The Bio-Fuel Sector is Attracting Some Big Names

Companies like Solazyme and FutureFuel focus on bio fuels, but there are bigger players taking a stab at the space, too.

Mar 24, 2014 at 12:36PM

Solazyme (NASDAQ:SZYM) and FutureFuel (NYSE:FF) are two relatively small companies largely focused on the emerging bio-fuel market. However, they aren't the only players in the space. And some of the other companies, like DuPont (NYSE:DD), operate on a scale that Solazyme and FutureFuel can only dream about.

The small fry
Solazyme uses microalgae to produce oil from plant based sugars, like sugarcane and corn. It's a fascinating technology that uses "indirect photosynthesis" to create marketable products. The company has some important partners, including the U.S. Navy, which uses fuel Solazyme creates in its ships.

Sweet

(Source: HitroMilanese, via Wikimedia Commons)

FutureFuel makes specialty chemicals and bio-diesel. It can produce nearly 60 million gallons of fuel a year. The company's process utilizes feedstocks such as soybeans, beef tallow, and pork lard. Unlike Solazyme, FutureFuel is a profitable company. That, however, has much to do with its specialty chemical business. In fact, in the company's annual report it notes that uncertainty, "...remains as to whether or not we will produce biodiesel in the future." And that's not in the Risks section, it's in the Business Description!

Part of the problem at both FutureFuel and Solazyme is size—the market cap of both is around the billion dollar mark. While they aren't mom and pop, they aren't huge, either. They simply don't have the staying power that larger companies may offer.

Big boppers
That's where companies like $60 billion market cap DuPont come in. The company's Industrial Biosciences unit is working on a plant in Iowa that will be capable of producing 30 million gallons of fuel a year, according to DuPont global public affairs leader Wendy Rosen. The plant should be done by the end of the year and will use corn stover as a feedstock. Corn stover is essentially what's left of a corn plant after the corn has been harvested.

Twenty eight billion dollar market cap Archer Daniels Midland (NYSE:ADM) is another biofuel player with huge scale. Interestingly, the agricultural giant works with Solazyme, providing that small fry with a big-name backer. However, Archer Daniels Midland's biofuel business goes well beyond this one partnership. The company produces both bio-diesel and ethanol. It's position in the agricultural industry is a big help in procuring feedstocks and in integrating its fuel making businesses into the broader ag industry.

Playing in private
Of course there are private players in the space, too, like POET-DSM Advanced Biofuels. This is a, "cooperative effort" between POET, "...one of the world's largest ethanol producers, with a 25-year history..." and Royal DSM, "a global science-based company..." The duo is building a demonstration plant in Iowa with the, "...goal of globally licensing..." its technology.

Steve Hartig, general manager of licensing at Poet-DSM, explains, "Basically, the plant will be mechanically complete at about the end of [Q1 2014], and we'll be starting up in second quarter." Abengoa Bioenergy is another company that looks set to start production at a biofuel plant early this year.

Images

Is the tide turning?
With so many companies, including giants like DuPont and Archer Daniels Midland, playing in the biofuels space, it looks like there's real investment potential. And there are a number of big projects coming on this year that could prove to be important milestones in the industry. However, the sector isn't for the feint of heart. FutureFuel's warning that it might pull out of the bio-diesel market should be seen as a blinking red light that this is still a new and largely immature industry.

That said, the U.S. Energy Information Administration clearly points to the potential: "From 2002 to 2013, biomass energy converted to biofuels grew more than 500% as U.S. production of ethanol and biodiesel grew." That kind of growth is hard to ignore, but you may want to be careful how you get involved. The diversified businesses of DuPont and Archer Daniels Midland may be a better option for conservative investors, while aggressive types may like the excitement of smaller Solazyme and FutureFuel.

Bio-Fuel isn't the only big change in the U.S. energy patch...

Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Reuben Brewer has no position in any stocks mentioned. The Motley Fool owns shares of Solazyme. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers