July 22, 2008
Crud, on another list
25 who ditched infotech for Cleantech. This is getting infamous.
Posted by Martin at 10:30 PM | Comments (0) | TrackBack (0)
Humm, do I have market moving powers?
Or is it just a cooincidence? On July 7/8 I make a series of posts related to the current poor economics of ethanol and how the stocks have been beaten down. On July 11, a major part of my thesis was reposted on July 11 over at Earth2Tech. Part of my thesis is that the Oil Companies will start buying Ethanol companies at these depressed (caused by the oil companies) valuations. That day Aventine and Verasun turned the corner on the bottom and started a run up gaining over 55% over the last week. Cooincidence or influence? you decide.... (i am in investor in neither)
Posted by Martin at 10:09 PM | Comments (0) | TrackBack (0)
Wow, another great article on my house
Sounds like a fun place to live.
Posted by Martin at 9:49 PM | Comments (0) | TrackBack (0)
cool art...
I bought this piece "Selling the War" (you have to click on it)
from Jamey Baumgardt about four years ago. Check out his other art here.
Posted by Martin at 9:33 PM | Comments (0) | TrackBack (0)
50/50 we loose the north pole this summer?
Mattr says those are the odds that the Scientists at the National Snow and Ice Data Center have given it. ouch
Posted by Martin at 8:49 PM | Comments (0) | TrackBack (0)
More on Coal prices
Ok, the problem in coal is larger than I thought.
and Raymond James says that coal fundamentals are "stronger than oil". I believe it with china having built half the US coal power production JUST LAST YEAR and having 58 plants idle due to no coal. Hummm....
thanks Stephen.
Posted by Martin at 8:45 PM | Comments (0) | TrackBack (0)
July 15, 2008
total miles driven down
The Goldman Sachs oil analyst had a good question last year. What is the top price for oil? The last dollar that starts to materially destroy demand. Up until dec. 07, no demand had been destroyed at all. Now it seems that the run from $100 crude to $140 crude in the last quarter has started to destroy demand. But prices keep rising due to fears of shortages ala Iran, etc. I do not believe this market is responding to supply demand issues anymore. It is scarcity pricing. In scarcity pricing if you hold a very scarce resource, the price of it is whatever anyone will pay. Not enough demand has been destroyed. And even if demand is destroyed, the remaining oil stays finite. The owners of that will know that prices will be higher if they don't sell now. If it goes down, they wait and it will go back up. I contend that prices will be fairly unresponsive to demand destruction until it destroys over 20M barrels a day of demand. Goldman only estimates 5M has been destroyed. Morgan hasn't put a number on it yet I don't think.
Posted by Martin at 9:50 PM | Comments (0) | TrackBack (0)
Ethanol crush spreads in the tank
They are now effectively negative. It is not just high corn. Corn has actually not gone up that much relative to other commodities. The problem is that the sales price of ethanol has not kept up with the RBOB. See the next slide on the fact the US is WAY long on Ethanol. WAY too much capacity, allowing oil companies to bid down ethanol.
Posted by Martin at 9:45 PM | Comments (0) | TrackBack (0)
Watch as electricity is the next commodity to spike
Got a whole raft of cool slides today from Morgan Stanley.
Check this out out. Oil and Natural gas on a tear. Coal has spiked significantly recently. but Electric prices have been relatively flat. Some of that is regulated prices, but most is delay in the supply chain. Go long on electricity. Get effecient air conditioners. Prices are going up.
Posted by Martin at 9:43 PM | Comments (1) | TrackBack (0)
My investment criteria
Ok, enough bitching about what I don't like in biofuel companies. While I intend to post later about what i DO like about next generation biofuels, I thought I would provide a bit of transparency on my investment criteria for green energy investments overall. While I am a bit of a numbers nerd and internally I have a spreadsheet with all sorts of weights, averages, and trendlines, that is a bit TMI for this blog. Here, in no particular order, are some of the traits I am looking for:
Market:
- Big ($1B+) existing market for the product you are going to replace or add capacity to. I don't want to build primary demand for products on a venture budget.
- Many non-ologopoly customers. Markets with only a few big customers tend to have purchasing price power and deny start-ups meaningful margins.
- International customers, ability to reach them. The US is behind the energy/carbon game and with the weak dollar, US companies many times have superior international opportunities in renewable energy markets.
