Monday, June 9, 2014

Methes Energies International Ltd. (MEIL) Well Positioned in U.S. Biofuel Market Ahead of New EPA Guidelines

Methes Energies, which has long since mastered comprehensive feedstock-driven RIN (Renewable Identification Number) tracking and documentation for EPA, IRS and LCFS (Low Carbon Fuel Standard) compliance, even creating their own proprietary biofuel-centric accounting and logistics software platform to support this end, recently doubled down on their biofuel/feedstock chain of custody validation ahead of the EPA’s upcoming Quality Assurance Program (QAP) for biofuel RINs on imports and domestic production.

A key deal with EPA-registered QAP provider of much sought after A-RINs at a discount (which offer downstream assurances and are generally viewed as a guaranteed RIN, as opposed to less unimpeachable B-RINs), places MEIL ahead of the pack when it comes to the new Renewable Fuel Standards (RFS) program. The new guidance set forth under this EPA program is designed, in part, to increase RIN transfer liquidity, particularly in the case of smaller biofuel producers, enhancing underlying growth dynamics for the sector.

The timing by Methes Energies here setting up their QAP program is superb, lining up several synergistic plays ahead of the EPA’s definitive move:

•           Increased B100 (100% biodiesel) production coming on stream from their primary plant in Sombra, Ontario (currently 13M gallons/year)
•           Recent BQ-9000® National Biodiesel Accreditation Program status award as a Producer and Marketer (fuses middle-distillate blendable ASTM D6751 standard for B100 with a comprehensive logistics situational awareness praxis)
•           Existing Foreign Renewable Fuel Producer importer of record status with EPA that lets them import to U.S. from Sombra and a fleet of railcars that can handle biodiesel and feedstock

The revised-down (about 16%) biofuel mandate by EPA for 2014 of 15.21B gallons gives operators like MEIL plenty of room to work with and this is one company that really knows what it takes to make it in this industry, something which places them ahead of competitors (producers/marketers) at a similar size and scale. But it is the broad-spectrum nature of MEIL’s business model that really sets them apart as one of the survivors that can thrive under prevailing market winds.

The company’s proprietary software platform for instance handles constantly changing ASTM methodologies and does full BQ9000 compliance with the BQ9000 LIMS (Laboratory Information Management System). This platform does far more than logistics like inventory management, tracking feedstock and doing blend audit trails on mixed fuel though, it handles complete sales and invoicing requirements, as well as sample management and comes ready to use out of the box, letting clients remotely manage everything via any device they want. Compelling service offerings like MEIL’s management software platform, combined with a production component and sales of their Denami 600 (1.3M gallons/year) and Denami 3000 (6.5M gallons/year) processor models, makes the company exceptionally resilient, with a strong foothold in the sector.

MEIL’s technological prowess is a core virtue when it comes to carving out a slice of the biodiesel market pie; a virtue evident from their real-time remote monitoring capabilities used to ensure seamless biodiesel production from the units sold to the company’s clients. These same senor and management electronics allow the company to handle upgrades and maintenance proactively, as well as recommend feedstock-related tuning for optimum product quality. Methes Energies really understands how to consistently make top-quality biodiesel, jump through all the regulatory loopholes with ease and get that product to market, making the tighter target from EPA even largely beneficial to the company (as less experienced players get strangled). Moreover, MEIL’s entire business strategy emphasizes competition in the sector as being healthy, given that they provide services, fuel production, biodiesel production units and related support (acting as a kind of fast-food franchisor type of operator).

An agile mover like Methes is poised to reap the substantial rewards that exist under such market conditions and the company is clearly thinking ahead of the game with their move to take advantage of the new EPA quality assurance regulations. It should be interesting to see how things shake out as the Sombra upgrades come online and they start moving more product to the U.S. over their rail infrastructure.

For more info on Methes Energies, visit: www.Methes.com

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