Stimulus or no stimulus, energy bill or new energy bill, the biofuel industry keeps evolving. The latest transaction involves an agreement between two Florida companies that will churn more grease into biodiesel.
Freedom Environmental Services of Orlando, Florida, has agreed to deliver as much as 12,000 gallons of yellow grease (you know, the byproduct of deep frying goodies like french fries, fried chicken, and apparently now, lattes) to Pristine BioDiesel, a new startup firm. Under the agreement, Pristine will pay Freedom $1.75 per gallon of grease, which in turn Pristine will refine into biodiesel.
It is an impressive deal at a time when clean energy companies are having difficulty attracting investors. Freedom, which already has a portfolio of businesses including wastewater treatment, environmental cleanup, and waste disposal, expects to net about one million dollars annually—a significant boost for a firm had revenues last year of over $4.5 million. Much of the yellow grease that Freedom will ship to Pristine is the result of the contracts it has with its current customers, including those the company scooped up by its merger with another environmental cleanup firm.
For Pristine, the deal is a boost in the arm for a very young company—it just started operations in May 2010. Its new biodiesel production plant gives Pristine the hope that it can start production of biodiesel from castor beans: currently the company is recruiting Florida farmers to participate in the venture. For now Pristine’s model is selling construction firms on biodiesel: it promises contractors that biodiesel can shield them from volatile fuel prices by offering them a consistent quote for its biodiesel, while offering to deliver the fuel onsite.
This is one transaction that appears exciting on the surface, yet reveals risks upon closer examination. Freedom’s stock is currently available via Pink Sheets—and stocks offered through Pink Quote are significantly more risky than those that have filing requirements with the major exchanges and the Securities and Exchange Commission. And Pristine is a brand new company that has not defined its business model yet: is it a biodiesel broker, developing a new innovative technology, or a fleet operator? Challenges that biofuel producers always face, too, is whether the capacity at which they initially promise actually meets demand—or can scale if there is an increased demand for fuel.
We look forward to following up in a year to see how this agreement pans out—because it is needed in the event oil spikes in price again—and it will.