-
Business Model:
- a leveraged business model. Basically the ability to improve margins with scale and technology. Many business plans I see are basically integrators selling professional services by the hour. While maybe a decent business, it should not be venture funded.
- Positioned with pricing power in the value chain. If you don't control enough of the value chain to set price, you are toast.
Product:
- no "miracle" inventions required to develope the product.
- No serious physics, chemistry, mechanical, or material science unresolved issues.
- Can be manufactured with existing off the shelf equipment (no custom fabs, expensive yet to be invented stuff, etc.)
- has some IP protection, but company has primary IP defense rather than offense strategy.
Team:
- Fundable CEO.
- World class technical tallent.
- Not their first start-up.
Deal Terms:
- Valuation and money raise appropriate for stage and raise sufficient to meet valuation milestones.
- Lead money gets a board seat with standard class protective provisions. I never invest without a board seat.
Other:
Major risk execution versus market, policy, or technology. Basically going into a deal I want to believe (true or not) the major risks to be around how the team executes on the opportunity with my dollars versus what happens in the overall market, policy, or if the technology works or not. Many times things happen around the company that have nothing to do with execution (see Imperium), but that is part of the deal.
i will come up with more stuff, but these are the major points.
Posted by Martin at 9:39 PM | Comments (0) | TrackBack (0)
July 10, 2008
Cost of Oil, gas totally bogus for surfers
I could not agree more. The cost of surfboards has doubled. My drive to Westport used to cost $80 round trip now costs over $200. I might as well fly to Hawaii. Hey, now that is not a bad idea.
Posted by Martin at 9:09 AM | Comments (0) | TrackBack (0)
July 9, 2008
A story about "1421: The Year China Discovered America (P.S.)"
On my trip to Indonesia, most of my conversations with locals and Americans were Asia centric rather than Euro centric. That was at first surprising, then obvious. Claude from Nihiwatu suggested this book and how it is re-writing western ideas about discovery of America, and a whole raft of euorcentric history books. I love it. In the same year that England invaded France with about 600 men making huge waves in western historical records, the Chinese emperor was marching an army of over 1 million north against the Mongols without as much as a note in the west. The most fascinating part for me has been reading the maritime exploration parts about a 10,000 ship armada with tankers larger than the largest supertankers today going all over the world to find a Southern Star for navigation. We in the west have alot to learn about World history. Read this book. I rate 5 of 5 stars.
Posted by Martin at 11:04 AM | Comments (0) | TrackBack (0)
July 8, 2008
What I like and don't like about the "second generation" biofuel companies that were funded in Q2
Ok I am a big fan of biofuels. I spent the last four years and substantial personal resources building Imperium Renewables and the largest biodiesel processing plant currently operating in the US at over 100M gallons per year. Lots of people ask me what I think of the "next generation" crop of companies being sold to investors today. Here are a couple general comments then some specific company comments.
General:
- the primary problem of biofuels today is oversupply relative to RFS mandates causing refined biofuel prices to significantly lag refined petroleum products. More biofuels actually makes the problem worse.
- Political will supporting biofuels has weakened measurably over the last year.
- Liquid fuel distribution infrastructure has remained largely stangnant for over 30 years. Most mid and downstream assets are owned by companies with capital structures optimized for cash dividends as opposed to investment for growth. High blends of ethanol requires new distribution infrastructure all the way up and down the chain.
- Debt markets remain closed and skeptical of new technologies.
Company specific:
Range Fuels: Triple the capital cost of first generation. While multiple feedstocks may be technically possible, actual availability of feedstock and transportation logistics will likely significantly change economics once plant is built. While Khosla likes to pay lip service to investing in technologies that are economic w/o government incentives, cellulosic ethanol generally through the 2.5x RFS credits, and Range Fuels specifically through large DOE grants have been showered with government money. If the plant eventually does get up and running
Sapphire Energy: Inventing an algae bug that will produce a crude oil substance compatable with today's light sweet crude refineries is not that hard. The Aquatic Species program of the DOE found thousands of them over a decade ago. The probelm is building the algae farm and cultivation system at a cost per acre that pays an acceptable ROI. I like the strategy to skip the big oil controled refined products channel and go direct to independent crude oil refiners, but the devil is in the details. What will be the actual yield? How will the refined products perform? Will customers accept the products? While the company announced significant funding, it has yet to enter pilot testing and hopes to one day produce "up to 10,000 barrels per day" of algae crude. Ok, that would be 0.011834 % of US daily crude requirements TODAY. Despite the many challenges and my reservations, Sapphire Energy is my favorite biofuel company funded last quarter.
