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INVESTOR PAGE
www.dailywealth.com
The Alternative Fuel Industry You've Never Heard Of
By Tom Dyson
Merritt must be one of the ugliest towns I've ever visited.
Beautiful forests and snowy mountains surround it, but the town itself looks like a sprawling trailer park in a dust bowl.
Tumble weeds blew down the streets. It would have been a good setting for a spaghetti western.
In the center of town there is a sawmill the size of three city blocks. A huge pile of logs occupied more than half the
space. "Excess supply," I thought to myself...
Merritt is in British Columbia, about 200 miles east of Vancouver. Last weekend, I went to Merritt to see the dead
forests and the Mountain Pine beetles that kill them, but I also had an appointment with the owners of a small sawmill.
Business in the Canadian sawmill industry is tough right now. The slump in the U.S. housing market and the huge
oversupply of logs has reduced prices for lumber products to 15-year lows. Now the strong Canadian dollar is putting
the Canadian lumber industry into receivership.
The couple that runs the sawmill had to lay off nine workers recently. That's half its workforce. Now this couple is
excited about another business... and that's why they were so eager to meet me...
They need $1 million to build a pellet mill.
"A friend from high school is a big cheese at Tolko," one of the sawmill owners told me. Tolko is one of the largest
lumber companies in Canada.
"I called him up," she went on, "and I said look, 'Give me an honest answer. I don't care what the answer is, I just need
the truth: Would a pellet mill be a good investment?' He told me a pellet mill would make 19%-22% returns."
Pellets are a form of bio fuel. They're made from sawdust and waste wood. You can dry and compress your waste
wood into these little pellets and use them as fuel. Demand is growing for these pellets every day.
The sawmill owner told me Merritt has five large mills that produce lots of waste chips and sawdust. Right now, it all
goes on the burn pile. She could take that waste and turn it into $200 per ton with a pellet mill. Then there's all the
wood killed by the beetle. As I explained in my last column, beetle-kill is perfect raw material for pellets, too.
The pellet business makes sense to me. You help people save money on their power bills, you help governments
make clean electricity, and you use waste materials to do it.
I asked her, if the pellet mill would be such a good investment, why wouldn't Tolko build it?
Tolko is in the lumber business, the mill owner told me. It doesn't want the distraction. Besides, a 20% return on $1
million just isn't a meaningful investment for Tolko.
To give you another example how lucrative the pellet business could be, look at the pellet mill going up in Kremmling,
Colorado, right now. This will be the biggest pellet mill west of the Mississippi, says the owner.
Like Merritt, Kremmling is also in the middle of a large pine beetle infestation. To ease the forest fire risk, the local
Colorado Housing and Finance authority helped with the financing, chipping in $6 million. The mill costs $8 million to
build.
The mills owners - Confluence Energy - will buy the trees from the U.S. Forestry Service for $18 a ton, process them
into pellets and sell them for $200 a ton on the other side. All said and done, this operation will make 40 new jobs,
dispose of the dead beetle wood, and generate excellent annual returns for its investors.
I think the wood pellet business could be a big growth industry if energy prices remain where they are and the
environment stays in the news. The sawmill owner's enthusiasm just confirms it.
If you're an entrepreneur looking for opportunity, you should learn more about pellet mills.
Good investing,
Tom
To discuss investing in one of our wood pellet plants:
CALL TINK BIRCHEM
1-218-735-8400
EcoLog provides informed analysis of emerging financing
and technology trends in the clean technology ecosphere
culled from research and interviews with leading research
labs, technologists and investors.
Wood Pellets: The Next Oil Wars?
by EcoLog on Tue 25 Apr 2006 05:12 PM PDT |
The hottest topic in Europe is not $75 oil but wood pellets. Residential boilers to large co-fired coal plants are
consuming the renewable resource so fast that exports can hardly keep pace. It is good news for countries
like Canada, Russia and the Baltic States who are becoming major suppliers of wood pellets to the greening
European economy For investors bullish on biomass, consider placing a few wood pellet processors in your
portfolio alongside ethanol plants.
The supply demand picture is going to get even tighter. Canada with its vast forestry resources is shipping
upwards of 500,000 tons of wood pellets to Europe, new wood pellet processing plants are coming online across
Europe and markets from Thailand to South Africa are shopping wood pellets. However, demand for wood pellets
is just starting to be stoked.
The Forestry Products Association of Canada says that once Canadian companies become more focused on
meeting CO2 reduction targets it will need to keep the bulk of its shipments of carbon neutral wood pellets at
home. In the US, wood pellet demand has taken off over the last year. New England states are now negotiating
with Canadian wood pellet suppliers in an effort to divert some of the European supply their way. And many
European markets are just starting to use wood pellets as a fuel. Consumption in the UK and Netherlands has
gone from 0 to 1 million tons in two years.
What’s more this industry is ripe for consolidation. In regions as diverse as Northwest Russia and Canada, the
industry is comprised of 10 to 20 firms producing 25,000 to 50,000 tons of wood pellets each. Companies like
Canadian forestry giant Canfor are buying up saw mills as the economic value of the residual waste rises with the
demand and price for wood pellets.
and technology trends in the clean technology ecosphere
culled from research and interviews with leading research
labs, technologists and investors.
Wood Pellets: The Next Oil Wars?
by EcoLog on Tue 25 Apr 2006 05:12 PM PDT |
The hottest topic in Europe is not $75 oil but wood pellets. Residential boilers to large co-fired coal plants are
consuming the renewable resource so fast that exports can hardly keep pace. It is good news for countries
like Canada, Russia and the Baltic States who are becoming major suppliers of wood pellets to the greening
European economy For investors bullish on biomass, consider placing a few wood pellet processors in your
portfolio alongside ethanol plants.
The supply demand picture is going to get even tighter. Canada with its vast forestry resources is shipping
upwards of 500,000 tons of wood pellets to Europe, new wood pellet processing plants are coming online across
Europe and markets from Thailand to South Africa are shopping wood pellets. However, demand for wood pellets
is just starting to be stoked.
The Forestry Products Association of Canada says that once Canadian companies become more focused on
meeting CO2 reduction targets it will need to keep the bulk of its shipments of carbon neutral wood pellets at
home. In the US, wood pellet demand has taken off over the last year. New England states are now negotiating
with Canadian wood pellet suppliers in an effort to divert some of the European supply their way. And many
European markets are just starting to use wood pellets as a fuel. Consumption in the UK and Netherlands has
gone from 0 to 1 million tons in two years.
What’s more this industry is ripe for consolidation. In regions as diverse as Northwest Russia and Canada, the
industry is comprised of 10 to 20 firms producing 25,000 to 50,000 tons of wood pellets each. Companies like
Canadian forestry giant Canfor are buying up saw mills as the economic value of the residual waste rises with the
demand and price for wood pellets.
WHY INVEST IN WOOD PELLET PLANTS?
- The wood pellet Industry is a long term growth industry in
the US - The wood pellet Industry in the US is where Europe was
only 10-20 years ago - The anticipated wood pellet Industry growth in the US can
be analyzed on past European growth facts - Low initial plant costs i.e. 8 million investments for 16-
million/year gross income - Better then ethanol and other Bio-fuels for the
environment - CO2 neutral fuel for home/commercial/industrial heating
- Saving jobs in the forestry industry
- Money spent on fuel stays in the US