For scientists and botanists, algae are among the world’s most basic organisms. Most species are tiny, energetic photosynthesis machines. For investors, algae, and the companies trying to harness its powers and potential, present a range of possibilities. “Algae are fascinating,” said Peter Park, an analyst with Park West Asset Management who is closely watching the progress of small companies focused on commercially farming algae for use as a biofuel. The big question about algae for investors remains: how good are the new technologies and how far away is the payoff?
The big company names like Exxon, Chevron and Sapphire Energy, to name a few, have taken an interest in algae, sometimes called “green crude” for its promise as an energy producer. But these companies are primarily investing in “open pond systems” for producing algae that have limited yields. It is the few, tiny, development stage companies that are doing the most interesting, albeit mostly untested, thinking on the potential of algae as a source of alternative energy.
Los Angeles-based OriginOil Inc. (OOIL.OB, http://www.originoil.com/ is attempting to patent a technology called Quantum Fracturing that increases CO2 absorption in the algae, allowing the cell to produce a greater volume of hydrocarbons. The company, which was recently named one of the 30 companies with “transformative technologies Biofuels Digest, hopes to ultimately license the technology to refiners and others and announced its first customer, Australia-based MBD Energy, in May. The stock trades relatively well (average daily volume is more than 183,000 shares) but its price is languishing at around $0.25, off its $52-week high of $0.40.
Scottsdale, AZ-based PetroSun Inc. (PSUD.PK, http://www.petrosuninc.com), formerly PetroSun Drilling, is focused on production of biodiesel because “it can be used in existing diesel engines, which relieves manufacturers from making costly engine modifications,” according to the company website, as well as the fact that it can be mixed with conventional petroleum diesel. But the stock has plummeted down to rock bottom $0.03 and is not trading.
U.S. and Perth, Australia-based *Algae.Tec Ltd (http://algaetec.com.au) is focused on a unique algae production system to produce algae for the production of biofuels and animal feed, among several other uses. The company, which has an algae development center just north of Atlanta, has created a technology called the McConchie-Stroud System (after two of the founders) that uses a 40-foot shipping container as a totally controlled environment to promote photosynthesis and drive algae production 10 times greater than an open pond system. These containers are stackable and mobile and can be situated virtually anywhere. The Company has just released its prospectus and plans to go public on the Australian Stock Exchange (ASX) sometime this summer and have a demonstration container operational by February 2011.
Melbourne, FL-based PetroAlgae (PALG.OB, http://www.petroalgae.com) licenses a commercial, open pond “micro-crop” technology system that enables the production of green diesel as a renewable fuel as well as protein for animal feed and human supplement. The renewable fuel component is functionally identical to traditional petroleum products (diesel, jet fuel, gasoline) and can be “dropped into” existing petroleum distribution channels. Its stock price has bounced between $6-$40 over the past year (it went public at $3 a share in 2008) but trades only sporadically and has been hit hard in the recent market downturn.
* Denotes Allen & Caron client.