EdeniQ: Actually the smoking dusty remains of the Altra train wreck "still in formation stage". While at Imperium I reviewed and dismissed as non-economic the Port of Morrow site they hope to develop. Maybe I missed something. On technology side they use all the right buzzwords about low capital costs, ellimination of catalyst and additives. All I can say is "show me".
Mascoma: Again, more non-specific "non-grain biomass" as feedstock. GM invested, that hasn't seemed to help their stock price. More government hand-outs (over $60M) and sky high capital costs. Show me the money.
Aurora BioFuels: $20M ain't nuthing when measured against their plans. Their mission statement lays out too much wood to chop in my opinion and not enough focus. It is not at all clear from public information what Aurora is planning to do new, different and proprietary from anyone else. See Sapphiire: Algae in the lab is easy. Making a million barrels a day (about 1% of US needs) is HARD.
Gevo: While the company is "working on an alternative jet fuel for Virgin Airways", Imperium actually supplied Virgin with such a fuel and flew Richard Branson around in the plane back in January. The company's "advanced" fuels like isobutanol and butanol face many distribution, field test, engine warranty and other implementation issues already overcome by first generation refined biofuels. This one is going to be a LONG burn.
Fulcrum Bioenergy: Waste seems like a good source of fuel. Unfortunately the energy balance has never worked for anything but sucking methane off garbage piles. Again the ethanol oversupply problem, the US is already long corn ethanol through at least 2012. From press releases the company seems more like a build own and operate project developer rather than a technology company. While this is a fine model, I am not sure it garners venture capital returns. Permitting of the first facility in collaboration with Casella Waste Systems is supposed to "start" in next 12 months. If the plant is running by 2010, I will give you $100.
Greenline Industries: No comment (too many NDA's).
GreenFuel Technologies: The long struggling Greenfuel may have finally found their stride. They arguably know more about the implementation details of growing algae for biofuels than any other company and have the scars to prove it. Their first pilot grew algae so fast they couldn't harvest it. Not much good. I like the strategy of co-locating algae farms with carbon emitters for multiple revenue streams. I like the folks at GreenFuel and wish them well. They still face the massive problem of getting the cost per acre of the algae farm down to an acceptable ROI. After 5 years, problem still not solved.
Amyris Biotechnologies: Originally founded with quite a different mission, these opportune scientists are marketing their lab skills to the fuel markets these days. More fancy bugs that look good under a microscope and are years away from any scale. If they suceed in making more than 100 gallons of anything by 2010 I will give you $100.
Posted by Martin at 9:16 PM | Comments (0) | TrackBack (0)
VC's stay drunk at the cleantech bar in Q2
says Cleantech Group. including:
SECOND-GENERATION BIOFUELS: While recent increases in grain prices have created controversy over first-generation biofuels, second-generation biofuel companies, which do not rely on food crops as a feedstock, continue to receive large amounts of venture capital. Second-generation biofuel companies Range Fuels, Sapphire Energy, EdeniQ, Mascoma, Aurora BioFuels, Gevo, Fulcrum Bioenergy, Greenline Industries, GreenFuel Technologies and Amyris Biotechnologies raised a combined $280 million in venture investment in 2Q08. Of this total, $136 million was invested in cellulosic ethanol startups and $84 million in algae biomass startups, including a $50 million round for Sapphire Energy—the single largest round ever raised by an algae company.
While as an entrepreneur, I approve of the continued funding, I want to see the products start rolling much sooner. Come on guys!
