumper.
  • JuiceBox 40A: $499 at eMotorWerks
    The least expensive 40A charging station available.  Maximum current can be set by adjusting trim-pots inside the enclosure.  Not safety certified, the company says they expect UL certification in March 2017.
  • JuiceBox Pro 40A and Pro 75A: $599 and $899 at eMotorWerks
    Full-featured, high-power charging stations at a low price.  Wi-fi enabled. Can be adjusted with a smartphone app to charge at any lower current required. Not safety certified, the company says they expect UL certification in March 2017.

(prices include shipping)

I had personal experience with eMotorWerks (JuiceBox) support through eBay, where I bought a refurbished JuiceBox Pro 40.  I found them very slow to respond, and had not reached a resolution after a week.  But given that mine was a cut-price refurbished unit (and their prices are amazing to begin with) I still give the brand my highest recommendation. 

I contacted eMotorWerks and asked them to respond to the previous paragraph.  Here is their response:

"We appreciate the endorsement of our products, and are working diligently to fully staff and train our support team. Our sales have nearly doubled at the end of 2016 due to accelerated growth in EV sales (record 25,000 EVs sold in December, nearly twice the previous year) and successful programs we recently launched with our utility and Community Choice Aggregation partners. We're working to further grow our support team and deliver top-notch service to all our customers."

After the first version of this article was published, eMotorWerks solved my problem to my complete satisfaction.

If you want top-notch service, ClipperCreek and ChargePoint Home have good reputations according to my poll respondents.  I do not know if growth is straining their customer service departments.  You will pay $100-$400 extra for similar models from these vendors compared to eMotorWerks, but you may consider the extra expense worth it, especially if JuiceBox has not yet received its UL safety certification when you care buying your charging station and this concerns you.

Putting It All Together

Although this is a rather technical article, choosing a home charging station does not have to be complex.  Here are the essential steps:

  1. If you do not drive much or your vehicle's electric range is less than 20 miles, a level 2 charging station is probably not worth the cost.  Try using just the factory level one charger for a while.  Otherwise:
  2. Use Table 2 to determine the charging station capacity your vehicle can use.
  3. If you are doing your own electrical work, go back and read the whole article.  Otherwise:
  4. Purchase a charging station from my top picks (above) with a rated capacity at least as high as given in Table 2. If you are relying on a government rebate program to pay for part of the cost, make sure that the model you choose qualifies for the program.
  5. Have an electrician or three give you quotes to install a "240 volt(V) 50 amp(A)" circuit to your parking space and install your charging station.  You can also ask them for a quote to install the minimum recommended circuit for your vehicle from Table 2, but the savings are not likely to be significant.  You will probably be better off with a 240V 50A circuit in the long run. 
  6. Have your electrician install the charging station, and adjust the charging station's maximum current to not overload the circuit. The adjustment should not be needed unless you opted for the cheaper electrical circuit.
  7. Charge your car quickly at home.

The prices and specific models mentioned in this article are based on what was available at the start of 2017, and will change.  The advice about charging station and circuit sizing should be more durable.

Giving Back

After you install your charger, I encourage you to let the occasional plug-in driver charge at your home.  You can do this with PlugShare.com and the PlugShare app (Android, iTunes) which is a great resource for finding both public charging stations and plug-in owners like yourself who want to may electric driving as worry-free as possible by extending the network of public stations.

My own charger is available on the PlugShare, and I'm looking forward to meeting the first plug-in driver I can help with a charge.

February 22, 2017

Alterra Power: Deep Geothermal

by Debra Fiakas CFA

Last week, one of the leaders in a development consortium, Iceland’s largest privately owned energy generator HS Orka hf, announced the completion of a project to prove the merits of deeper geothermal wells.  The project in the Reykjanes Peninsula in southern Iceland reached 4,659 meters depth in January 2017, where temperatures measured 427 degrees Centigrade and fluid pressure was 340 bars.  By all accounts the project was successful, suggesting that deep wells could a cost effective approach to geothermal energy.

The drilling program was mentioned in early December 2015 a recent post “Hot Rocks, Warm Stock,” which touched on the option of investing in a larger company, Statoil (STL: SW or STO:  NYSE), for a stake in geothermal technologies for renewable energy.   Unfortunately, a position in Statoil brings with it the noise of Statoil’s fossil fuel interests.  Fortunately, for the more environmentally-conscious investor, there is an alternative.

HS Orka is majority owned by Alterra Power (AXY:  TO or MGMXF: OTC) a Canada-based geothermal power generation company.  Alterra has interests in eight different power facilities totaling 825 megawatts of generation capacity using hydro, wind, geothermal and solar technologies.  The assets are located in Texas and Indiana in the U.S., British Columbia in Canada and, of course, the HS Orka asset in Iceland. Alterra’s development pipeline includes additional geothermal projects in Iceland through HS Orka, in Peru through a local Energy Development Corporation, and in Italy through Graziella Green Power.  Notably HS Orka is also planning new hydro-electric projects, in which Alterra will participate.  No doubt the knowledge gained during the recently completed deep well drilling project will boost HS Orka’s geothermal development as well.

