Biodiesel Gets a Big Pump

On Wednesday, Imperium Renewables, a Seattle-based biodiesel start-up, announced that it had received a total of $214 million in funding -- $113 million in private equity financing and $101 million courtesy of a senior secured credit facility.

The company intends to use the money to build three biodiesel plants around the world. By the end of 2008, it expects to be capable of producing 400 million gallons a year.

To understand the scale of this plan, it helps to know that only 300 million gallons of biodiesel were produced in the entire U.S. in 2006. At a minimum, this will make Imperium one of the larger producers of biodiesel in the country.

Archer Daniels Midland (NYSE: ADM  ) is working on a 50 million-gallon facility, and you might recall this past fall that VeraSun (NYSE: VSE  ) announced that it's planning on building a 30 million-gallon facility.

This is not to suggest that the field will belong to Imperium. The entire biodiesel field is going gangbusters. Standard Renewable Energy, a Houston-based start-up which is already operating a biodiesel plant through a joint venture with Chevron (NYSE: CVX  ) , is reported to be negotiating a deal similar in size to Imperium's. And I'm sure that ADM, Cargill, and others are in the process of expanding as well.

In fact, biodiesel could very well be this year's ethanol. In 2004, only 25 million gallons of the fuel were produced. In 2005, the figure jumped to 75 million, and it swelled to 300 million gallons in 2006. According to one report I saw, analysts are predicting that it will double again in 2007.

This still pales in comparison to the total amount of regular diesel fuel consumed in the U.S. (62 billion gallons), but it is a good start, and the numbers should continue to grow at a healthy clip for the foreseeable future. This is especially true as the environmental benefits of biodiesel become better understood, and as General Motors (NYSE: GM  ) , Honda (NYSE: HMC  ) , and DaimlerChrysler (NYSE: DCX  ) all begin manufacturing automobiles capable of running on diesel in the next few years.

So who will the winners be in the emerging field of biodiesel? Honestly, I can't say. As Imperium's CEO Martin Tobias has said, there are "a lot of novices bumbling around, and they will be making a lot of mistakes."

From my perspective, the safest way to play the field right now is to look to soybeans. That's right, soybeans. The U.S. Department of Agriculture estimates that for every additional 50 million gallons of biodiesel produced, soybean prices will increase 1%.

Interested in other biodiesel-related Foolishness? Check out these articles:

Got an opinion on these stocks? Bring it to CAPS!

Fool contributor Jack Uldrich does like edamame (the fancy Japanese name for soybeans), but he doesn't invest in soybeans, nor does he have a stake in any of the companies mentioned in this article. The Fool has a strict disclosure policy.

Read/Post Comments (0) | Recommend This Article (27)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 522582, ~/Articles/ArticleHandler.aspx, 10/22/2016 5:59:17 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 20 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
ADM $42.32 Up +0.14 +0.33%
Archer Daniels Mid… CAPS Rating: ***
CVX $101.30 Down -0.57 -0.56%
Chevron CAPS Rating: ****
DCX.DL $9.70 Down +0.00 +0.00%
GM $32.04 Up +0.29 +0.91%
General Motors CAPS Rating: ***
HMC $29.79 Up +0.12 +0.40%
Honda Motor CAPS Rating: ****
VSE $0.28 Down +0.00 +0.00%
VeraSun Energy CAPS Rating: *