Welcome to Amitkeerti's World

I am a SW Engineer by Profession and a blogger by choice. I am a voracious reader and like to give my opinion about what i read. I try to convery my thoughts in a way that is meaningful and responsible. In my blog you would find me the way I am. I love to write about my take on the Society in general, Finance, day-to-day interesting events, me, inspirational thoughts. More about me as you read my blog.

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Location: Bangalore, Karnataka, India

Wednesday, June 18, 2008

Toiling for cleaner oil

Read the below article in economic times.
The article is present at:
http://economictimes.indiatimes.com/Markets/Toiling_for_cleaner_oil/ articleshow/3049750.cms

Read the article below:

Toiling for cleaner oil
Cows do it. Elephants do it. Termites do it best. They munch on a plant or piece of wood, break the tough plant cell walls, and burn the sugar for energy. That’s cellulosic biofuel.

But what appears elementary chemistry in the animal gut is crazily difficult — and expensive — to repeat in a factory. How to convert plant cellulose into alcohol is the next big challenge. However, with the kind of money and science being poured in, we could be just a year away from commercial sales. Since we can’t digest cellulose, production of cellulose does not compete with the production of food.

Ethanol from corn was a no-brainer because you can easily convert starch into sugar and then alcohol. With cane juice, you are a step closer. But cellulose is a tough molecule to crack.

It takes five steps. First, chop a plant and mix with water to make a slush. Second, extract cellulose from this slush. Three, add some enzymes and convert the cellulose molecules into sugars. Four, remove lignin from the sugar. Lignin is what helps plant cells transport water and also makes wood burn longer. Five, ferment the sugar into alcohol and distill it into fuel.

From what I understand, it is “cellulose deconstruction” or how efficiently you break down the cellulose into sugars using enzymes; and how well you use yeast and other micro-organisms to ferment those sugars into ethanol differentiates one lab tech from another. If you can reduce the lignin through “cellulose architecture”, even better. Nature has provided termites, cow, sheep, elephants with special enzymes or enzyme-making bacteria that break down cellulose without a fuss at room temperature. But it isn’t easy in a lab.

So money is pouring into enzyme technology. Because they’re hard to make from scratch, scientists generally extract them from micro-organisms that produce them naturally. But the trick is producing the enzymes cheaply enough at an industrial scale and speed. Right now enzymes that destroy plant cell wall tissue cost 30 to 50 cents per gallon of ethanol compared to 3 cents per gallon for corn. The US Department of Energy hopes to reduce this cost to $1.07 per gallon by 2012 to be effective.

Some industrial biotech boffins are trying to build the ultimate microbe in the lab, one that could combine the two key steps of the process. Others are using “directed evolution” and genetic engineering to improve the enzyme-producing micro-organisms currently in use. Still others are searching new and better bugs and yeasts through “pathway engineering”. It’s bio-construction versus bio-tinkering versus bio-prospecting in the industrial biotechnology market, all with the single goal of creating the perfect enzyme and yeast cocktail.

Meanwhile, cash continues to pour in. DuPont and biotech firm Danisco’s Genencor division this week committed to spending $140 million to launch a joint venture to develop and sell cellulosic ethanol technology. The joint venture expects to enable production of commercial volumes of cellulosic ethanol in four years.

They are just the latest of a growing number of large companies that are investing in cellulosic ethanol. Others include General Motors; German car maker Daimler, which is teaming with Archer Daniels Midland and Germany-based Bayer CropScience, to research the use of jatropha as a feedstock for biodiesel production. Most chemical or oil companies you will find have tied up with agricultural commodity trading companies such as ADM, Cargill, EDF&Man, ConAgra, Louis Dreyfus, Tate & Lyle for complete backward integration.

So what’s in it for India? Plenty. Praj Industries is one of those at forefront of global advanced biofuel research. The company is checking out crop residues, local grass, corn stover, bagasse or left over straw from cane and sweet sorghum, and distiller’s grain from corn that is fed to animals. It’s bullish on Indian grass varieties as they have less lignin, need less inputs and are easy to grow.

Praj believes algae offer even more promise. Algae double in three days, can use salty water, don’t have lignin, can grow organically, and produce 500t per hectare biomass. Algae don’t just create energy from the sun. They do it more effectively than anything else save photovoltaic panels. And, as you may have guessed, they’re a lot cheaper than photovoltaic panels.

In fact, if you feed algae sugar instead of sunlight, they really flourish. Algae contain 45% oil, which can be extracted in the bed itself and taken to a biodiesel factory. Praj will start growing algae using photobioreactors in a couple of months.

The bigger takeaway from Praj’s R&D is the potential for advanced biofuels in India. By using molasses, India has insulated itself from any blame in the food-vs-fuel debate. But with crude oil at $125/barrel, we could all do with more biofuel.

