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New Corn Ethanol Producer Acquires Cellulosic Ethanol Technology

11 August 2006

Alternative Energy Sources, a newly-formed corn ethanol producer led by former executives from Archer Daniels Midland, has entered into a letter of intent to acquire all of the outstanding capital stock of Flex Fuels USA—a developer of cellulosic ethanol technology—and its affiliate ACN Energy Consulting Inc. in a stock-for-stock merger. The parties expect to sign the merger agreement on or before Sept. 15, 2006.

Total consideration for the acquisition is up to 11.5 million shares of Alternative Energy Sources’s common stock, 8 million shares being issued upon execution of the merger agreement and 3.5 million shares being issued upon completion of certain milestones related to Flex Fuels USA’s cellulosic ethanol technology.

Alternative Energy is excited about adding cellulosic ethanol into our aggregate ethanol portfolio. We have had an intense period of carbohydrate-based ethanol evaluation of sites, and are in the process of optioning land in cornbelt states for greenfield plants. Adding cellulosic ethanol will provide tremendous diversification to our future ethanol production base.

—Mark Beemer, CEO of Alternative Energy Sources

Flex Fuels, based in of Huntsville, Ala., has developed technology to produce cellulosic ethanol using biomass and other forms of waste rather than corn or sugar. Alternative Energy and Flex Fuels USA estimate four to five months of design and engineering, with an anticipated construction beginning in the second quarter of 2007. Once processes are finalized, he said the company anticipates building one of the first cellulosic ethanol facilities in the Eastern United States.

Formed on 12 June 2006, Alternative Energy Services is engaged in the development of greenfield sites, including constructing, owning and operating fuel-grade ethanol plants. Both Mark Beemer, CEO, and Lee Blank, COO, worked at Archer Daniels Midland.

On 20 June, Alternative Energy Sources merged with Beemer Energy, a privately held Delaware corporation engaged in the development of green-field ethanol sites, the conversion of existing industrial facilities to ethanol production and the management of ethanol businesses. The merger resulted in Beemer Energy becoming a publicly traded company, and Beemer’s management (Beemer and Blank) and board of directors have assumed operational control of Alternative Energy.

Concurrent with the closing of the merger, Alternative Energy Sources completed a $12 million private placement financing of common stock and warrants to a group of institutional and accredited investors. Initially targeting a $5 million financing, the private placement was significantly oversubscribed. The net proceeds from the financing will be used for general working capital purposes.

The company is developing two corn-based ethanol plants in Iowa. Both are expected to be in commercial production in 2008. Each plant is expected to produce approximately 110 million gallons of ethanol per year and more than than 500,000 tons of Dried Distillers Grains (DDGs) per year.

The company intends on lowering the cost of ethanol production via several mechanisms:

  • Coal-fired plants. The company projects that by using low-sulfur Powder River Basin Wyoming Coal for energy generation at the plants, it can reduce its costs per MMBTU by 70% compared to natural gas.

  • Economies of Scale. The company’s executives project that by building identical, large-capacity plants they can minimize repair and maintenance inventory. Management furthermore plans to use technology to reduce its labor requirements to those of smaller facilities producing 40 million gallons per year.

  • Unit Train Economics. Railroad economies of scale would be maximized by outbound 100-car unit-trains of ethanol and outbound 75- to 100-car DDG unit-trains. 100-car ethanol loading is intended to be accomplished in merely one day. The company plans to direct the ethanol shipments and DDG by-products into premium destination markets away from the saturated Midwest markets.

  • Lowest-Cost Producer Status. The ethanol plants are located in the Cornbelt on mainline railroads where cheap basis corn is grown. Droughts in these areas are minimized by the extensive deep prairie soils and truck sourcing of corn is available and plentiful.

August 11, 2006 in Cellulosic ethanol, Ethanol | Permalink | Comments (8) | TrackBack (0)

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Comments

coal-fired plants? so much for ethanol being carbon-neutral...