Alterra Power reported $42.9 million in total sales in the first nine months of the year 2016, providing $2.7 million in net income or $0.06 per share.  Since there is considerable noise in reported income from charges and benefits through the shifting values of equity derivatives, the financial fortunes of this company are best viewed from the perspective of cash earnings.  Operations generated $15.5 million in cash in the first nine months of 2016, representing sales-to-cash conversion rate of 33.8%.  This compares favorably to the conversion rate in the previous year of 28.0%, and suggests Alterra can consistently generate cash for future investments.

Internal cash resources have not been enough for Alterra’s ambitious development plans.  The company had $273.6 million in long-term debt on the balance sheet at the end of September 2016.  The debt-to-equity ratio was 1.15, suggesting there is potential for additional leverage if the company needs to move aggressively in its renewable energy markets.

Alterra’s common stock trades on the Toronto exchange under the symbol AXY, but investors can also gain access through the Over-the-Counter Pink Sheets where the stock is quoted as MGMXF.  The shares have traded off in recent weeks providing a compelling entry point for shareholders with the lengthy investor horizon and risk tolerance for smaller companies.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

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.

February 19, 2017

A Better Battery Or Bust

by Debra Fiakas CFA

Last month BioSolar (BSRC:  OTC/PK) reported positive test results for its proprietary energy storage technology.  The company is developing an alternative anode material for lithium ion batteries using silicon-carbon materials.  BioSolar’s engineers are targeting dramatic improvement in anode performance and equally impressive reductions in cost.  If they are successful, it could mean longer lithium ion battery life, greater capacity and shorter charging time  -  the dreams of every manufacturer with an electronic product.

Most lithium ion batteries rely on graphite for the battery anode.  However, silicon anodes could offer as much as ten times more capacity as anodes made with graphite.  Unfortunately, silicon has a few downsides that make it unreliable as well as unaffordable.  BioSolar is working to overcome those downsides and make silicon anodes an affordable alternative by using a silicon alloy.

Biosolar is also working on the other important battery component  -  the cathode.  Existing lithium ion batteries are limited by the capacity of the cathode.  The company has developed a new cathode made from a conductive polymer that can withstand higher charge-discharge cycles.  This would extend the life of the lithium ion battery and lower the overall cost of operation.  In June 2017, the company filed an application for patent protection of its proprietary process and material for high capacity cathodes.

The company is not alone in the quest for a better lithium ion battery.  There are others experimenting with polymers and silicon-based materials for lithium ion energy storage.  For example, researchers at the University of Leeds in the United Kingdom, Lawrence Berkeley National Laboratory in California, Wuhan University of Technology in China, and Pacific Northwest National Laboratory in Washington are just four of several research and development groups publishing papers on their experiments with conductive polymers.  The activity could be a source of competition, support or distraction for BioSolar.  For example, the University of Leeds has licensed its technology to privately held Polystor Energy Corporation in the U.S., which planned to commercialize the Leeds polymer gel for use as the electrolyte in a lithium ion battery.  While Polystor would not have competed against BioSolar's anode or cathode materials, its progress or lack of progress could have an impact on investors' view of polymer technology in the energy storage sector.

BioSolar’s research and development efforts are led by its Chief Technology Officer, Dr. Stanley Levy.  With a dozen patents in his own name, Levy has been recognized by his peers for technical work on plastics and film development.  His prior experience includes stints at DuPont, Global Solar and Solar Integrated Technologies.

Besides the mechanical engineering background of Levy, BioSolar’s chief executive officer, David Lee, brings electrical engineering education and experience to team.  Lee founded BioSolar after working in various engineering positions at the electronics, space and defense units of TRW as well as management roles at RF-Link Technology, Inc. and Applied Reasoning, Inc.  A plus for BioSolar is Lee’s time in the trenches in marketing and sales, which will be needed to get the company’s technology turned into marketable products.

As a developmental stage company BioSolar has no revenue.  Its operations are limited to managing sponsored research activities.  BioSolar has received support for its research activities from the University of California at Santa Barbara.  For the rest of its work the company relies on cash resources to support its development plans.  Operating expenses have been near $600,000 per quarter.  One of the company’s most significant expenses is a research arrangement with North Carolina Agriculture and Technical State University, which is conducting tests on BioSolar’s polymer and silicon-alloy materials.  

With only $244,776 in its bank account at the end of September 2016, any investor considering a position in BSRC might take pause.   Since the close of the September quarter the company entered into an arrangement for an unsecured convertible promissory note for up to $500,000.    Nonetheless, expect more capital raising efforts involving dilutive securities of some kind or another.  There is really no other way to entice investors to an early stage company than to offer a piece of the pie.  The company has not yet found sponsorship by a large investor or strategic partner, so capital raising activities appear to be limited to individual investors.

For investors with no interest in a private placement, there are shares quoted on the Over-the-Counter market.   At a nickel, the shares are price like options on management’s ability to reach the development milestone before running out of money.  It is a high risk proposition, but one that could yield exceptional returns if BioSolar is successful in getting its materials into a working prototype battery and the market recognizes some value the accomplishment.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

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.

