Energy Business

Alternative Energy Watch: Another Biofuel IPO; Batteries Make Headlines; SunPower Gets Federal Loan Guarantee (AMRS, GEVO, ADM, VLO, DD, CVX, BP, AONE, HEV, SPWRA, NRG, FSLR)

Today’s round-up of alternative energy news includes a new IPO filing from a well-known entrepreneur, some developments in batteries, and another federal loan guarantee for a large solar PV project.

Biofuel maker Kior, Inc. has filed its Form S-1 for an Initial Public Offering. The filing does not include price or number of shares, but the company probably intends to raise up to $100 million. Khosla Ventures II, L.P. owns more than 23 million shares of Kior common stock, about 75% of the total outstanding. According to the S-1, none of these shares is included in the IPO and the shares will be locked up for 360 days after the IPO. Khosla Ventures is headed by Vinod Khosla, a long-time entrepreneur and venture capitalist who was a founder of Sun Microsystems and who has invested in many green energy companies in the past decade.

Kior is trying to join Amyris, Inc. (NASDAQ: AMRS) and Gevo, Inc. (NASDAQ: GEVO), both recent IPOs in the biofuels market. Kior’s fuel is derived from biomass to produce a “drop-in” replacement for hydrocarbon-based fuels. Corn- and cane-ethanol are not one-for-one replacements for petroleum-based fuels, and must be handled separately until blended because ethanol’s water content cannot flow through the existing petroleum pipeline systems. The largest corn-ethanol makers in the US are Archer Daniels Midland (NYSE: ADM), Valero Energy Corp. (NYSE: VLO), Pacific Ethanol, Inc. (NASDAQ: PEIX), and privately held Cargill.

In addition to the new biofuel makers, major petroleum and chemical companies are beginning to get interested in drop-in biofuels. These include E.I. du Pont de Nemours and Co. (NYSE: DD), Chevron Corp. (NYSE: CVX), and BP plc (NYSE: BP).

Kior claims that it can produce its biofuel at an unsubsidized cost of less than $1.80 gallon, which is equal to about $1.10 for a gallon of ethanol. In March 2011, corn ethanol sold for $2.49/gallon.

The company also claims that it reduces greenhouse gas emissions by more than 80% compared with petroleum-based gasoline or diesel fuel. Corn ethanol reduces GHG emissions by about 25%, while cane ethanol lowers emissions by 71% and biomass-based biodiesel reduces GHG emissions by 76%.

Kior uses primarily Southern Yellow Pine wood chips as its feedstock. The attraction here is that the feedstock is not a food crop. The company figures it will use about 500,000 tons of the stuff in four planned commercial-scale plants each capable of processing 1,500 tons of feedstock every day.

The company has never posted a profit, and its pro forma net loss per common share has grown from -$0.26 in 2008 to -$0.48 in 2009 to -$1.17 in 2010. The company had $51.4 million in cash at the end of December 2010 and working capital of about $40 million. Much of that is committed to a small commercial-scale plant in Mississippi. The proceeds of the IPO will fund a larger commercial-scale plant, also in Mississippi.

An analyst at Deutsche Bank has noted potential for lithium-ion battery makers in the grid power storage sector. A123 Systems, Inc. (NASDAQ: AONE) and Ener1, Inc. (NASDAQ: HEV), both makers of lithium auto batteries, could benefit from the need for frequency regulation on the power grid.

The world’s larges lithium-ion battery maker, Sanyo, estimates the current market for lithium-ion batteries is $13 billion, almost all in consumer products like cell phones. By 2015 the market will grow to $44 billion, with the consumer products share remaining the same, while vehicle batteries will account for another $13 billion and the rest, about $18 billion, will be used in power storage. Using relatively scarce lithium resources to build grid storage that doesn’t have a weight requirement seems a bit extravagant. This estimate could be wishful thinking.

Finally, SunPower Corp. (NASDAQ: SPWRA) has received a conditional guarantee for a $1.2 billion loan to proceed with construction on a 250-megawatt solar PV power plant in southern California. NRG Energy Inc. (NYSE: NRG) will finance and own the plant, known as California Valley Solar Ranch. First Solar Inc. (NASDAQ: FSLR) and privately held BrightSource Energy have already received guarantees worth more than $2.5 billion. The US Department of Energy has so far offered guarantees or conditional commitments to 21 projects ant more than $19 billion.

Paul Ausick

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