Global Clean Energy Holdings, Inc. (GCEH-OTC: BB)
May 21, 2010 Issue
The Most Powerful Name In Corporate News and Information
Global Clean Energy Holdings, Inc. Is Successfully Providing Non-Food Based Feedstock Into The Biofuels Market And Doing It At A Cost Effective Sustainable Price Point - Global Clean Energy is positioned well for exponential growth
Energy Holdings, Inc. (Global) is a Los Angeles-based ag-energy feedstock
development and operations company with international capabilities in
eco-friendly biofuel feedstock research, and sustainable agriculture
cultivation, production, and distribution.
CEO and President
Richard Palmer is the President and Chief Executive Officer of Global Clean Energy Holdings, Inc. Mr. Palmer is also a member of the Board of Directors. Mr. Palmer has more than 25 years of hands-on experience in the energy industry and held senior level management positions with a number of large engineering, development, operations and construction companies. He was a co-founder of Mobius Risk Group, LLC, an energy risk advisory services firm, and was a principal and Executive Vice President of that firm from January 2002 until September 2007. From 1997 to 2002, Mr. Palmer was a Senior Director at Enron Energy Services responsible for structuring of complex energy transactions ranging in total value of $250 million to $3.2 Billion. Prior, from 1995 to 1996, Mr. Palmer was Vice President of Bentley Engineering and a Senior Vice President of Southland Industries from 1993 to 1996. Mr. Palmer received his designation as a Certified Energy Manager in 1999, holds two Business Management Certificates from the University of Southern California's Business School, and is an active member of both the American Society of Plant Biologists and the International Tropical Farmers Association.
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published - May 21, 2010
CEOCFO: Mr. Palmer, what was your vision when you became CEO, and where are you today?
Mr. Palmer: The vision has always been developing a reliable supply of sustainable, subsidy free, non-food based plant oils to replace the use of fossil fuels. There have been many problems and a lot of controversy associated with food-based biofuel production. We began researching alternative feedstock years before there was the controversy around corn-based ethanol and soy, palm and canola based biofuels. There is an economic disconnect utilizing food based feedstock since there is no correlation between the cost of the food-based fuel feedstock and the fossil fuel market. Anytime you have non-correlated markets like that, you are going to run a risk where the costs exceed the market price, which is the case in both the ethanol and biodiesel markets. Plus, using food for fuel is just fundamentally wrong. There are plenty of plant oils, that are not food-based that can be used for fuel. Look at where the biofuels market started and where it is today, you can actually see that with all the food-based fuels, there is a problem with the cost component. The only thing keeping them alive is the subsidy provided by the Federal Government. Our vision, right from the beginning, was to produce a cost based, non-food based, alternative feedstock into the biofuels market as a replacement for fossil fuels, at a cost effective price point, without the need for subsidies.
CEOCFO: How are you preparing to do that?
Mr. Palmer: We are focused on non-food based feedstocks that can be produced in a self-sustaining manner, without sacrificing the environment and without displacing land that can be used for food crops. We are currently focused on one plant, Jatropha curcas, which is a tree that is indigenous to Mesoamerica; Mexico and Central America and the Caribbean. Jatropha is indigenous to many regions of Mexico where it grows with natural rainfall and grows in soil that was not necessarily conducive to growing food. This is a very hearty plant, if planted in the proper climatic regions, does not require expensive irrigation systems. We like the fact that Jatropha can be grown on soils that do not take away from food-based products and crops, and that we can farm it in areas of the world that desperately need the employment; very poor areas of the world where unemployment is extremely high. It allows us to use land that is not used for anything else. We are able to add incremental productive land into the market. In this manner, we are able to produce these feedstocks very cost effectively.
CEOCFO: What is happening today?
Mr. Palmer: Our focus is to make sure that our “best in class” farming processes and procedures are in place so that we can be very efficient with our farming operation. This will ensure that will be a low-cost producer in this space. We continue to invest large sums in research & development, on land and on continually improving our farming operations. We own a little over 8,800 acres of land on three farms in Mexico and Belize and we have almost 6,000 of those acres already planted, with a number of those acres already productive. We are selling these products into the market. So where are we today? We continue to expand our farms, we continue to improve our farming practices and have applied “Best Practices” to all of our procedures. We continue to develop high-value markets for our products.
We are planting everyday…
We just reported net earnings in 2009, which represents our 1st year of earnings ever in the company’s history. We acquired additional land in 2010 to expand our farming operations. We expect to continue expansion and could more than quadruple our farms over the next 24 months. Our investors continue to support that effort, as they see that our cost base is in line with what our original expectations. We continue to learn more and more about this plant, it is a very young plant genetically speaking, so we continue to invest in research and development to continue to improve its yield. We are creating many new jobs, supporting a strong social structure and adding productive land to the environment, while growing a self-sustaining, highly scalable business.