It would be good to use the waste heat from power plants to provide the heat for distillation.

Dang it, retrofit existing power plants, preferably base load plants, for waste heat capture. It does not have to be for biofuel, it could be for paper, or plywood, or woodworking.

Ethanol -- especially corn ethanol -- was never meant to be zero-carbon. But it can still be a somewhat net positive item, if the value (by whatever measure -- dolalrs, BTUs, carbon) of its final products exceeds the value of its inputs. Based on the literature I have seen (referenced on this site and others) there is some "energy capture" -- sunlight that gets incorporated into the corn which is eventually incorporated into the ethanol and DDG products. For all the fossil fuels you put into ethanol production, somewhat more energy-value comes out in final products. Not a heck of a lot more, but some more. And it is also usually the case that had you replaced, by other means, the products you got out of the ethanol production pathway, you probably would have released a bit more carbon into the atmosphere than had you gone the ethanol route. That can depend on the details of the ethnaol production process, and coal sets that back a bit.

Beyond the energy/carbon balance of corn ethanol (which most consider positive, but a few observers still think is negative) are items such as increased farm incomes (which reduces the need for subsidies to farmers), displacing petroleum demand (reducing imports), improved air quality (ethanol used as an oxygenate tends to make gasoline engines run cleaner), and laying the groundwork for producing and using more obviously promising biofuels, such as cellulostic ethanol, biobutanol, etc. To me, these benefits seem substantial.

As the past year has shown, corn ethanol has moved into the mainstream. The phase out of MTBE helped, as ethanol was the only oxygenate left for air quality purposes. The cutting edge of biofuels and green fuels has certainly moved past corn ethanol.

For that matter, they could use solar thermal heat for distillation. If Kramer Junction in California can generate 300 megawatts of electric power using the heat of the sun, I would imagine solar thermal troughs could generate enough heat for the solar distillation of ethanol.

NBK-Boston. I agree with you. USA could produce enough bio-fuel to sustain the needs of 100+ million high efficiency PHEVs but not the current 200+ million gas guzzlers.

We have to phase in PHEVs and EVs if we want to progressively replace fossil fuels with much reduced quantities of bio-fuels. Otherwise, the ecosystem will not sustain it for an extended period.

The clean electrical energy required for 200+ million PHEVs and EVs can be produced from hydro-sun-wind-waves and a few new nulear facilities.

SNG could power SOFC power plants where no combustion and CO2 neutral fuel is used. We could also go for more ditributed SOFCs and have one in every home doing cogenerated heating and cooling. Lots of ways of getting energy for homes and cars.

Hemp was outlawed by greedy people. Do a study on hemp and and legeslation inacted by pressure from Hurst/DuPont and the wood pulp industry. Also look at the viability of high quality fuel production from rapidly renewable hemp production in southern regeons of the United states where growing is virtually all year long. Antiquated political dogmas are responsible for slothful abuse of our environment. The production of hemp would drastically increse oxygen levels in the atmosphere and reduce CO2 levels in abundance. The clean fuel made from hemp ethenol would produce much fewer Carbon based polutants and other harmful toxins currently being released into our air. Hemp is not the same as Marijuana that is smoked for intoxication. That product must be specialy grown and pollinated a special way to render an intoxicant weed. Male plants must be separated from female plants and isolated. The D.E.A. knows this and so does the E.P.A. but politics and stupid illogical laws keep average unread (Television addict) Americans in the dark about these things. If the candidates running for office of the presidency had any guts they would expose this rediculous sham and vow to reverse these boggus laws and save us from foriegn oil dependancy and save us from political conflict with oil producing nations. We would litterally eliminate the need for their oil. What are they going to eat over there? Oil? No! THey will buy our food surplus. Putting America back in the global driver seat of food production. Hungry people usually won't bite the hand that feeds them. Get the picture war mongers? All of

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