Text 27193, 243 rader
Skriven 2007-02-13 18:58:00 av Jeff Binkley (1:226/600)
Ärende: Renewable economics
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I thought I'd share this...

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http://www.forbes.com/free_forbes/2007/0226/078.html

On The Cover/Top Stories
KissyKat And The Magic Diesel
Daniel Fisher 02.26.07

  
When the cry goes up, "Renewable Energy!" an army of penny-stock 
operators swings into action.

An aerial photo on the web site of U.S. Sustainable Energy Corp. shows a 
plant in Natchez, Miss. where the company says it will soon begin 
producing 1.5 million gallons a day of biodiesel-like fuel from 
soybeans. To put that in perspective, that's double the current 
biodiesel output in the entire country.

John Rivera, U.S. Sustainable's chairman, admits he gets some skeptical 
looks when he describes his "secret" process for turning soybeans into 
liquid gold at a rate (five gallons per bushel) that experts say defies 
the laws of chemistry and physics. "Everybody comes out here and says, 
'Hey, you're full of it,' and then they see me do it," says Rivera, who 
in the 1990s promoted a similar process for turning used tires into fuel 
oil. "That's when I turn to them and say, 'Welcome to the Liars Club. 
Because now nobody's gonna believe you, either.'"

Somebody's buying Rivera's story. His company, which has not yet 
reported any revenue (it intends to start filing financials with the 
Securities & Exchange Commission "soon"), carries a market value of $227 
million. Hey, that's nothing. A December news release from U.S. 
Sustainable says that the company could have "an immediate market value" 
of $12 billion.

Things only get more confusing if you follow the trail to EarthFirst, a 
Tampa outfit that told the SEC it loaned $3.3 million to U.S. 
Sustainable Energy last year. EarthFirst Chairman John Stanton put out a 
news release in April trumpeting U.S. Sustainable's revolutionary 
biofuel process. In the days before the release EarthFirst's trading 
volume spiked to 5 million shares from several hundred thousand and the 
stock price bounced to 17 cents, briefly arresting a long slide to a 
nickel a share.

No, no, says Stanton. That's a different U.S. Sustainable Energy. Rivera 
wanted to use the same name for his company, explains Stanton, who 
admits doing business with Rivera in the past.

Details, details. The big picture: Everyone is in love with renewable 
energy--George Bush, any congressman you could name, the eminent venture 
capitalist Vinod Khosla, Goldman Sachs (nyse: GS - news - people ). At 
the upper end of the investment spectrum the field has attracted $53 
billion in private capital over the last three years for windmills, 
solar panels and low-carbon energy sources. At the lower end there are 
the penny stocks.

Watch your wallet. Des Moines lawyer Steven Wandro is trying to recover 
$3.8 million stolen a few years ago from a group of grain farmers who 
thought they were investing in an ethanol plant. The money passed 
instead to a film studio and a Florida scamster named Jerry Drizin, 
allegedly at the behest of a Nigerian in Germany, as detailed in a 
federal judge's ruling in the case. "People are just running to this 
thing in a way that I think is scary," sighs Wandro, who recalls how 
legitimate ethanol projects in Iowa collapsed after oil prices fell in 
the mid-1980s. "It's a prescription for dashed expectations."

Capitalizing on the popular mania for sustainable energy, the penny-
stock operators are converting failed Canadian mining outfits and 
Internet firms into green machines with names like Western Wind Energy 
and Hydrogen Power International. Western Wind, run by Vancouver mining-
stock executive Jeffrey Ciachurski, paid Khandaker Partners, a New York 
research firm, $22,000 for a November report touting a "price target" of 
$11.59 a share. Ambitious, given that the price is now hovering around a 
buck. Western Wind is trading lawsuits with former employees who accuse 
the wife of the chief executive of posting unflattering comments on a 
stock bulletin board, including one suggesting that one of those 
employees was "caught shagging some Red Head" near the proposed wind-
farm site. (Ciachurski denies his wife ever made such comments.) 
Hydrogen Power of Englewood, Colo. says it has a revolutionary method 
for making hydrogen fuel out of aluminum. One problem: The fuel source 
weighs more than the high-pressure hydrogen tank it is supposed to 
replace. That problem is being worked on.