Posted by Martin at 8:06 PM | Comments (0) | TrackBack (0)
Big Oil - 1, Renewable Fuels - 0, part 1
I have written a major review piece on the state of liquid renewable fuels versus petroleum over the last four years. IT will be published in an upcoming issue of The Strategic News Service, after which I will post in parts here. Today I am posting the first two paragraphs:
Four years ago I ditched Technology for Energy and wrote about it for SNS. While preparing for FIRE this year, I had the opportunity to reflect on the last four years of renewable fuels in America. 2004-2008 will go down as arguably the first major battle, first real challenge, to petroleums 100% lock on our liquid fuels budget. In the same time period where Brazil reduced their petroleum consumption 40% largely through ethanol, Americas petroleum appetite grew by over 7% and we continued to consume more than a 1 out of every 4 barrels of oil on the earth. After over $30B of capital investment, Americas liquid renewable fuel industry is today valued at 30-40% of asset replacement cost and is faced with negative operating margins. Capital has fled the sector. The sad conclusion is that renewable fuels/biofuels have lost round 1. Big Oil ran the table, pitched a no-hitter, and skunked the visitors. During the last four years of unparalleled opportunity and investment in alternatives to petroleum oil, thedinosaurs have vanquished all comers.
At this point I could write a letter full of speculation, theories and even conspiracies as to how big oil has managed to maintain, and even improve their lock on our wallets, but I will leave that for another time. For now, let us just review the facts and the current state of the renewable fuel industry. Being the CEO and Chairman of Imperium Renewables, Inc. (5/05-1/08), the first large scale US biodiesel producer, I have been in the middle of this battle and have all the arrows in my back to prove it. While I remain an optimist, it is clear the dinosaurs wont go away without a BIG fightand it is going to take a lot more than nifty technology to get rid of them. While many today extol the virtues of next generation biofuels, the economic damage done to investors in this first round and the structural impediments that remain will provide a significant drag on the industry for some time to come. Let usstart with a few macro stats, a summary of the wrenches that have gummed up the works, and then onto a few modest proposals to help renewable fuels going forward.
Posted by Martin at 11:37 AM | Comments (0) | TrackBack (0)
What is happening with oil prices?
Big Gav and Anawhata over at The Oil Drum down under continues to publish the most data driven clear headed analysis I have seen. Read this post to get up to date.
some snippets:
The hard facts
* The world price of oil in US dollars has doubled in the last year (June 2007 to June 2008) from US$67/barrel to over US$135/barrel
* The world price has gone up by 6 times in 6 years, from US$20/barrel in 2002 to over US$135/barrel by mid 2008
* With hindsight we can see that the great cheap oil era lasted 16 years from 1986 to 2002 when the price was mostly in the range $15 – 25/barrel, coming off a $39 peak during the "oil shock" of 1980 (equivalent to about US$95/barrel in 2008 money). The short sharp spike seen at the end of 1990 was due to the first Gulf War.
Lead times for new industry infrastructure are typically 3 to 10 years. All new mega-projects on the production side are well known out as far as 2012, and few seem likely to boost global supply by enough to overcome declines in old oil fields. See the comprehensive listing of oil megaprojects at http://en.wikipedia.org/wiki/Oil_Megaprojects/2008. Note that major oil projects are developing a history of running late, often years late, as they encounter challenging technical difficulties operating in extreme environments like deep ocean or freezing Arctic conditions.
Rapid demand growth is often blamed for rising prices – demand growth in developing countries, particularly China and India, and in key oil supplying nations such as Saudi Arabia and Russia. But the decline of mature oil fields throughout the world is an even greater source of demand for new oil supplies than the growth of end user demand. Declining fields are losing 5.2% of total oil production per year thus requiring about 3.5 million barrels/day of new oil each year for the global oil supply to stay the same. (Nobuo Tanaka, International Energy Agency) http://www.iea.org/Textbase/press/pressdetail.asp?PRESS_REL_ID=267. Recent annual growth in end user demand, on the other hand has not exceeded 1.5 million barrels/day.
Folks we are going to $200-$300/barrel one way or another. Fasten your seat belts.
Posted by Martin at 10:08 AM | Comments (0) | TrackBack (0)
July 7, 2008
Make a rainbarrel
Thanks Mom for this reminder. A rain barrel is a simple and economical way to conserve. Just tap it whenever you need more water for the yard, the plants, whatever! At my house I spent a fortune re-routing the gutters into to the apple orchard, but there is still more water running than I know what to do with. the rest goes into the storm sewer. Humm. maybe I need a barrel..