CEOCFO: How did you find the Jatropha plant?
Mr. Palmer: We spent years researching different plants that were capable of producing non-food based oils to replace fossil fuels. We needed a plant that could produce commercial yields in less than 5 years, one that could be grown with minimal inputs, and a plant that could be grown without the need for subsidies. The only one we found that fit our criteria was Jatropha curcas. This plant had been the focus of early research in Central America as well as in Europe. They have also been doing some research on it in India and Africa. As we spent more time with the plant it became very clear that this plant’s genetic roots are in Mexico, so where better to let it thrive than where it is from. We really liked the Mexican market because of its close relationship economically and logistically to the US market, the largest single user of diesel fuel in the world. Mexico is a strong NAFTA ally with the US and provides areas where land and labor costs can support the economics…this added to the close proximity to the United States, makes Mexico the perfect solution. We started with a 75 acre test farm in Mexico about 4 years ago. We started gathering all the different varieties of Jatropha from all over the world. We now have over 35 different varieties planted in our research farm in Mexico. Based on the results we found, we selected specific varieties which we planted in our 5,000-acre farm. From these approximate 4 million trees, we continued to extract selected varieties and expand our farm with the improve varieties.
CEOCFO: What happens when the plant is ready?
Mr. Palmer: We grow the Jatropha plant; it produces a fruit which we harvest. The fruit is about the size of a walnut and when you open up the fruit, inside of each fruit there are three large seeds, each seed is about the size of a pinto bean. That pinto bean-sized seed contains about 35% oil. The oil is a very high-grade vegetable oil, it is not edible, but it is a perfect oil as a fossil fuel replacement. The high-grade oil can be converted into a replacement for diesel fuel or jet fuel ior can be used as a direct fossil fuel replacement without any further processing.
CEOCFO: Walk us through the extraction process and how you get it to the end user?
Mr. Palmer: First of all, we are a grower. Once grown the trees, we harvest the fruit, separate the seeds from the fruit. We utilize the fruit as as a natural fertilizer, which we put back onto our fields. We extract the oil in a very simplistic mechanical process. We utilize a specialized screw press which extracts about 92-94% of the oil from the seeds. We end up with a crude oil. That oil is the feedstock which can be sued in its raw form or can be easily converted into other liquid fuels. We ship the raw oil or Crude Jatropha Oil (CJO) to end users or refiners. That oil can be directly used in medium-speed diesel engines used for power generation, or in furnaces and boiler or, with a rather simplistic process called transesterfication, the oil can be converted into biodiesel or through hydro-treating, can be converted into a jet fuel replacement.
CEOCFO: Where do you sell your products?
Mr. Palmer: Our largest customers are industrial users and US based biodiesel refineries. The users or refineries which are located on the Gulf of Mexico sea ports are going to be the best candidates because we can transport our products via ocean barge from our farm. The oil is biodegradable so we don’t have the concern over oil spills, like crude oil. A little fact: Our farm is closer to Houston Texas than El Paso is to Houston Texas, and we can ship it very efficiently in tankers across the Gulf of Mexico. It is a lot more efficient bringing a large volume of oil in a tanker or an ocean-going barge across the Gulf of Mexico than it is to bring oil from any of the US States that produce vegetable oil. It is a lot cheaper and logistically a lot more efficient.
CEOCFO: What is the market potential?
Mr. Palmer: I don’t think that any one crop or any one product is an end-all answer to all of our problems. The diesel market in the world is about 250 billion gallons a year, and the US market is over 60 billion gallons a year, both of which are growing. Even if we produce everything that we plan to produce, 500 to 600 million gallons a year, it is a very small percentage of the total market. We essentially have an unlimited market. People ask me who our competitors are. There really aren’t any direct competitors in the market because the market size is so large. There is little chance that Jatropha farmers will ever be competing for the same customers. I expect that all of our oil will be sold before it ever leaves our farm. We do not expect to have inventory sitting around waiting to sell. We will have long term contracts with end users that will either be using it for power generation, converting it into a jet fuel or diesel fuel replacement, or users they are using it for other high-value feedstocks such as green chemicals or green plastics. The plant oil is a hydrocarbon and it can be used to replace a lot of petroleum feedstocks. Most any process that uses petroleum based feedstocks can use Jatropha oil. The first diesel engines didn’t run on fossil fuel, they ran on peanut oil, and could run on any vegetable oils. The only reason they have been running off fossil fuels for all these years is because fossil fuels have been very inexpensive. Once you get above $30 or $40 a barrel for oil, plant oils become more effective and more cost effective. The engines actually run better on plant oils and the emissions are significantly lower. From a national security point of view, these oils can be grown in friendly countries. It is a very effective risk management strategy to hedge the volatility of politics in the Middle East, South America or other places that control crude oil production. We are producing a cost-based fuel, not a market based product.
CEOCFO: Do you see challenges ahead as you continue to grow?