Cornell Capital of Jersey City, N.J. has pumped at least $100 million 
into green-themed companies in the past couple of years. "Solar, wind, 
clean technology plays--we love the space," says Troy Rillo, a Cornell 
managing director. "We think the trends are great."

Great for Cornell, which gets shares at a discount that it can then sell 
in the open market. Great for investors paying full price?

Check out some Cornell clients. NewGen Technologies, which says it plans 
to build several hundred million dollars' worth of ethanol refineries, 
was formed out of a shell company. XsunX, formerly known as Sun River 
Mining, is now a solar-cell company with no revenue and no orders. 
Market cap: $86 million. Earth Biofuels, whose mascot is country music 
star Willie Nelson, raised $52.5 million from Cornell and other 
convertible-debt buyers but sank more than half the dough into a 
Louisiana ethanol refinery project that has stalled amid charges of 
excess costs and failed financial commitments. Power Technology (otcbb: 
PWTC.OB - news - people ) is on the verge of producing what it claims is 
a revolutionary lightweight lead-acid battery but has yet to find any 
potential customers. Still, it's aiming to raise capital in a public 
share offering; proceeds will repay a $1.4 million loan from Cornell.

Don't like the Cornell portfolio? Maybe there's something in the cozy 
family of GreenShift Corp., a holding company for six publicly traded 
entities--combined shares outstanding: 3 billion--with names like gs 
CleanTech and gs AgriFuels. GreenShift is working on technology to feed 
carbon dioxide to algae and then harvest the algae as if they were corn 
stalks. If you find this impractical you are presumably not among the 
investors whose enthusiasm has given GreenShift a market cap of $114 
million.

In 2005 a predecessor of a GreenShift unit, called Incode, was flogging 
KissyKat, an online dating service for pet lovers. That operation didn't 
work out. Reincarnated as resource firm, GreenShift lost $9 million on 
sales of $17 million over the first nine months of 2006. Most of that 
revenue came from a waste-disposal business and a machine shop in Ohio. 
But GreenShift's chairman and controlling shareholder, Kevin Kreisler, 
has dreams, and the algae venture is just one of them. Another is to 
convert the waste material from corn ethanol plants into oil that can be 
used to make biodiesel. GreenShift says it has sold several of the $1.6 
million units so far, but there's a reason it has the business largely 
to itself: Michael Ladisch, a Purdue University engineering professor, 
says that few ethanol plants produce enough waste oil to justify 
trucking it to a biodiesel plant.

No problem, says Thomas Scozzafava, president of GreenShift's gs 
AgriFuels unit and a former Lehman Brothers (nyse: LEH - news - people ) 
merchant banker. All you do is cluster the corn-oil units around 
biodiesel plants that use another money-saving GreenShift innovation: a 
"continuous base catalyst reaction" system that relies on a "proprietary 
process intensification and advanced separation technologies"--whatever 
those are. There are plans to use them in a new Mean Green Biofuels 
plant, in Memphis. Mean Green is meantime applying for emissions 
permits.

EarthFirst, John Stanton's firm, claims to be at "the forefront of 
alternative energy sources," according to its Web site, but still gets 
most of its revenue from moneylosing waste-disposal and biodiesel-import 
businesses, and recently filed to allow Laurus Capital to sell 76 
million shares, whose proceeds would be used to retire convertible debt 
held by Laurus. A self-described turnaround expert, Chairman Stanton 
doesn't disclose in EarthFirst's sec filings anything about the $157 
million collapse of Keller Financial, a used-car finance firm in Florida 
he briefly ran. A plaintiff attorney reportedly claimed that Keller 
preyed on unsophisticated, elderly investors. Stanton later paid 
$181,000 to settle a bankruptcy trustee's claim.

Stanton owns stakes in U.S. Energy Initiatives, which lost $4.5 million 
on sales of $426,000 in the first half of 2006 trying to sell kits to 
reconfigure diesel engines so they run on natural gas; and U.S. 
Sustainable Energy, which claims a catalytic vacuum distillation process 
that sounds remarkably similar to the one John Rivera is cranking up 
over in Natchez. Both involve heating organic materials in a vacuum 
until they break down into carbon and vapors that can be condensed into 
a low-grade fuel oil. "Why you'd put soybeans in there, I don't know," 
says Thomas Adams, a biofuels expert at the University of Georgia. 
"Sewage works just as well."

