VeraSun Energy Corporation (NYSE: VSE), the nation's second-largest ethanol producer, last week announced plans to produce biodiesel from oil extracted from dried distillers grains (DDG), a co-product of the ethanol production process. Similar announcements have been made by GSGF.PK).
Removing the oil from DDG both increases the value of the oil for fuel use, and enhances the resulting distillers grains as a livestock feed by concentrating protein and reducing fat content.
Biodiesel production grew to 150 million gallons in 2006 from 75 million gallons in 2005. The Energy Information Administration projects biodiesel demand will increase to more than one billion gallons by 2010 and double to two billion gallons by 2020.
Currently, the majority of the ethanol produced domestically is based on a dry milling technique that converts corn into ethanol. The corn is milled and then mashed with a combination of heat and enzymes that convert the starch in the corn into fermentable sugars. This mash is then cooled and mixed with yeast to create a fermented mash which is then separated into alcohol and stillage. The alcohol is distilled and dehydrated into 200 proof fuel-grade ethanol. The stillage is sent through series of centrifuges and evaporators and then to a rotary dryer to reduce moisture. The output of the drying stage is a co-product called distillers dried grains ("DDG") which is conventionally sold as a livestock feed.
VeraSun is currently evaluating locations for a 30-million-gallon-per-year biodiesel production facility, with plans to commence construction in 2007 and begin production in 2008. The Company has contracted with Lurgi PSI, Inc. for design and engineering services for the biodiesel facility and with Crown Iron Works Company for oil extraction equipment. As a result of the exclusivity provisions in these contracts, VeraSun expects to be the first to develop large-scale facilities using this technology. The Company has also filed a provisional patent application with the U.S. Patent Office for the production process.
According to this presentation the company had gross revenues during the second quarter of 2006 of $153 million with a net income of 12.8% before deducting IPO related expenses and 26.8% after deducting IPO expenses, while their cost of producing ethanol was $1.33 (after deducting income for sale distillers grain) of a gross price of ethanol sold of $2.39. VeraSun has 5% of the U.S. ethanol market, in second place behind Archer Midland Daniels (ADM) which has 22% of the market.
The company has two operating production facilities located in Aurora, South Dakota, and Fort Dodge, Iowa, is constructing a third facility in Charles City, Iowa, and has two additional facilities under development in Welcome, Minnesota, and Hartley, Iowa. Upon completion of the new facilities, VeraSun will have an annual production capacity of approximately 560 million gallons of ethanol per year.
Greenshift's Biodiesel from Corn Oil Activities
GS CleanTech (OTC BB GSCT.OB), a Greenshift (OTC BB: GSHF.OB) company, has a patent-pending corn oil extraction technology that intercepts the stillage flow between the evaporation stage in the drying stage. The stillage has a concentrated syrup-like consistency after evaporation. GS CleanTech heats the concentrated stillage and then uses advanced centrifuge technology to spin crude corn oil out of the heated concentrated stillage. The crude corn oil is then routed to storage for use as a raw material for biodiesel production and the now defatted concentrated stillage is returned to the drying stage of the ethanol production process where it is dried into defatted DDG.
GS CleanTech's pricing model for its corn oil extraction technology is based on GS CleanTech's provision of turn-key extraction systems for no up-front cost in return for long-term agreements to purchase the extracted corn oil based on a fixed discount to prevailing fuel prices. Alternatively, GS CleanTech's clients have the option of purchasing their installation of the corn oil extraction technology provided that GS CleanTech retains the right to purchase the extracted corn oil based on a fixed discount to prevailing fuel prices for the life of the use of the technology.
GS Cleantech has executed contracts to phase up to about 22.5 million gallons per year of corn oil extraction from five ethanol producers between this quarter and 2008. Its most recent installation is at Little Sioux Corn Processors, LLC, a Marcus, Iowa based ethanol producer.
GS Agrifuels, another Greenshift company, formerly Mean Geen Biofuels, is also planning to produce biodiesel from DDG as reported earlier. They recently closed acquisition of NextGen Fuel, Inc., a producer of modular, continuous-flow multi-feedstock biodiesel process equipment based on NextGen's patent-pending process intensification technology. According to the press release they claim that their process:
reduces up-front capital and ongoing operating costs by as much as 50% versus traditional technologies. Additionally, NextGen's systems can be manufactured and shipped to customers in as quickly as 12 weeks from the time of order. NextGen currently offers turn-key biodiesel production plants rated for 5 million gallons per year and 10 million gallons per year, but the modular and continuous-flow aspects of the technology make scaling plants up or down easy and cost-effective.
According to a Sept. 6, 2006 press release:
GS AgriFuels is currently developing several sites for the construction of its planned integrated multi-fuel production facilities. GS AgriFuels' planned Memphis facility will have an initial nameplate capacity of 10 million gallons of biodiesel and 5 million gallons of ethanol, methanol and/or biomass-derived synthetic diesel and will commence production in 2007. GS AgriFuels' expects to scale its Memphis, Tennessee facility to in excess of 45 million gallons of annual fuel production given that facility's location in a major distribution hub.