Posted by Martin at 10:19 AM | Comments (0) | TrackBack (0)
July 3, 2008
The history of oil intensity
for those of you looking for the historical perspective:
Prior to the embargo of 1973-74, total energy expenditures constituted 8 percent of U.S. gross domestic product (GDP), the share of petroleum expenditures was just under 5 percent and natural gas expenditures accounted for 1 percent. The price shocks of the 1970s and early 1980s resulted in these shares rising dramatically to 14 percent, 8 percent, and 2 percent respectively, by 1981. Since that time, the shares have fallen consistently over the last two decades to current levels of about 7 percent for total energy, while petroleum has fallen even further to 3.5 percent and natural gas to just over 1 percent. The shares were lower during 1998, when oil and natural gas prices were lower, but have risen recently in response to higher oil and natural gas prices.
As I noted earlier, the oil intensity is now well over 7% of GDP and growing fast.
Posted by Martin at 1:52 PM | Comments (0) | TrackBack (0)
July 2, 2008
US shark attack database
Florida and Hawaii top the list. Washington is at the bottom. Go Westport!
Posted by Martin at 3:25 PM | Comments (0) | TrackBack (0)
July 1, 2008
How about the scrap metal business?
Here is a business idea. Get into scrap metal business for cars. CIBC has a new report out predicting that $7 gas will cause about 10M cars to be scraped over the next 4.5 years. I agree. Humm, how to capitalize....
A 6% scrappage rate would take roughly 14 million
vehicles off the road every year. For the number of
vehicle registrations to remain constant in the face
of that decline, there would have to be an offsetting
number of new vehicle sales that year. But given their
link to fuel prices, new vehicle sales will be at least three
million below that number by 2012. Our projected 11
mn vehicle sales in 2012 will be the lowest level since
the early 1980s. Summing up the cumulative difference
between new sales and scrappage over that period
suggests that somewhere in the neighbourhood of ten
million Americans will be coming off the road over the
next 4½ years (Chart 10).
Posted by Martin at 11:02 AM | Comments (0) | TrackBack (0)
some petroleum and renewable fuel stats
i am writing a special letter for SNS. Here are some stats I have been collecting about oil and renewable liquid fuel industry from jan 2004 thru May 2008. A couple things jump out.
1. Oil stocks have been winners, ethanol companies loosers.
2. The price of refined renewable products, biodiesel and ethanol, has lagged the run in refined petroleum products significantly.
3. margins in Ethanol/Biodiesel have gone from bad to terrible despite or maybe because of huge capacity additions.
4. If we had all just put all our money in crude oil in Jan 2004, we would have done better than any other possible investment.
Posted by Martin at 10:31 AM | Comments (0) | TrackBack (0)
Global oil chokepoints
64% of the world's oil runs thorugh 10 chokepoints in the distribution chain. Wonder what they are and how vulnerable the global Oil market is? Read this.
Choke points: Straits of Hormuz, Strait of Malacca, Abqaiq processing facility,
Suez Canal, Bab el-Mandab, Bosporus/Turkish Straits, Mina al-Ahmadi terminal
(Kuwait), Al Basrah oil terminal (Iraq), LOOP (United States), Druzhba pipeline
(Russia).
Posted by Martin at 10:03 AM | Comments (0) | TrackBack (0)
June 26, 2008
Get Smart kicks Love Guru ass (rated 4 stars)
and rightfully so. Very funny. Not a slapstick rolling funny as the show, but plenty whitty. And a bit smarter I think. Go see this summer fun movie. 4 of 5 stars.
Posted by Martin at 7:52 PM | Comments (0) | TrackBack (0)
June 25, 2008
Mark Andersen presents a solution to our energy crisis
basically everything needs to convert to electric, cars, locomotives, boats, etc. Fast track nuclear to replace coal today. Run nuclear for 20 years while we scale up wind and solar. After 20 years, shut down nuclear, the transportation fleet is transitioned to electric and Boom, America is energy independent. Nice idea, but change doesn't happen like that unfortunately. It is going to be much more bloody. Too many people standing in the way.
Posted by Martin at 8:57 PM | Comments (0) | TrackBack (0)
Tobias Foundation Sumba biodiesel project report
Just finished a post about the project over on the Foundation web page. All the dirty details.