February 16, 2017

Why We Can't Take Our Eyes Off Gevo

Jim Lane 

So, feel the bioeconomy backbeat and let the music flow. AY-YI YI-YA AAAY, Gevo (GEVO) just can’t stop dancin’.

(Whoops, that was Becky G‘s Can’t Stop Dancin’, not Gevo’s.)

But there’s something so cool in that technology that we can’t take our eyes off the company and its progress, even though looking at the balance sheet can feel like watching a car crash in slow motion. This week, Gevo executed a series of moves including signing up its first direct customer for hydrocarbons for the proposed expansion of its Luverne, Minnesota plant. The highlight was a five-year offtake agreement with Haltermann Carless, ETS Racing Fuels and EOS.

Let’s look into that.

In the first phase, HCS will purchase $2-$3 million worth of isooctane produced at Gevo’s demonstration hydrocarbons plant located in Silsbee, Texas. This first phase is expected to commence in 2017 and would continue until completion of Gevo’s future, large-scale commercial hydrocarbon plant, which is likely to be built at Gevo’s existing isobutanol production facility located in Luverne, Minnesota.

In the second phase, HCS will agree to purchase approximately 300,000 to 400,000 gallons of isooctane per year under a five-year offtake agreement. Gevo would supply this isooctane from its first large-scale commercial hydrocarbons facility, which is likely to be built at Gevo’s existing isobutanol production facility located in Luverne, Minnesota.

The LOI establishes a selling price that is expected to allow for an appropriate level of return on the capital required to build out Gevo’s existing production facility in Luverne, Minnesota.

What’s HCS up to? They’ll market and distribute Gevo’s products globally on a non-exclusive basis, and the intent of the two companies is to establish further offtake arrangements for other products such as Gevo’s alcohol-to-jet fuel, also known as ATJ, and its isobutanol.

Reaction from the principals

“Haltermann Carless and HCS will serve as a major and substantial offtaker of Gevo’s renewable isooctane from Gevo’s demonstration plant and a vital offtaker from Gevo’s first commercial hydrocarbon plant. Gevo and HCS agree to evaluate options to make the partnership most impactful and provide maximum credibility for Gevo’s next generation technology,” said Henrik Krüpper, Chief Sales Officer and member of the HCS Group GmbH’s Executive Committee.

“We are very pleased to establish this commercial relationship with HCS Holding, which is world renowned in the industry for the high quality of its performance fuels. We expect that they will be an important customer and partner for Gevo,” said Dr. Patrick Gruber, Gevo’s Chief Executive Officer.

“When we produce ATJ, we also produce other products such as isooctane and isooctene. We believe that a binding offtake agreement with HCS Holding is one more piece of the puzzle to validate our case for expanding the Luverne plant,” continued Dr. Gruber.

The Ritual Massacre of the Shareholders

And, there has also been the advanced bioeconomy’s annual ritual of the Reorganization of the Debt and the Massacre of the Shareholders.

These rituals are such a fixture nowadays at some of the most extravagantly interesting technology companies that you’d think there’d be a painting of the scene by Correggio hanging in the Louvre, adjacent to the Assumption of the Virgin.

Imagine: The frightened shareholders in the tumbrils, the sad but determined executive team with a hang-dog “well, we have to do something” look, the debt-holder looking like Calvin Coolidge saying “well, they hired the money, didn’t they?”, while somewhere in the background a thousand points of light representing flared natural gas in the Bakken dump wisps of CO2 into the heavens, and an Angel of the Lord weeps in heaven, holding a tablet inscribed “how renewable fuels could save the planet”.

Back to reality, Gevo raised $11.87 million in a 6.25 million share offering, and given that the company recently executed a 1-20 stock split, it’s like more than 120 million of the old shares suddenly flooded the market.

$1.78 million of the proceeds go immediately to Whitebox, a senior debt holder, and the company will be paying down another $8 million in debt between now and mid-June, which means that, at the end of the day, the entire share offering was essentially a means by which Gevo converted roughly $10 million in debt to equity, as it moves to reduce its current $28 million debt load with Whitebox and begin to assemble a balance sheet that supports expansion of the company’s Luverne plant to make ATJ renewable jet fuel and hydrocarbons for the likes of HCS.

The Gevo dilemma

Of course, the question that hangs over the enterprise is that — now that Gevo has developed a stable technology for making isobutanol and has proven it out at Luverne, and developed a demo-scale technology for making renewable hydrocarbons at its Silsbee, Texas plant — how is it going to finance a business plan? That is, finance the construction of an expanded plant that can make enough molecules at enough scale to a) make a difference in the world and b) rescue Gevo from the financial trough into which it has fallen.

Since money is unlikely to fall from the sky like manna from heaven, the likely solution is an offtaker who steps forward out of the desire for the product.

We suspect the inflection point might be renewable jet fuel.

After all, airlines have seen enough pressure on their sustainability goals from regulators, have seen enough shaking heads when it comes to the prospects for a solar plane any time in the next 50 years, and enough companies that can produce jet fuel decide to make renewable diesel. Airlines and the companies in their supply chain have figured out that there’s little hope that, on the numbers, anyone is going to be supplying jet fuel so long as the California Low Carbon Fuel Standard offers big support for diesel and nothing for jet.