Adams questions how Rivera can produce biodiesel without methanol--or 
transform 60 pounds of soybeans into 37 pounds of biodiesel, versus the 
27 pounds generally considered the limit. Rivera says his process is a 
secret and now claims he means "biofuel." He's not the only one pushing 
the limits of science: In its sec filings EarthFirst claims it can 
create more than 20 pounds of carbon, fuel oil, combustible gas and 
scrap steel from a 20-pound tire.

While scrambling for green-energy investments they can trumpet in news 
releases, penny-stock operators invariably collide. That's what happened 
in Plaquemines Parish, south of New Orleans, where Earth Biofuels of 
Dallas last year announced plans to restart an alcohol refinery, closed 
since the first ethanol boom went bust in the early 1990s. Months later 
South-ridge Enterprises, a onetime mining operation now in the ethanol 
business, said it was buying $6 million worth of equipment from the same 
plant to build its own 60-million-gallon-a-year ethanol refinery. Its 
shares jumped 20 cents to $1.84 on the news.

Earth cried foul, saying it owned the equipment. Southridge has sued 
Earth's partner in the deal, blaming it for the loss of $60 million in 
market value. A lawyer for the Louisiana partners says he expects the 
case to be dismissed, but the point seems moot: Earth has since 
imperiled its own $27 million investment by failing to come up with $80 
million to finish the refurbishment by a Dec. 4 deadline. Earth says the 
project is "still viable."

So, apparently, is AFV Solutions of San Diego, which plans to import 
hybrid natural-gas/electric buses from China. Up until early 2005 AFV 
was known as Dogs International and planned a chain of "bed and biscuit" 
upscale kennels. (It still owned one in Flagler Beach, Fla. as of its 
most recent sec filing in November.) Dogs International turned green 
after Jeffrey Groscost, former speaker of the Arizona House of 
Representatives, took over as chief executive. Groscost was famous in 
Arizona for pushing through a subsidy program for alternative-fuel 
vehicles in 1999 that cost the state more than $200 million before it 
was shut down; buyers could get up to half the cost of a $50,000 suv 
back from the state.

AFV shares surged from $1.60 in 2005 to $11.30 in May 2006. That's when 
it announced $4.8 million in financing and plans to import Chinese 
buses. AFV has yet to sell a bus, and its share price has since deflated 
to $4.50. Groscost died suddenly in November.

Some schemes are outright fraud. LeeRoy Allen was ordered to pay 
$270,000 and barred from involvement with public companies last October 
after the sec accused him of converting a penny stock called J-Bird 
Music Group (former home of faded stars like Billy Squier and The Guess 
Who) into a purported biodiesel company with "no assets, funding or 
viable product." Allen consented to the charges without admitting or 
denying guilt.

In New Jersey the state attorney general last fall filed civil fraud 
charges against Brian Smith and his wife for promoting Digital Gas 
(other-otc: DIGG.PK - news - people ). The company lacked even a bank 
account yet had shares trading on the pink sheets that briefly soared to 
90 cents a share last spring, giving it a theoretical value of $22 
million. As he pumped the stock with press releases like the one 
claiming Digital Gas had a "high temperature fuel cell" that would 
unlock as much as 1.1 billion gallons of oil from a neglected oil shale 
deposit, New Jersey officials say, Smith was using stock to renovate his 
home and pay his attorney.

Smith insists, in an e-mail, that he's innocent and his company "is 
actively seeking to commercialize its energy savings, alternative energy 
and farming opportunities." For assets, his Web site offers a grainy 
image of the deed to a 178-acre granite quarry in New Brunswick, Canada. 
Despite Digital's legal problems, "We're still in the pipeline," says 
Theo van Bakkum of iccu Holding bv, a Smith partner who is working on a 
new method for storing electricity.

"We are here to help farmers, lessen the heavy yoke of imported fuel, 
help to create food and jobs for Americans and offer the greatest 
solution to the world's need for energy since humans harnessed the power 
of fire itself," says Taylor Moffit, chief executive of Originally New 
York, an o-t-c bulletin board and would-be ethanol producer with a grand 
total $331 in revenue since it launched in 2001. Dream on--you'll get a 
lot of investors to dream with you.


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