India grows about 200 mn tonnes grains annually. That means 600 mn tonnes stalks, straw, dried leaves. Part of it is fed to animals, but mostly it is burnt as fuel or left to rot in the fields. If 10% is collected by ethanol factories, the gains could be tremendous. Plus extra farmer income. More importantly, we won’t need 400 mn tonnes of thirsty sugarcane.

Algae are even better because they are cost-effective, high-yielding and not fussy. That means encashing all those difficult bits of land that won’t grow anything else.

In a perfect world we should be scouting for an alternative to the internal combustion engine rather than struggling with alternative fuels for it. Meanwhile, my vote goes to algae oil. They say the left-over green stuff is great for the skin and protein supplements.

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Sunday, June 08, 2008

Praj Industries: Annual report 2007-08: My Summary

Couple of days back I got the annual report of praj industries by post. I hold very few shares of praj industries. But am very optimistic of the field (in general) in which praj works and its products. I plan to add more shares of praj in future. I expect the stock markets to remain range bound for few more months giving me some breating space to invest in smaller chunks :)

Here is a short summary of the annual report of Praj (I am NOT going to go into the numbers. I am going to write about what they have implemented in 2007-08 and what are their plans for future. whats the fun in dissecting the quaterly numbers. It is a mere indication of past performance which has no direct impact on future potential. It is a mere indication). Alright from the annual report I see the following:

Subsidiaries
Praj has the following subsidiearies which perform the respective roles as explained below:
(1) Praj Schneider Inc:
This is a wholely owned subsidiary of praj industries. This will focus on Canada and South central American. It is a customer touch point in the northen americas.
This is a preexisting subsidiary

(2) Biocnergy Europa B.V.
Praj and aker solution have formed a joint venture called BioCnergy. This will basically cover the European market. It recently won a large contract from Vivergo Fuels to build a plant to generate 120 Million Litres per day. This plant uses praj's technology as the basis.
praj has lot of hope from this plant in uropian market.
This is a new subsidiary added in 2007-08.

(3) Praj Jaragua Bioenergia S.A.
This is a JV between Praj and Group garcia. This jv is for the brazilian market. Brazil is the bastion for biofuels. This is a sugarcane based ethenol manufacturing jv.
This is a new subsidiary added in 2007-08.

Other subsidiaries are: Praj Far east co. ltd, bangkok for south east asian markets. Yaan esites limited.


Shaping the future:
(1)Matrix-the innovation center:
With a commitment of close to 70 crore rupees. This new R&D center for biofuels has been established. Outside US and europe this is the largest R&D center for biofuels. This Plant focuses on manufacture of ethenol from Cellulosic.
Matric innovation centre has applied for 3 patents. one for cellulosic ethenol and 2 for high-energy ethenol blends.

Focus is also on bio-chemicals and bio-lubricants and research is on for this.

(2) Sweet Shorgam:
A fully integrated plant (from farm-to-fuel) is being installed for Tata Chemicals. This plant uses sweet shorgam as the basis for fuel. Research in the area of sweet chorgam has been going on for about 5 years now. The process of generating ethenol from Sweet shorgam has already been patented by Praj. This is a big advantage as it has exclusive rights on a specific process thereby it can leverage the patent's potential to market its manufacturing plants.

Praj is also focussing on non-edible oil seeds like jatropha, Karanja, Safflower, pongemia. It is also looking at 2nd generation oil bearing organisms like algae for biodiesel.

Geographies
(1) Asia:
Govt would be making 10% blending mandatory. So there would be interest in ethenol in our country in the near future. Some states have abolished taxes. Many sugar companies would want to setup ethenol plants. So india is a good business opportunity for praj.

(2) Africa:
Africa has vast landbank. Praj has 3 plants running in africa. 2 in nigeria and 1 in kenya.
With the on ground experience praj is exploring more possibilities.

(3) Europe:
Obtained contract from british sugar's wissington plant . Suedzucker's Belgium plant. an Anklam plant in Danisco. Above 3 companies are the top 3 sugar manufacturing companies in europe.
BioCnergy (subsidiary of praj) will help drive the growth.

(4) North America:
3 projects under execution in US. Praj has hopes from the Sugarcane based plant in Luciana. US is a tough market because of lack of sugarcane and dependence on corn.

(5) South, Central America and Caribbeans:
There is thrust in developing more plants in these areas. Colombia is Praj's key reference and they have also won orders in Central America to build ethenol plants.

(6) Brazil;
A key proponent of bioethenol. They also focus on biodiesel. Brazil has mandated 2% mixing of biodiesel by 2009 and upto 5% by 2012. so brazil will be an opportunity for praj to showcase its biodiesel.


Conclusion:
As warren Buffet's principle says: invest in companies whose business is understandable and who are focused on one thing (like gilette in which buffet had sizble investment). Praj is focused in biofuels and they are good at it. Past performance has been good and future looks good. Even assuming 30% growth year on year, it is a good company to invest.

For more information I suggest the following link on Praj's Website:
http://www.praj.net/v2/index.php?option=com_content&task=view&id=294&Itemid=81

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