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Methes Energies International Ltd. (MEIL) Capturing Sustained Demand for Biofuel, Modular Denami Processors Heart of Success Story

Methes Energies is an increasingly successful producer/seller of biodiesel, as well as automated biodiesel processors which are coveted throughout the industry for their compact, continuous flow, multi feedstock-ready design and the proprietary, performance maximizing/remote monitoring software that goes along with them. The company continues to edge forward as a sector player on the strength of top-quality B100 (100% biodiesel) coming out of their showcase production and the 13M gallons/year primary production facilities in Ontario, in conjunction with a considerable mastery of the complex RIN (Renewable Identification Number) tracking and documentation required to satisfy EPA, IRS and LCFS (Low Carbon Fuel Standard) regulations.

Methes has even developed a comprehensive RIN authentication architecture consisting of a best practices model and proprietary software platform that is feedstock-centric (as it should be for optimal RIN authentication), tracking the entire lifecycle of the feedstock/fuel while also giving the user a powerful tool for handling everyday accounting tasks. This situational awareness capability over its own feedstock/output, and the ability to provide the same service to its clientele, is one of the keys to MEIL’s competition-friendly business model, which emphasizes building a network of interests in the biodiesel space and optimizing its own competitiveness (like a franchisor role in the fast food sector). Recent Producer/Marketer status achieved for the BQ-9000® National Biodiesel Accreditation Program, combined with the company’s selection of EPA-registered QAP (quality assurance program) provider, Genscape Inc., for RIN verification and the company’s existing Foreign Renewable Fuel Producer importer of record status with EPA, makes Methes an extremely agile biodiesel facilitator.

With global biodiesel production on-track to rise 8% this year to just over 29M tons, even the lower proposed EPA target cap in the Renewable Fuel Standard for 2014/2015 of 1.28B gallons of biodiesel, nearly 29% lower than the 1.8B gallons produced by the industry last year, can’t slow down what markets see as a good thing. A major deal announced last week by Methes Energies (Jun 18) with some of the company’s U.S. clients has them on task to supply over $6M in biodiesel (1.4M gallons plus) by September 30 this year. Moreover, this deal is essentially the tip of the iceberg with these clients and it is expected to be the first of many more like it to come. MEIL structured the deal around a 3-month window, wisely not getting themselves locked into a longer period, largely due to the potential for market volatility.

Interestingly enough, this deal also holds the possibility for MEIL to get retroactively reinstated Biodiesel Blender’s Tax Credit at $1.00/gallon. All the sweeter when you realize Methes has their feedstock and selling prices locked in for the next three months according to company President, Nicholas Ng, who also noted that production ramping across the company’s entire footprint was currently going quite well. With 26 jumbo rail cars at their disposal dedicated to moving B100, Methes is able to ship relatively cheap, yet extremely high-quality product to markets across North America and the U.S. appetite for biofuels isn’t slowing down, despite what the EPA thinks the market wants. Motorists in Iowa for example purchased some 2.7M gallons of E85 (85% ethanol and 15% gas) in Q1 this year, a 48% jump over the same period in 2013 according to the Iowa Renewable Fuels Association, with the real-world cost saving benefits of biofuel resonating in end markets soundly.

The company’s production footprint is made up of their own Denami 600 (1.3M gallons/year) and Denami 3000 (6.5M gallons/year) units, a testament to their system engineering and manufacturing prowess. These babies can reliably produce ASTM-quality B100 biodiesel from a wide variety of feedstocks and MEIL is able to churn a new unit out in only 16 to 20 weeks of manufacturing up-time, ultimately delivering solutions based on the Denami unit(s) that range from customized turn-key facility installs, to fully-managed and maintained implementations. Modular and scalable, the Denami systems can rapidly evolve a biodiesel production footprint in a highly granular fashion, allowing customers to tack on as much or as little custom production as required for their specific purposes/locations as things change over time.

Whether they are shipping fuel to eager end markets or helping clients implement their own localized production solutions, Methes continues to generate substantial buzz in the biofuels space and it is worth keeping an eye on the company for more activity as energy prices inexorably climb on broad-spectrum influences that range from mounting carbon regulations in the U.S. and EU, to energy-related geopolitical tensions. Green energy like biofuels continue to remain an attractive, securely executable play in this market, with ready transportation and usability logistics maintaining bullish baseline tailwinds for the entire sector.

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