And they have also calculated that the technology case for making $3 renewable jet fuel is pretty good right now, and it might be time to lock in some long-term supply contracts and some long-term feedstock contracts.

Yes, airlines are enjoying low fuel prices now, but someone has to ask how long the public will permit concentrated amounts of CO2 to be vented at 35,000 feet, where it can do some damage — without extracting a carbon fee for skyfill.

After all, everyone pays for landfill. Just try and dump some garbage without paying a municipal fee. Landfill fees didn’t arrive with the Garden of Eden — someone thought them up when the public got good and tired of free and open dumping.

When a carbon fee arrives for skyfill — and there’s no certainty of it but history argues that it will — those airlines that have access to renewable fuels will have such a built-in price advantage that it’s quite difficult to see how the other airlines will ever be able to afford new jets — which cause balance-sheet woes for very large enterprises, in their own right, enough to make the Reorganization of the Debt and the Massacre of the Shareholders a ritual that a lot of companies might want to send a representative to the Louvre one day to see.

Gevo’s sufferings might be a harbinger of the suffering meted out to a lot of companies who bet against the public appetite for making polluters pay, once they can really smell the garbage wafting across every nostril back in town.



Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

February 15, 2017

Bioplastics Maker Avantium's IPO Plans

Jim Lane

Here’s our 10-minute version of the filing, slightly re-organized to make sense to Earthlings instead of aliens from the Planet Prospectus.

In the Netherlands, bioplastics maker Avantium is planning an initial public offering and listing of all shares on Euronext Amsterdam and Euronext Brussels. The company expects to raise up to €100 million (USD$106 million) and complete the offering by the end of the current quarter. More than half of the offering has already been secured via commitments from cornerstone investors.

Avantium’s YXY technology converts plant-based sugar into chemicals and plastics, including 2,5-furandicarboxylic acid, a precursor to the promising bioplastic polyethylene furanoate. Approximately €65–€75 million of the proceeds will be used to help fund the company’s first world-scale plant, a 50,000 tons per year FDCA production unit planned for Antwerp as part of a joint venture with BASF. The rest of the funds will be used to build pilot plants for the company’s Zambezi and Mekong renewable chemicals projects, as well general corporate purposes.

“With the commercialization of the YXY technology and other projects entering the pilot plant stage, access to equity capital markets will be the most logical step to effectively support our strategy and our ambitious plans for growth,” says Tom van Aken, Avantium CEO. “We look forward to the opportunities a public listing can bring.”

We Plan to Raise Gobs of Money

From the Filing: “Avantium aims to raise up to €100 million in gross proceeds from the Offering to support the YXY technology business and the other renewable chemistries projects.

The Company anticipates to use €65-75 million of the net proceeds of the Offering for the funding of the Joint Venture, enabling it to construct and operate the reference plant for the commercialization of the YXY technology.

Our Big Bright Green YXY Machine

From the Filing: “Avantium develops ground-breaking proprietary chemical technologies and production processes to convert biobased feedstock into high-performing, cost-competitive and sustainable products.”

“In 2011, Avantium was the first company to build an FDCA pilot plant with a production capacity of 15 tons FDCA per annum. This pilot plant enabled Avantium to test PEF through its partners and to continue its process development efforts to improve the economics of the process and strengthen its engineering package in preparation for the scale up to commercial and industrial scale.”

I want to say one word to you. Just one word. Are you listening? Plastics.

From the Filing: “Significant market opportunity driven by increasing demand for renewable chemicals used as building blocks for materials such as plastic bottles for beverages, films for food packaging and electronics, catalyzed for textiles, coatings and engineering plastics.”

With 311 million tons produced in 2014, plastics are essential materials in people’s everyday lives. This number is expected to double in the next 20 years and increase to approximately 1 billion tons by 2050. Rapidly increasing consumption, together with climate change concerns and the increasing demand for renewable, sustainable products and a circular economy, puts pressure on the use of fossil resources. Avantium’s market opportunity is driven by the increasing demand for renewable chemicals and materials, and increasing consciousness around the sustainability of products and production methods.

“The demand for renewable and sustainable materials is developing fast. Avantium is a pioneer in the area of renewable chemistry with a proven track record of developing advanced chemical catalyzed production processes. Since 2006, Avantium has been a leader in the development of novel chemical catalytic processes for the production of FDCA and PEF, derived from biomass feedstock. PEF is strongly positioned to become the next generation packaging material, based on its unique set of properties. It is a 100% biobased, 100% recyclable plastic with superior performance properties, making PEF an attractive alternative to PET and other packaging materials such as aluminum, glass and cartons.

We’re Not a One-Trick Pony

From the Filing: “Avantium has a leading position in providing advanced catalysis R&D services & systems to companies in the oil, gas, chemical and renewable industry, while simultaneously commercializing the YXY technology for making biobased chemicals and bioplastics.

