24th January 2007

Biofuel companies such as Ft. Lauderdale, Fla.-based Losonoco are hoping to benefit from a federal plan to cut U.S. consumption of gasoline and replace it with biofuels.

In his State of the Union address Tuesday, President George Bush said biofuels will be key to a plan to cut gasoline consumption by 20% within 10 years. The proposal calls for expanding production of ethanol and other alternative fuels to 35 billion gallons per year by 2017.

Losonoco Inc. has raised $5 million in initial funding to create a network of bio-diesel, cellulosic ethanol and traditional ethanol refineries across the U.S. and Europe.

The capital was raised in a series of tranches from prominent individuals, with the most recent $2.5 million commitment arriving in November.
Among Losonoco's backers are board members Steve Percy, the former president and chief executive of BP PLC (BP) unit BP North America; Lady Barbara Judge, chairwoman of the U.K. Atomic Energy Authority; and Roger Putnam, former chairman of Ford Motor Co.'s (F) European division. Losonoco's founder and chief executive, Alan Banks, is the founder and former chief executive of Core Ratings Ltd., a governance, environmental and social research rating agency acquired by Fitch Ratings Ltd. in 2003.

The company, whose name is an acronym for "low sulphur dioxide, no carbon dioxide", is ready to begin construction of its first cellulosic plant, Banks said. To finance the new plant, Losonoco has hired a syndicate of investment bankers to raise an additional $30 million in venture capital from institutional investors, he said.

Boost From Bush
Losonoco could benefit from the Bush administration's plan to boost the use of renewable fuels in the U.S., said Banks.
"This is a paradigm shift that addresses huge issues of national security, the environment and employment, creating manufacturing jobs in rural America," Banks said.

Other alternative energy companies also could see growth. Venture capital and buyout firms invested hundreds of millions of dollars in biofuel companies in 2006. Among the mammoth deals that contributed to the rising totals for the biofuels sector in 2006 was the $140 million Series B financing for Goshen, Calif.-based Cilion Inc., an ethanol refiner backed by Advanced Equities Inc., Khosla Ventures, