Recently Clean Technology Australia hosted a cleantech dealer forum to brief institutional investors by CEO presentations on three listed Australian Biofuels companies with interests in Australia and Overseas. The CEOs and companies were:
- Len Humphreys, Australian Biodiesel Group Ltd ASX listing:(ABJ)
- Darryl Butcher Australian Renewable Fuels Ltd ASX listing:(ARW)
- Peter Anderton Australian Ethanol Ltd ASX listing:(AAE)
Australian biofuels companies are benefiting from the increasing demand for alternative fuels as a source of energy for transportation and electrical generation. No doubt you already know that demand is being driven by a combination of factors such as climate change, high oil prices, market and government incentives or subsidies and increasing oil imports. Presenter’s explained the national and international market opportunities, the maturing of the industry, the technologies and the investment rationale including debt and equity with the prospect for solid growth and returns.
I’ve summarised a few of the key points presented below – but you should be able to find more on each of the companies at the above websites and via their ASX profile. For US readers you may find it interesting to see the external perspective on the US market.
· When compared with the usage of biofuels such as ethanol OS, Australia is at a very early market development stage. Ethanol makes up 23% of fuel market in Brazil, 3.2% in US and 0.3% in Australia. US market for biodiesel is mainly made up of smaller producers, whereas Australia is now becoming dominated by larger production facilities. There is a lot of opportunity to aggregate production, vertically integrate feedstocks in the US.
· Availability of feedstock is a large factor in how large production of biofuels in a market can grow. In the US production is supported by 80mT soy crop in US. In Australia the market can grow to around 600-750 million L based on tallow and other waste oil feedstocks.
· Oil price has significantly climbed in last year and looks set to remain high. Tallow and oil seed commodity prices are generally in decline but the availability of tallow is expected to tighten.
· Companies are looking to increase their control of the oil field – this is resulting into forays into the oil crop production market. Interestingly the oil crops in developed countries need not necessarily compete directly against food crops.
· Technology has moved from liquid catalyst to solid catalysts to improve the quality and yields from the product. There is also likely to be a shift to high quality product as the off take shifts from the farmyard tractor to $10m locomotives.
· Logistics are some of the key cost challenges that have to be considered in the construction and siting of production facilities. This presents limits to the optimal scale of plant to be developed eg 45 Million L in Australia and 250 Million L in US
· Cost Structure is US$2.73/gal cost reduced by US$1/gal Blending rebate vs. current oil price of US$3.50/gal for mineral oil. Current margins in the industry look to be around 27%-29%. 75% – 77% of cost is the feedstock price. UK has rebate of 20p per litre. Australian biodiesel market mechanisms include the 38c/L producer’s rebate.
· The varying maturity and regulation in US vs. Australia is resulting in varying financial environments for raising capital. There is a significant ability to raise debt to finance capital upgrades or purchases in the US where as in Australia debt finance is most difficult but there is significant interest in the equity markets.
For a detailed summary which includes a link to the presentations visit the Clean Technology Australia Website