“Besides the YXY technology which is deployed in the Joint Venture, two other projects have reached or are entering pilot plant stage – project Mekong and project Zambezi. Project Mekong is a one- step process for the production of MEG from glucose. Biobased MEG is chemically identical to fossil- based MEG. Today’s market for MEG is predominantly fossil-based and represents an annual turnover of over US$25 billion. Project Zambezi is a cost-effective process for the production of high-purity glucose from non-food biomass that can be converted into biobased chemicals. Avantium intends to start the construction of dedicated pilot plants for these projects in the next two years. Avantium’s project Volta comprises the direct use of electricity in chemical processes to convert CO2 into sustainable chemical building blocks. Avantium is working on electrochemistry since 2013. To further enhance the technology, Avantium acquired all assets and patents of Liquid Light in December 2016. Liquid Light’s assets have been transferred to Amsterdam, and are currently being integrated in Avantium’s laboratories.”

We Are the World

From the Filing: “Avantium has formed business collaborations with over 20 partners, including The Coca-Cola Company, the world’s leading manufacturer, marketer and distributor of non-alcoholic drink concentrates and syrups with more than 500 brands globally; Danone, a leading global food company; ALPLA, one of the world’s leading companies in the packaging solutions sector; and Mitsui, one of the largest international companies in Japan. The Joint Venture will continue the activities initiated by Avantium with Toyobo, one of Japan’s top producers of fibers and textiles, to cooperate in boosting PEF polymerization for a range of uses.”

We Have Offtake A-Go-Go

From the Filing: “Able to attract renowned global partners throughout the entire value chain, such as The Coca- Cola Company, Danone, Toyobo, ALPLA and Mitsui.”

From the Department of You Won’t Be Left Hanging

From the Filing: “Avantium has obtained significant commitments from reputable cornerstone investors, which also includes a number of existing shareholders and convertible bondholders; as a result, more than half of the Offering has been secured, assuming €100 million gross proceeds from the Offering…Provided there is sufficient demand, it is intended to allocate at least 10% of the shares to retail investors in the Netherlands and Belgium.”

The First Commercial: Thunderbirds are Go!

From the Filing: “Synvina, the joint venture with BASF, established on 30 November 2016 (the “Joint Venture”), intends to commercialize the YXY technology and build the first commercial scale FDCA (2,5- furandicarboxylic acid) reference plant in Antwerp with capacity of up to 50,000 tons per annum, to enable a global market pull for biobased materials from industry leaders.”

“The Joint Venture intends to build and operate the first commercial reference plant for the production of FDCA, the key building block for producing polyesters, such as polyethylene- furanoate (PEF), a 100% biobased and fully recyclable plastic. PEF has improved barrier properties for gasses like carbon dioxide and oxygen, leading to longer shelf life of packaged products. It also offers a higher mechanical strength, thus thinner PEF packaging can be produced and fewer resources are required. The end markets for packaging materials made of PEF represent an aggregate annual turnover of over US$200 billion.

We’ll Spending Your Money Making Stuff, not on Making Technology that Will Make Stuff Someday

From the Filing: “The remainder of the proceeds of the Offering will be used to build pilot plants for the two most advanced development projects in the renewable chemistries business (project Zambezi and project Mekong) and to operate these plants up to commercial stage, for other projects in renewable chemistries and for general corporate purposes in line with the Company’s business and strategy.”

We Get Along so Well, we could give lessons to the Trump Administration

From the Filing: “Proven 16-year track record in providing advanced R&D services and systems to a strong base of global blue-chip customers in the chemical, refinery and energy sector. Led by a committed, entrepreneurial and strong management team combining deep sector knowledge and industry experience. Avantium is led by Tom van Aken (Chief Executive Officer) and Frank Roerink (Chief Financial Officer). Van Aken joined Avantium in 2002 as Vice-President of Business Development and became Chief Executive Officer in 2005. He has led the company through the transition to become a focused chemical and cleantech company by divesting its pharmaceutical business and by the development of the YXY technology. Prior to joining Avantium, Van Aken held various commercial positions at DSM, primarily in DSM’s fine chemicals and life sciences business in the United States and the Netherlands. Roerink has been CFO at Avantium since 2007. Prior to that he held several positions at Unilever for over thirteen years. Lastly as Director of Mergers & Acquisitions for Unilever, prior to that he was Finance Director at Unilever Bestfoods in the United States. The Executive Board is supported by the Management Team members, Gert-Jan Gruter (Chief Technology Officer), Steven Olivier (Managing Director Catalysis) and Carmen Portocarero (General Counsel).

Yep, We Use Protection

From the Filing: “The Catalysis technology is protected by a portfolio of 19 patent families. Avantium has extensive experience and expertise in the high tech field of catalysis R&D, which generates a high level of repeat customers and the stability and profitability of its Catalysis business. As a first mover, Avantium has been able to build a strong and extensive IP portfolio: the YXY technology is currently protected by 38 active patent families covering each step of the production processes of FDCA, PEF and selected PEF applications in bottles, fiber and film.

We’ll get this done next month, or my name’s Vinod Khosla

From the Filing: “The Offering is envisaged to take place before the end of the first quarter of 2017, subject to market conditions. If and when the Offering is launched, further details will be included in the prospectus.”

The Bottom Line

It’s been nearly 4 years since the BioAmber IPO closed out a wave of industrial biotech initial listings — we’ve had some smaller flotations since then, but nothing like €100M since the days of Solazyme (SZYM) and Amyris (AMRS), in this space. Will the window open and at a good price. Stand by — but if offtake, well-financed commercial partners for a JV, share-buying commitments from partners and a hot technology making an uber-hot product set count for much with investors, this IPO ought to sail through. Stand by.