Mr. Palmer: Without a doubt, we see challenges. We expect exponential growth, and anytime a company expects this scale of expansion, there are many challenges. These include finding good people, raising capital and making sure there are very tight controls on operations. All of these are very big issues and we have a strategy in place for each one of them. We have invested a lot in developing very tight processes and procedures. Also with any type of agricultural business, you always have the unknowns of Mother Nature. We have in place controls so that our farms are strategically separated to reduce our risk of natural disasters like fires and floods and other natural occurrences. We have a very strong risk management strategy in place to identify, quantify and mitigate those risks. However, you have to balance the risks with the opportunity that exists since. This is such a young plant genetically speaking, so we have significant opportunity for improved genetic development. There has been very little genetic research and development performed on this plant. We are working with a number of leading US Plant Science Universities on plant and genetic development. Their expectation is that we can experience exponential yield expansion based upon a structured plant breeding and genetic development program. We expect this will be the first plant commercialized utilizing modern genomics. This, linked with a strong agronomy (soil science) program and an agricultural technologies development program, will allow us to see a 400 to 500% increase in yield over the next ten to fifteen years. This is a reasonable and achievable goal. This level of yield improvement has been seen in many other commercialized plants including corn, rice and wheat...and many others.
CEOCFO: Has your research become proprietary?
Mr. Palmer: There many different parts of our R&D program that are proprietary without a doubt. As we perform genetic research and development and continue to institute our strategic plant breeding program, we will continually develop special high yielding varieties that have characteristics that we can protect through the patent process. Our process integrates genetics, agronomy, and agricultural technologies…this combination is very powerful and is highly proprietary. The most successful plant science companies in the world, who provide plants into the market, protect their intellectual property. We are doing the exact same thing.
CEOCFO: Why should potential investors pay attention to Global Clean Energy?
Mr. Palmer: Many companies are trying to develop the silver bullet to solve the energy issue. Our belief is that there is no one answer. We feel that a strong strategy, good sound business practices and sound application of science is the winning formula. We feel we have a good strategy that is commercially viable now. We already have commercial scale and have a highly scalable business model.
As we look at the growing demand in the world for liquid and solid fuels, I do not expect that we are going to change our lifestyles. So, we need solid reliable solutions to feed that demand. Global Clean Energy is going to be part of that solution.
The need for liquid transportation fuels will continue to grow as worldwide industrial demand grows in developed and developing countries like China, India. We are going to continue to see a growing appetite for fossil fuels and the cost of those fossil fuels are going to go up...substantially. In addition, we have a finite amount of fossil fuel available in the market place. Many experts feel we are going to hit that peak soon, if we haven’t hit it already. We are not going to be able to satisfy all the liquid fuel requirements in the world. We feel our strategy is sound and the increase in demand can be fulfilled in a socially and environmental responsible manner by utilizing plant-based fuel in trucks, jets, power generation and other diesel vehicles. It is a more secure approach and a more cost-effective approach. Just from a risk management approach, it is a lot more predictable way to go without the environmental risks associated with oil drilling, transportation and fossil fuel combustion. We will NEVER have an environmental catastrophe associated with our plant oils, like the one unfolding in the Gulf of Mexico from the oil spill from British Petroleum’s (BP’s) crude oil drilling platform fire.
We have developed a highly scalable model. We are taking a very engineered and process based approach to our farming. We feel we are on a solid path with genetics working toward the improvement of yields as well as the development of proprietary varieties that will give us a very high valued edge in the market place. This will allow us to grow significantly.
CEOCFO: Final thoughts, what should people remember most about Global Clean Energy and your product?
Mr. Palmer: First of all; whatever the combination of solutions are in the energy market, each one has to be economical and each has to stand on its own two feet, without being reliant on subsides to survive, or it won’t be sustainable. Global Clean Energy has that solution. Secondly, we need to always consider the social point of view. We need well thought out approaches which creates new jobs. Global Clean Energy has already created hundreds of new “green collar” jobs, and this could grow exponentially with our business. These are very good jobs, which include management jobs, technology jobs, and skilled and unskilled farming jobs. The third item to consider is the total impact of the solution on the environment. While many solutions look good on the surface, once you dig deep you find they could be doing more harm to the environment than good. Global Clean Energy’s Jatropha farm developments create a significant benefit to the environment. We have about 4.0 million new trees already planted. By continually adding more trees, we are filtering more CO2 from the atmosphere than we are creating.
What Global Clean Energy is doing is
economical, socially beneficial, environmentally responsible and most
importantly it is sustainable and scalable.
Global Clean Energy Holdings (Symbol: GCEH) has developed a highly scalable model and are taking a very engineered and process based approach to its farming operations. They are on a solid path with genetics working toward the improvement of yields as well as the development of proprietary varieties that will give them a very high value edge in the market place. This will allow them to grow significantly. - Richard Palmer
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