Posted by Martin at 10:12 AM | Comments (0) | TrackBack (0)
Lots of pictures, few words (rated 5 stars)
I am a minimalist at heart. My house is minimal, all my art is modern, etc. Most books are too thick and have too many words. While I have never been a fan of graphic novels or cartoons generally, a friend suggested this book so I one-click’ed it off Amazon. Got yesterday and read it in about an hour. Entertaining. The “career” advice is pretty standard fare stuff for an old wizened CEO like myself, but will probably be manna from heaven for the 20 something lost generation it is targeted to.
Let me save you the hour if you are that pressed for time.
1. There is no plan
2. Think strengths, not weaknesses.
3. It’s not about you.
4. Persistence trumps talent.
5. Make excellent mistakes.
6. Leave an imprint.
got it?
Posted by Martin at 7:54 AM | Comments (0) | TrackBack (0)
June 24, 2008
Nigeria Oil output lowest in 25 years
Thanks CNN. that is about 900,000 -1.2M bpd out of the market. In a world where tens of thousands of barrels a day change prices double digits, that is alot. The rebels are winning and there is no sign they will back off. I wonder what would happen if restless minorities in other oil producing states turn on their radio and learn that the Rebels in Nigeria are winning?
Posted by Martin at 9:56 PM | Comments (0) | TrackBack (0)
How long do we have left?
How high can oil go before it drags down the world wide economy? Hummm higher than it is now I guess. Up until 2005, the percentage of world wide GDP taken up by Oil was actually on a steady decline toward below 1% as productivity grew, industries converted to electric, etc. Then the price spike happened, China and India decided to industrialize on the back of oil, and we are now at over 7% of world wide GDP spent on oil. If you include all economic activity around oil (exploration, distribution, etc.) more than 1 out of every 10 dollars in the WORLD are spent on something related to oil. Hummm. What gets cut? When does the weight of this expense make other businesses totally uneconomic. Like pizza delivery, collecting the garbage, flying, etc.?
Kenneth S. Deffeyes says:
How big is the problem? Multiplying production (barrels per year) times the oil price (dollars per barrel) gives a total cost in dollars per year. It's an enormous number; tens of trillions of dollars per year. To put a scale on it, the three thin curves on the graph show the oil cost in contrast to the total world domestic product; the annual value the goods and services added up for all the world's countries. The three curves show the oil cost at one percent, two and a half percent, and five percent of the total world economic output. At $130 this morning, we are at six and a half percent.
Oil production obviously cannot consume 100 percent of the world's income. My intuitive, uninformed guess is that it cannot go above 15 percent. If we see oil at $300 per barrel, we will be looking out over the smoldering ruins of the world's economy. Source
Posted by Martin at 8:53 PM | Comments (0) | TrackBack (0)
What is this?
Plas2Fuel's first beta unit that converts all plastics back into crude oil. Very cool. I am still unsure of the energy balance and the supply of plastics, but the process seems to work.
Posted by Martin at 10:03 AM | Comments (0) | TrackBack (0)
June 23, 2008
thanks Robert, importing Thunderbird to Outlook 2007 under Vista
for the easiest guide to converting thunderbird to Outlook mail. Back on Outlook. Thunderbird doesn't make the change back easy. The only change I have to the process is that under Vista no more Outlook Express. You have to use Windows Live Mail. In Windows Live Mail, drag and drop all the .EML files converted from thunderbird then do "Export to Exchange". Then open Outlook and open the .pst that is created, copy messages in. Pretty stupid that you have to pull the mail through windows live mail to get to outlook, but that is MS fo you.
Posted by Martin at 8:48 PM | Comments (0) | TrackBack (0)
thinking about sheds again
thinking about small sheds for storage of toys at my surf camp.
Looking at KitHaus (too expensive pre sq ft), modern-shed (good prices, a little small) and moderncabana (less modern, slightly more expensive). I will probably go over to the modern-shed offices here in seattle and see if they can do something slightly larger for me.
Posted by Martin at 6:28 PM | Comments (0) | TrackBack (0)
changes at Go Fish
Mr. Downing is out with $120K consulting gig and Mr. Freeman is in with $37,500/month salary going up to $50,000/month after financing of $8m or more. Oh and a $12,500/mo retroactive bonus after one year. good gig.
I hope he can pump up the company. It HAS to be worth more than $10M that it is now.
Posted by Martin at 1:10 PM | Comments (0) | TrackBack (0)