The Digest has one of those Multi-Slide Guides

Yep, we have the skinny on Avantium, here.

https://intended-listing.avantium.com/wp-content/uploads/2017/02/13FEB17_Avantium-announces-intention-to-launch-Initial-Public-Offering-and-listing-on-Euronext-Amsterdam-and-Euronext-Brussels.pdf

Additional reporting by Rebecca Coons, based on an earlier report that appeared in Nuu.

Jim Lane is editor of Biofuels Digest., where this article was originally published.  Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

The Republican-Proposed Carbon Tax

by Noah Kaufman

A group of prominent conservative Republicans—including former Secretary of State James Baker III, former Treasury Secretary Hank Paulson, former Secretary of State George Shultz and former Walmart Chairman Rob Walton—met with key members of the Trump administration on Wednesday about their proposal to tax carbon dioxide emissions and return the proceeds to the American people. Such an economy-wide tax on carbon dioxide could enable the United States to achieve its international emissions targets with better economic outcomes than under a purely regulatory approach.

Attributes of the Republican Carbon Tax Proposal

While the details on the plan from the newly formed Carbon Leadership Coalition (CLC) are considerably less specific than a legislative proposal, this is a well-thought-out and ambitious plan that makes a good-faith effort at addressing many of the difficult choices on the path to enacting a carbon tax. Consider the following attributes:

  • Significantly reduces emissions. The group proposes a tax that would start at $40 per ton of carbon dioxide emissions from fossil fuels and increase over time. A paper released by CLC provides a useful summary of recent modeling efforts on the effects of a carbon tax on emissions. It concludes that the CLC proposal (including the effects of rolling back some regulations) would reduce greenhouse gas emissions roughly 28 percent below 2005 levels by 2025, the upper end of the United States’ commitment under the Paris Agreement on climate change. It also implicitly recognizes concerns of the environmental community by calling for a rate that is high enough to provide greater emissions reductions than regulations already in place. WRI research shows that models tend to underestimate the emissions reductions from a carbon tax, so it seems likely that the United States would achieve its 2025 emissions target under this proposal.

  • Benefits for poor and middle classes. As WRI research has shown, a carbon tax’s effects on household finances are most heavily dependent on how the revenue is used. According to the CLC proposal, all tax proceeds would be returned to the American people on an equal basis via quarterly dividend checks. CLC chose this approach because of its transparency and because the longevity of the policy would be “secured by the popularity of dividends.” In addition, this tax-and-dividend approach would be highly beneficial to poor and middle-class households, who would receive far more in dividends than they would spend on the tax. (Of course, these households—and all households—would also benefit from cleaner air and reduced risks of climate change.) High-income households, on the other hand, would be better off if the revenue were used in other ways, such as to lower other taxes.

  • Addresses concerns about U.S. competitiveness and international action. A core pillar of the CLC proposal is a “border carbon adjustment.” Exports to countries without comparable policies would receive rebates for carbon taxes paid, while imports from such countries would face fees contingent on the carbon content of their products. The border carbon adjustment would protect the competitiveness of energy-intensive companies and those that are subject to foreign competition. It would also encourage all U.S. trading partners to adopt similarly stringent policies, which is necessary to achieve meaningful global progress on climate change.

  • Cost-effectively reduces emissions. As economists will tell you, putting a price on emissions is the most cost-effective way to reduce them because it encourages producers and consumers to seek out the lowest-cost opportunities to reduce their emissions. Economic models show that for decarbonizing the U.S. economy, economic outcomes are far better with a carbon tax as the centerpiece of policy efforts as compared to a strictly regulatory approach.

  • Offers potential for bipartisan support. Transforming to a low-carbon economy is an objective that Democrats widely support, but it will require new and comprehensive legislation that attracts Republican support as well. Prominent Republicans are supportive of the CLC proposal because it embraces both free markets and limited government with its plan to eliminate regulations that are no longer necessary with the existence of the carbon tax (“Less Government, Less Pollution,” as CLC puts it).

More Details Eventually Needed

The CLC proposal will need to gain support from policymakers currently in office for it to become proposed legislation. If it does, important details will need to be filled in. Examples include:

  • Details of the regulatory reform. The CLC plan involves replacing much of EPA’s regulatory authority over carbon dioxide emissions. Environmental groups are likely to push for mechanisms to ensure that the emissions reductions needed to meet climate goals are sufficiently certain; the Environmental Defense Fund recently described options for combining such “Environmental Integrity Mechanisms” with a carbon tax. In addition, the policy should avoid eliminating regulations that are not duplicative with a carbon tax. For example, WRI research has explained why supporting the research, development and deployment of the next generation of low-carbon technologies will lead to more cost-effective decarbonization in the long-run.

