Pure Energy eyes trash-to-gas IPO
by Oliver Ludwig
NEW YORK, Feb 12 (Reuters) - Pure Energy Corp. plans to
use garbage to make a gasoline substitute and hopes to
make a splash in public equity markets with an initial
public offering (IPO) by early next year.
"Once we go public we're going to be under a high
power electron microscope," said Merrick Andlinger,
Chief Executive of the company that holds a patent to turn
ordinary trash into a clean-burning gasoline substitute.
Pure Energy is hoping the appeal of its products in cutting
U.S. reliance on imported oil and getting rid of tons of
unwanted garbage are enough to get a piece of a gasoline market
controlled and fiercely defended by Big Oil.
But the company, whose new fuel will be roughly 70 percent
trash and 30 percent natural gas liquids, will need from
$125 to $150 million to build its first commercial plant,
Andlinger said in an interview at the company's New York
"There will be a component of debt and a component of
equity," said Andlinger, a former Wall Street investment
banker specializing in energy. He noted the company's
financial advisor is Wall Street player Donaldson, Lufkin
Using data from two pilot plants, the company
plans to put together a financing package by the
end of this year detailing the economics of the commercial
plant. That would set the stage for an initial public
offering (IPO), Andlinger said.
He noted that Pure Energy, now closely held by
directors and a small cadre of private investors,
would give up an unspecified minority stake in any public
Pure Energy is also likely to issue "recourse debt"
which would offer a stake in the plant to its holders
Talks are already underway for the plant to be built
either in the densely populated Northeast or California.
But the Pure Energy chief stressed that any location near
a big city with air pollution and lots of trash would be
That first plant will have capacity of at least 30 million
gallons a year, or enough to power 30,000 to 40,000 cars
per year, and will be built no more than 100 miles (160 km)
from where its users are.
The first plant, which Andlinger says will be operational
by 2001, will produce "P-series," a fuel made largely
from trash-based ethanol and aimed at government vehicle
fleets so that Pure Energy can gain a foothold in a
The U.S. Department of Energy (DOE) said P-series is near
approval as an alternative fuel, and Andlinger said that
should ease its acceptance into government fleets. By
2002, 75 percent of all state and federal government vehicles
will have to have the ability to run on alternative fuels.
But the challenge to grab additional market share beyond
government fleets looks terribly daunting at the moment as
oil prices have lost 30 percent since last autumn and are still
falling amid a growing supply glut.
But Andlinger is more excited about Pure Energy's long
term prospects than he is by falling oil prices, which
he considers a near-term challenge.
The company has three other products in various
planning stages, and is looking to expand the trash-to-fuel
concept outside the U.S.
Andlinger has particularly high hopes for "E-series,"
a gasoline additive aimed at winning a piece of the
federally-mandated oxygenate market, now nearly 300,000
barrels per day. (12.6 million gallons bpd).
He said he hopes E-series, which will have a higher
ethanol content than P-series, will grab market share
away from the controversial fossil-fuel based oxygenate MTBE.
MTBE (methyl tertiary butyl ether), used in one-third
of U.S. gasoline at concentrations of about 11 percent
by volume, has been plagued by charges that it contaminates
E-series will have a special formulation that will
keep it from evaporating and releasing smog-causing
compounds as much as gasoline oxygenated with pure ethanol,
The company also plans a diesel fuel made partly
from trash as well as another garbage-based gasoline
substitute that will be cheaper than P-series and aimed
at the consumer market.
Pure Energy will go ahead with its plans whether or
not it gets financial help from the government in the
form of incentives for the company or consumers, but Andlinger
noted such support would speed the transition to renewable
"We are planning for free-standing economics of our
products regardless of tax incentives."
"But we think it's important that those kinds of incentives
exist as we and others are developing this industry,
recognizing that those are temporary and we're planning for
the day when they don't exist," said Andlinger.©