2011 Becomes Year of Biofuel IPOs... Renewable Energy Files (REGI, KIOR, SZYM, GEVO, AMRS, CDXS)

2011 may be off to a “Web 2.0 IPO Year” but it might just as easily be “The Year of Biofuel IPOs”… Biodiesel maker Renewable Energy Group Inc. has filed a Form S-1 for an initial public offering worth about $100 million. If the IPO is completed, the stock will trade under the symbol ‘REGI’ on the NASDAQ.

This is following on the launches of Solazyme, Inc. (NASDAQ: SZYM) and Kior, Inc. (NASDAQ: KIOR). Three other firms launched last year, GEVO, Inc. (NASDAQ: GEVO), Amyris, Inc. (NASDAQ: AMYR), and Codexis, Inc. (NASDAQ: CDXS). Whether the playing field is big enough to contain all these players remains to be seen.

Renewable Energy Group makes biodiesel from low-cost feedstocks like used cooking oil and non-food grade vegetable oil. Last year the firm sold about 68 million gallons of biodiesel, an amount it says is about 22% of total US production.

The company plans to use the proceeds from its IPO to purchase its manufacturing facility in Seneca, Illinois, which it currently leases. Any remaining proceeds will be used “for working capital, capital expenditures related to improvements of production processes and logistics, investments in new biofuel businesses, production technologies or other assets, and in opportunities to extend our biorefinery platform to the production of renewable chemicals and feedstocks.”

The company did not specify how many shares it will offer, and it has also made a provision for an unspecified overallotment option.

Renewable Energy’s revenues have grown from $85.45 million in 2008 to $216.46 last year, and sales in the first quarter of 2011 totaled $100 million, up by a factor of three from the same period in 2010.

Profits have been more elusive though. The company lost -$21.59 million in 2010, but it posted a profit of $3.74 million in the first quarter of this year. It also posted a profit of $3.08 million in the same period a year ago.

Like other biofuel makers, Renewable Energy Group relies on government mandates and tax incentives to be competitive with petroleum-based fuel. In 2011, for example, a federal mandate requires that 800 million gallons of biomass-based diesel be used, and that number rises to 1 billion gallons in 2012. In the first quarter of 2011, 297 million gallons of biodiesel were produced in the US, compared with a total of 311 million gallons in all of 2010.

The greatest threat to Renewable Energy Group’s success, then, is a reduction in federal requirements for the use of biodiesel. Rising feedstock costs are also always a threat to bio-mass producers.

The company reports $101 million in total debt and just $4.4 million in cash. For sure it’s time for an IPO.

The full S-1 filing is here.

Paul Ausick