  • Support for coal communities. While the near-term effects of a carbon tax on the vast majority of American households and businesses would be small, communities of coal industry workers (and others whose livelihoods are tied to a high-carbon economy) are already struggling. In order to avoid making the situation worse, certain policy measures must be in place to help rebuild these economies. Whether by allocating tax revenues to economic development in these communities (just a small sliver of the tax revenue could provide enormous help) or though separate legislation, support for workers in the fossil fuel industry should be a key consideration in designing our country’s decarbonization strategy.

There is strong support for carbon taxes among the American public and in the business community, including more than two-thirds of all Americans and more than half of Republicans. Nearly 40 countries and more than 20 sub-national jurisdictions are now pricing carbon.

Despite this support, political gridlock and the powerful corporate opposition have obstructed policy action at the U.S. federal level. Overcoming these entrenched interests will require courageous politicians. This proposal deserves serious attention from the Trump administration and policymakers on both sides of the aisle.

Noah Kaufman is an economist for the U.S. Climate Initiative  at the World Resources Institute.  The focus of his work is on carbon pricing and other market-based climate change solutions.

February 08, 2017

What Good Is Shareholder Advocacy?

By Marc Gunther. 

Last week, ExxonMobil added Susan Avery, a physicist, atmospheric scientist and former president of the Woods Hole Oceanographic Institutions, to its board of directors.

Shareholder advocates, led by the Interfaith Center on Corporate Responsibility (ICCR), which has been organizing shareholder campaigns at ExxonMobil for nearly two decades — yes, two decades — welcomed the appointment.

Tim Smith, the director of environmental, social and governance (ESG) shareowner engagement at Walden Asset Management, said in a news release: “This action by the board is encouraging for shareowners and we want to commend Exxon for this prudent and forward-looking decision.”

For shareholder advocates — investors who represent public pension funds, socially-responsible money managers, unions and church groups, and exercise their rights as owners to try to influence corporate behavior — this is about as good as it gets. ICCR and its allies have for three years called on ExxonMobil to elect an independent director with climate change expertise. They’ve won.

But will the planet notice? Of course not. No new director, not even a climate scientist –and there’s a difference between being a scientist and an advocate — will persuade the board or top executives of ExxonMobil to turn a company that says it is “committed to being the world’s premier petroleum and petrochemical company” into, say, a wind or solar firm. In a long profile of ExxonMobil published just this week, Steve LeVine of Quartz concluded: “Exxon is, and will long continue to be, foremost an oil company.”

Shareholder advocates will continue to push ExxonMobil, and the company will continue to do what it chooses to do, a dynamic that underscores the problem with shareholder advocacy: It’s all about persuasion. Those hundreds of shareholder resolutions that are filed every year with big companies? They are all precatory — a fancy legal term that means expressing a wish or request — and so corporate managers are free to ignore them, and often do, even in the exceedingly rare cases which a majority of shareholders vote for a resolution.

I say this not to disparage shareholder advocates. I’ve long admired such titans of the shareholder advocacy movement as Robert A.G. Monks (who I profiled in 2002 for FORTUNE) and Nell Minow, as well as Tim Smith, who led ICCR for many years, and their allies at nonprofit As You Sow, . But in these times, it’s important for social-justice advocates, nonprofit groups and those who fund them to take a hard-headed look at their strategies, to see what’s working and what is not. As Kevin Starr, who heads up the Mulago Foundation, argued recently:

That means that you get absolutely clear on what you’re setting out to accomplish, identify the outcome(s) that would signify impact, connect the dots from your work to all the way to impact, and strip away all the stuff that doesn’t get you there. You measure what’s critical to delivery, behavior change, and eventual impact, and you continually iterate based on what you measure.

How many social-justice advocates, nonprofits and foundations do this? Not enough, I’m certain. Which brings us back to shareholder advocacy.

It’s hard to measure the impact of shareholder advocacy, or any advocacy, for that matter. Often, shareholder advocates work on issues that also attract attention from politicians, regulators, activist groups, business-friendly NGOS, corporate social-responsibility insiders and consumers. When change happens, it’s hard to tease out cause and effect.

Some notable achievements

That said, shareholder advocates have notched some notable achievements. In the 2000s, first at Dell, later at Apple, and eventually through much of the computer industry, they persuaded companies to take back and recycle electronics. According to The Shareholder Action Guide, a new book from Andrew Behar of As You Sow, the group wangled a meeting in 2007 with Steve Jobs, then Apple’s CEO. Jobs was, no surprise, caustic and negative at first, but he eventually conceded that Apple did not want to be seen as an environmental laggard. Not long after, Apple announced a broad set of environmental commitments known as “A Greener Apple.” Score one for engaged owners.

More recently, Natasha Lamb, who leads shareholder engagement at Arjuna Capital, a sustainable investing firm, led a series of successful engagements with technology companies, including Apple, Intel, Amazon, Expedia, and eBay, around the issue of gender pay equity. All have promised to close the gap between what they pay men and what they pay women. This year, Arjuna will take the campaign to finance and consumer products firms. “There’s a critical mass of companies that are doing it, and the other companies see the writing on the wall,” Lamb told me.

Such victories have led As You Sow’s Behar to declare, with some exuberance:

We believe that most of the world’s environmental and human rights issues can be resolved by increased corporate responsibility and that shareholders are the single most powerful force for creating positive, lasting change in corporate behavior.

