Company Overview
Universal Bioenergy Inc. (UBRG) is poised to commence production of renewable fuels with a particular focus on biodiesel production. UBRG owns a biodiesel fuel refinery in Mississippi that provides the company with strategic access to major inland ports and airports, railway hubs, highway intersections and trucking destinations. The Company also benefits from the small footprint of its refinery, which provides UBRG with lower energy costs than other biodiesel producers.
UBRG has obtained the necessary permits to begin operating its refinery and expects to commence production at 20,000 gallons every three days within the next 30 to 45 days. Following modest capital expenditures, the Company expects to ramp up biodiesel production to 30,000 gallons per day, or approximately 11 million gallons annually. With biodiesel (B100 variant) currently selling from the refinery at around $4 per gallon, this would imply annualized revenues quickly rising to a $44 million range. At full capacity, the refinery would be producing 120,000 gallons per day, or 35 million gallons annually, and generating annualized revenues from biodiesel sales exceeding $140 million annually, assuming $4 per gallon biodiesel prices.
Universal Bioenergy uses a proprietary production process called Ultra Vibration Fusion, which cuts processing time by 40%-50%, resulting in huge production cost savings compared to competitors. In addition, the Company anticipates soon signing an agreement for a new technology which will enable UBRG to produce biodiesel at temperatures of 110 degrees versus the industry norm of 300 degrees, resulting in sizable energy cost savings.
Investment Highlights
Sizable, growing domestic biodiesel market
Global biofuel sales were $20.5 billion in 2006 and are forecast to reach $80.9 billion by 2016. The U.S. is expected to emerge as the world’s largest biodiesel market, accounting for 19% of global consumption by 2012. Domestic biodiesel production is growing rapidly, rising from 28 million gallons in 2004 to 490 million gallons in 2007. U.S. demand for biodiesel is expected to exceed 800 million gallons by 2010. EPA regulations, tax incentives and environmental concerns about diesel fuel exhausts are encouraging biodiesel use in North America. Biodiesel provides fuel efficiency, power, torque and haulage rates comparable to conventional diesel with better lubrication that extends engine life. Biodiesel can be blended in any concentration, from 0 to 100% (B100), and used without diesel engine modification. Rising crude prices, combined with tax incentives for biofuels, are helping biodiesel emerge as an affordable, eco-friendly alternative to conventional diesel fuel.
Strategically located refinery
UBRG’s processing facility is located in the center of the U.S. and is strategically located for easy access to feedstock supplies and fuel distributors. The facility is located in southeastern Mississippi and is readily accessible via water, air, road and rail transport. The area, known as “America’s Distribution Center,” hosts the world’s largest cargo airport, the nation’s second largest inland port, is a major rail hub, and is at the crossroads of major highways. In addition, the refinery’s proximity to large marinas is a sales advantage for UBRG since marine biodiesel is typically priced $1 higher than truck biodiesel.
Production gains boost revenue visibility
The biodiesel refinery is located on a 4.3-acre site and offers ample space for expansion. The Company expects to commence production at 20,000 gallons every three days within the next 30 to 45 days. Following modest capital expenditures, the Company expects to ramp up production to 30,000 gallons per day. UBRG has four jacketed reactors, each with a capacity of 50,000 gallons. Once all four reactors are online, the Company anticipates increasing production to 120,000 gallons per day or about 35 million gallons annually, within 18 months. Following the implementation of this plan and assuming $4 per gallon biodiesel prices, UBRG’s revenues could rapidly expand from $44 million in its first full year of operation to an annualized rate of $140 million within two years.
Efficient production process provides cost savings and competitive advantage
UBRG uses a highly efficient biodiesel production method called Ultra Vibration Fusion, which cuts production time by 40%-50% and produces high-grade biodiesel that meets or exceeds ASTM standards at much lower cost than competitors. In addition, the Company expects to soon sign an agreement for a new technology which will enable UBRG to produce biodiesel at temperatures of 110 degrees versus 300 degrees, which is the current industry norm. The new technology should result in significant energy cost savings. The Company’s long-term goal is to further reduce energy costs by going completely off-grid and using wind, solar and other alternative energy sources to power its plant and production process.
Secure feedstock supply
The Company’s refinery has the ability to process a wide variety of feedstock, including used vegetable oil, animal fats and non-edible plant oils, without requiring major technical changes to the plant. UBRG is sourcing non-vegetable feedstock from suppliers in Africa, Columbia and Malaysia, and is negotiating with a large rendering plant to provide it with animal fat feedstock at a 20% price savings. Over the longer-term, the Company plans to contract with farmers to cultivate oil-producing seed crops from non-edible plant sources on fallow land. Plans entail cultivating a shrub called Jatropha, the seeds of which produce four times as much feedstock oil per acre as soybeans.
