Plant to convert sugar cane and sweet sorghum to 20-25 million gallons per year of Isobutanol [Read more...]
The news about the Environmental Protection Agency’s plan to limit carbon pollution from existing power plants just got even better: the proposed Clean Power Plan (CPP) can save the power industry and its customers — us — as much as $2 to $4 billion in 2020 and $6 to 9 billion in 2030, while cleaning our air and modernizing the electricity sector.
It’s that time of year again. Are you prepared for the gift giving season? In case you need some extra help, we here at RenewableEnergyWorld.com (REW) wanted to give you some ideas for holiday gifts that you might not have thought of yourself. Below please find some ideas to inspire you to give the gift of renewables. Disclaimer: Part of this list
The clean energy revolution is now, and the U.S. Energy Department is stepping up its commitment to help innovators commercialize their best ideas. At the recent Industry Growth Forum (IGF) in Denver, Colorado, Assistant Secretary for Energy Efficiency and Renewable Energy David Danielson announced the new Lab-Corps program to accelerate the transfer of clean energy technologies from the national laboratories to the marketplace, so that game-changing innovations don't languish for lack of money and equipment.
by Debra Fiakas CFA
Alternative chemicals developer MagneGas Corporation (MNGA:
Nasdaq) is posting another guard at the gate. The
company recently filed a patent application to protect new
enhancements of its plasma arc technology and gasification
system. Plasma is any gas taken to a whole new phase through
extremely high temperatures. For perspective the sun is
actually a very large ball of plasma. Here on Earth MagneGas
is using its proprietary system to gasify carbon-rich liquids such
as municipal wastewater to produce hydrogen gas for industrial
applications and vehicle fuel.
Many investors have probably heard about plasma gasification
technology and might be wary that there is little to differentiate
the MagneGas system from everyone else. Granted MagneGas is
not the first to use a plasma torch powered by an electric
arc. The electric arc provides a spark to ionize a gas and
perform an operation like cutting metal. Electric arc welders,
torches and furnaces are widely used in manufacturing construction
and solid waste treatment.
However, MagneGas has a lengthy history with plasma arc
technology. The company’s engineers have figured out how to
maintain a stable electric arc under water. Organic matter in
the water is catalyzed by the electric arc and turned into a usable
gas product. The company calls it ‘submerged electric arc’ and
already has received patent protection for their unique application,
process and design. MagneGas management touts its submerged
electric arc innovation as more effective than vacuum or air
electric arc technologies, especially when it comes to liquid
Technology Turns into Product with Large Market Opportunity
The company is using its plasma gasification system called Venturi
to process waste water into a hydrogen-based alternative fuel.
The fuel is sold under the brand MagneGas2 as a substitute for
natural gas to power industrial equipment or as an alternative to
acetylene. A highly flammable colorless gas, acetylene
is put to wide use by industry, principally as feedstock for
production of chemicals like butanediol. However, acetylene is
also commonly used for welding applications and metal cutting
because of its high flame temperature. The automotive,
aerospace and glass industries are big consumers of acetylene.
Yet even these industrial users are sensitive to acetylene’s origins
from hydrocarbons via calcium carbide (coke) or from methane
combustion and the greenhouse gases that are emitted during the
MagneGas2 has been well received by the metalworking market because
it is over a third faster than acetylene. Using MagneGas2 also
reduces the oxygen requirement, saving industrial customers time and
money on the job, not to mention improving safety conditions for
workers. The company is planning demonstrations of MagneGas2
at trade shows to build awareness and interest. To accelerate
the penetration of the industrial market, MagneGas recently acquired
a well-established gas distribution company based in Florida.
The plan is to cross-sell MagneGas2 to the distributor’s customers.
The company has a challenge ahead. The acetylene market is
highly concentrated and dominated by a few well-established
suppliers, which compete intensely on price. Air Products and
Chemicals (APD: NYSE), Linde AG (LIN: DE) and Praxair
(PX: NYSE) are the incumbent acetylene suppliers, from which
MagneGas will need to grab some market share by converting users of
acetylene to MagneGas2.
Management has additional markets in its sights. The
technology can also be used for sterilization so waste streams can
be treated and re-used or safely disposed. Plasma processing
of waste is ecologically clean and the lack of oxygen in the process
prevents formation of toxic materials. An alliance with Pioneering Recycling
has been struck to gain access to the medical waste market, where
contaminated organic matter is a common problem. The alliance
is planning to use the Venturi system in sterilization mode to
efficiently and effectively treat liquid medical wastes.
MagneGas has also teamed up with Future Energy in
Australia to target the energy market. An unnamed third party
has been lined up to help with a demonstration to prove the
viability of co-combusting MagneGas2 at a coal fired power
plant. The expectation is for higher electric output and
Interested parties can also buy the equipment used to gasify liquid
wastes such as chemicals or sewage. The company is prepared to
sell its plasma arc flow refinery in various sizes from 50 kilowatts
to 500 kilowatts at about $10,000 per kilowatt. Sales of the
refinery system have been far and few between and do not seem to be
a promising revenue source for MagneGas without a more serious
business development effort.
Better Mouse Trap at Bargain Price
It appears MagneGas really has invented a better mouse trap in the
form of ‘submerged electric arc’ technology, but investors have yet
to acknowledge the earnings potential of the invention. Then
again valuation is challenging. The company has recorded
revenue from early sales of MagneGas2 as well as development
contracts, but the company has yet to post a profit. In the
most recently reported twelve months sales totaled $1.1 million
resulting in a net loss of $6.8 million. Accordingly, MNGA is
valued at 27.5 times sales and its price-earnings multiple is
MNGA shares are trading below one dollar per share after backing
down from a 52-week high stock price of $2.45. The retreat in
the share price might seem appealing for the bargain hunters.
However, investors interested in MagneGas technology will need to be
patient in waiting for the company’s market penetration strategy to
bear fruit. The business model probably will take at least two
to three years to unfold. Thus watching quarterly results
could get frustrating for investors with a need for fast
action. Trading volume in MNGA shares has built up to about
250,000 shares per day, helping to narrow the bid-ask spread to just
under a penny. Nonetheless, the stock is relatively volatile
as measured by a beta of negative 2.80. A long position
in MNGA could quickly show a loss - at least on paper.
Surprisingly given the modest profile of this emerging business, a
sizeable short position has built up in MNGA shares equal to about
1.3 million or 6.3% of the shares not held by insiders. If the
naysayers are proven wrong about MagneGas, the stock could get a
boost higher as traders have to buy shares to close out their losing
In the meantime, patient investors might consider a reasonable case
for sales, earnings and valuation for MagneGas based only on the
market potential of its most developed product -
MagneGas2. If the company captures just 0.1% of the $40
billion world industrial gas market by successfully selling
MagneGas2 as acetylene and natural gas substitutes, it could realize
$40.0 million in annual sales. In the long-term a 10% net
margin is reasonable for MagneGas based on the success of incumbents
in the industrial gas market. That implies estimated earnings
per share for MagneGas near $0.11. The large chemicals and
industrial gas suppliers are trading at an average of 18.0 times
earnings suggesting that MagneGas shares could be worth $1.98 per
share under this scenario.
Now that would be financial plasma!
Debra Fiakas is the Managing Director of Crystal Equity
Research, an alternative
research resource on small capitalization companies in selected
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.
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