On Tuesday, Clean Energy Fuels Corp (NASDAQ: CLNE) jumped nearly 11% on news that it will be buying two liquefied natural gas systems from General Electric (NYSE: GE) but what about non-ethanol biofuel stocks like FutureFuel Corp (NYSE: FF), Renewable Energy Group Inc (NASDAQ: REGI) and KiOR Inc (NASDAQ: KIOR) – especially after President Obama’s reelection? After all, T. Boone Pickens backed Clean Energy Fuels Corp does not exactly meet the definition of being a renewable energy stock as its building a network of liquefied natural gas fueling stations across the country for long-haul truckers. Moreover, the latest World Energy Outlook (WEO) report from the International Energy Agency (IEA) reveals that while fossil fuels will remain the leading source of energy, renewable fuels are also expected to gain "market share" and become the second largest power source worldwide by 2015. However, the IEA report concluded that renewable fuels will not continue to grow to the projected popularity unless current government subsidies remain intact. As with solar stocks, that hunger for subsidies is an Achilles heel for the the renewable energy and biofuel sectors. With that in mind, how are biofuel stocks FutureFuel Corp (FF), Renewable Energy Group Inc (REGI) and KiOR Inc (KIOR) fairing? Here is a quick look and reality check:
FutureFuel Corp (NYSE: FF) Has Been Hit By Low Biofuel Prices
FutureFuel Corp develops, manufactures, and markets products within two segments: Chemicals and Biofuels. FutureFuel launched a biofuels product platform in late 2005 and is an active participant in the US Biodiesel industry with a multiple feed stock operation consisting of soybean oil, beef tallow and pork lard and a current production capacity of 59 million gallons per year. Last Week, FutureFuel Corp reported a 2.2% revenue decrease to $88.3 million and a net income fall from $12.7 million to $12.5 million. Renewable identification numbers (RIN) also fell from $1.17 at the start of the quarter to $0.76 at the end of the quarter and stood at $0.53 on November 8. The fall in prices could be explained by the increase in the mandated production levels of biodiesel from 1 billion gallons this year to 1.28 billion gallons. FutureFuel acknowledged the difficult market conditions and the expiration of the $1.00 per gallon federal blenders tax credit at the end of last year is impacting the biofuel segment’s gross profit but the gross profit for the chemicals segment increased year-over-year. On Tuesday, FutureFuel Corp fell 0.78% to $11.48 (FF has a 52 week trading range $9.01 to $13.10 a share) for a market cap of $474.42 million plus the stock is down 7.6% since the start of the year and down 2.8% over the past five years.
Renewable Energy Group Inc (NASDAQ: REGI) Is Increasing Production
Renewable Energy Group is a North American biodiesel producer with a nationwide distribution and logistics system focused on converting natural fats, oils and greases into advanced biofuels and more than 225 million gallons of owned/operated annual production capacity at biorefineries across the country. Last week, Renewable Energy Group reported a 26% revenue increase to $322.9 million while net income of $46,714,000 to a net loss of $2,288,000. Renewable Energy Group has also just acquired an offline 15 million gallon-per-year capacity, multi-feedstock biorefinery in New Boston, Texas, for 900,000 shares of common stock and $0.3 million cash that will increase the company’s capacity to 227 million gallons per year with production set to begin during the first quarter of 2013. On Tuesday, Renewable Energy Group rose 2.01% to $5.07 (REGI has a 52 week trading range of $4.28 to $10.65 a share) for a market cap of $183.16 million.
KiOR Inc (NASDAQ: KIOR) Has Its Plant Up and Run
KiOR is a next-generation renewable fuels company that has developed a proprietary technology platform to convert biomass into renewable crude oil. KiOR was founded by Khosla Ventures, one of the US’s most prolific biofuels venture capital firms, to make renewable fuels from cellulosic biomass through a one-step catalytic process. The New York Times recently had a biofuels story mentioning that KiOR has spent more than $200 million on a plant that to mix shredded wood waste with a patented catalyst to do in a few seconds what it would otherwise take nature millions of years to do - remove oxygen from biomass and convert hydrogen and carbon into molecules that can be processed into fuel. KiOR’s goal is to turn out 13 million gallons of fuel a year and it has FedEx Corporation (NYSE: FDX) along with a joint venture of Weyerhauser and Chevron Corporation (NYSE: CVX) lined up already as customers. And while KiOR surged last week after reporting no revenues and a $27 million loss, it also reported that its plant is up and running. With that said, KiOR is still a high risk and very speculative investment at this point in time. On Tuesday, KiOR rose 6.96% to $6.42 (KIOR has a 52 week trading range of $4.82 to $18.39 a share) for a market cap of $672.82 million plus the stock is down 36.9% since the start of the year and down 56.5% since the middle of 2011.
The Bottom Line. Investors should not completely rule out biofuel stocks like FutureFuel Corp, Renewable Energy Group and KiOR BUT they should keep in mind that these types of stocks (like solar stocks) depend upon government subsidies to a big degree.