Skilled management team
The Company’s CEO, Dr. Richard Craven, has more than 14 years of high-level business management experience and more than nine years of marketing experience. He also taught at the university level for nearly two decades. Through much of his career, Dr. Craven has focused on developing environmentally-friendly fuels and alternative energy sources.
Dr. Craven worked as the lead chemical researcher and developer at Antek Research Inc., an environmentally focused nonprofit research firm. His research efforts focused on optimizing and improving biodiesel reactions and production, the use of reaction by-products to trigger reactions for waste-to-fuel conversion, and waste conversion to other useful products.
By purchasing an existing production facility that was in bankruptcy proceedings, UBRG was able to acquire a ready-to-operate plant at a fraction of Greenfield costs and gain access to a labor pool of experienced managers and technical staff.
Biodiesel Industry Outlook
Biodiesel is a liquid biofuel that can be substituted for diesel as a stand-alone fuel (also known as B100 or 100% biodiesel) or used as an additive or extender by blending it with petroleum. B20, a combination of 80% petroleum diesel and 20% biodiesel, is the most popular blended product qualifying for fleet compliance under the Energy Policy Act of 1992. Other variants such as B5 (5% biodiesel, 95% petroleum diesel), and B2 (2% biodiesel, 98% petroleum diesel) are also available.
Typical biodiesel feedstocks include vegetable oils from soybeans, rapeseed, Jatropha and animal tallow. Soybean oil and yellow grease (cooking oil recycled from restaurants) are the most common feedstocks used in the United States.
The U.S. will become the world’s largest biodiesel market
Crude oil prices have fluctuated wildly in 2008 and are projected to average $115 per barrel in 2008 and $126 per barrel in 2009. Rising oil prices, combined with environmental concerns and increased regulation of greenhouse gases, are encouraging businesses and consumers to explore alternative fuel sources, including biodiesel. According to SRI Consulting, the U.S. is on track to become the world’s largest biodiesel consumer, accounting for roughly 19% of the world’s biodiesel consumption by 2012. The U.S. currently accounts for approximately 13% of world biodiesel production.
According to the National Biodiesel Board (NBB), increased demand for biodiesel will come from four major segments - urban transit, government/regulated fleets, marine and underground mining. These markets will use biodiesel mainly as a fuel additive to meet EPA regulations requiring the use of Ultra Low Sulfur Diesel (ULSD) in diesel-powered vehicles. Due to low lubricity, ULSD has the potential to damage diesel engines. Operators can avoid potential damage by using biodiesel as an additive and as a cetane booster.
Biodiesel as an alternative to petroleum diesel
There is a wide gap between crude oil supply and demand in the U.S. Only about one-quarter of the petroleum consumed in the U.S. is produced in this country. The U.S. currently relies on oil imported from other countries to meet domestic demand. Last year, crude oil imports averaged more than 5.1 million barrels per day. Biodiesel offers an attractive alternative fuel that can ease America’s dependence on foreign oil, reduce pollutants and generate carbon credits.
Press - Guardian UK
U.S. biofuel makers, struggling to make a profit at a time of tumbling oil and gasoline prices, look upon President-elect Barack Obama as a staunch ally for growth.
Obama has expressed support for the federal requirement to use ethanol, made mostly from corn, as a motor fuel and says he will accelerate the development of new feedstocks. That is a great contrast from foodmakers and livestock producers who tried last summer to scale back the ethanol mandate.
Ethanol makers believe Obama's victory will give them a more assured path into the future. The 2007 energy law sets a target of using 36 billion gallons of renewable fuels by 2022, including 15 billion gallons of grain-based ethanol by 2015.
"What is good for biofuels is good for much of agribusiness -- particularly elements leveraged to the crop sector such as farm equipment, seed developers and others," said analyst Mark McMinimy of Stanford Washington Research. "And in this sense, the election outcome may be the gift that keeps giving for biofuels and crop-related industries."
Voters in western Minnesota reelected Collin Peterson, the House Agriculture Committee chairman. A Democrat, Peterson advocated programs in the 2008 farm law that will encourage commercial development of cellulosic ethanol.
"I'd like to see us do nationwide a 15 percent blend," said Peterson in an interview with Reuters, up from the current 10 percent ethanol content in gasoline. "Obama would be supportive of whatever we (Congress) come up with."
The Renewable Fuels Association, a trade group, said Obama was steadfast in backing ethanol, biodiesel and other biofuels throughout the campaign.
Ethanol output, running at an annualized rate of 10 billion gallons a year, is approaching a "blend wall" when production equals the legal limit for use.
"In order to achieve the full promise offered by America's ethanol industry, expanding markets for ethanol is critical," said RFA earlier this week.
Ethanol production has tripled since 2003 and, at latest count, equaled 10 billion gallons a year. The industry has been stressed by highly volatile oil and corn prices.
The second-largest U.S. producer, VeraSun Energy Corp, filed for bankruptcy protection last week.