Say what? Shareholders are “the single most powerful force” for changing companies? More powerful that governments, activists, consumers and workers? Forgive me, but I’m skeptical.

Having paid on-and-off attention to shareholder advocates for years, my impression — and yes, it’s an impression, not a peer-reviewed study — is that they have been stymied more often than not. For much of the mid-2000s, for example, shareholder advocates pushed Coca-Cola and PepsiCo to use more recycled content in their plastic bottles. They got some tepid commitments, but as oil prices fell, so did the interest in using recycled instead of cheaper virgin plastic. US recycling rates have been flat for years. Shareholder persuasion can’t overturn economics.

On the issue of CEO pay–long the No. 1 agenda item for many shareholder advocates–there has been scant progress. Just the opposite, in fact: The left-leaning Economic Policy Institute reported last year that from 1978 to 2015, “inflation-adjusted compensation of the top CEOs increased 940.9 percent, a rise 73 percent greater than stock market growth and substantially greater than the painfully slow 10.3 percent growth in a typical worker’s annual compensation over the same period.”

Nell Minow, who has worked on corporate governance issues since the 1990s, says: “Every effort to contain CEO pay has been (throwing) gasoline on the fire.”

Making the business case

There’s a pattern here, as Arjuna’s Natasha Lamb explained:

Shareholder engagement works when the change requested by the investor is in the company’s self- interest. In the absence of that, if it’s only about the right thing to do, that’s not enough. It’s got to be the smart thing to do. There’s got to be a business case.

To be more specific, there’s got to be a business case that appeals to corporate managers, who have an annoying but predictable tendency to pursue their own self-interest, even when it conflicts with the long-term interests of the company. This is key. You may be able to make a very good business case for curbing CEO pay, but try making it to a CEO. He or she is unlikely to be persuaded.

So what are the chances that shareholder advocacy can move the needle on the all-important issue of climate change? The advocates argue that climate change creates risks to oil companies like Exxon or Chevron, citing global efforts to curb carbon emissions. Says Lamb: “If a cap is put on the amount of carbon we can burn as a planet, and they can’t sell two-thirds of their assets, that’s a detrimental risk to their business.” This is a legitimate worry for long-term investors, particularly pension funds such as CalPERS or CalSTRS that are investing today on behalf of workers who will be collecting pensions a half century from now.

The trouble is, the executives who run ExxonMobil or Chevron don’t operate with a 50-year time horizon, even though they invest capital in oil and gas infrastructure that may be around for nearly that long. They’re thinking about the next five to 10 years, for obvious reasons. (The average tenure of a FORTUNE 500 CEO is about five years.) Boards don’t seem to be any better. And while Shell, Total and Statoil have all invested in renewable energy, they are driven by near-term market opportunity, not shareholder pressure. Short-term thinking may be the biggest obstacle to effective shareholder advocacy.

The other obstacle is that the world’s biggest institutional investors vote no or abstain on the vast majority of the environmental, social and governance resolutions filed by the shareholder advocates. BlackRock, Vanguard, Fidelity all support management, and not the advocates, just about all the time.

This may come has a surprise because Larry Fink, the CEO of BlackRock, which the world’s largest asset manager, loves to pontificate about corporate sustainability and long-term thinking. What’s more, in a recent report, the BlackRock Institute recommended that “all investors should incorporate climate change awareness into their investment processes.” Yet, as The Times recently reported, Block Rock “voted against every shareholder proposal relating to diversity, environment, governance and social concerns over the last year, according to Proxy Insight.” Every single one.

Resolutions about resolutions

Shareholder advocates have taken notice, so they are now filing resolutions at Black Rock (as well as at other big asset managers) that accuse BlackRock of putting its reputation at risk because of its “perplexing and troubling” votes on environmental and social issues, as the Financial Times reported.

Resolutions about resolutions, in other words. It brings to mind a cat chasing its own tail.

[BlackRock’s behavior is perplexing only if you overlook the fact that big-company CEOs are among its big customers. BlackRock manages corporate pension funds and 401-K plans. When there’s business to be done, why annoy a customer or potential customer over a trivial matter like global warming?]

In fairness, the new set of shareholder resolutions at asset managers won’t do any harm, and they could do good. If BlackRock worries about its reputation, it may begin to align its proxy voting with its sustainability rhetoric. And then, the fossil fuel companies may pay more attention to shareholder resolutions. And then? Well, I’m not sure what is supposed to happen after that.

Someday we’ll find out, I suppose. It could be a long wait.


Marc Gunther writer for Fortune, GreenBiz and Sustainable Business Forum co-chair, Fortune Brainstorm Green 2012 and a blogger at www.marcgunther.com.  His book, Suck It Up: How capturing carbon from the air can help solve the climate crisis, has been published as an Amazon Kindle Single. You can buy it here for $1.99.




Share Us







Flipboard

Subscribe to this Blog

Enter your email address:

Delivered by FeedBurner


Subscribe by RSS Feed



Search This Site

Archives

Certifications and Site Mentions


New York Times

Wall Street Journal





USA Today

Forbes

The Scientist

USA Today

Seeking Alpha Certified

Seeking Alpha Certified

Twitter Updates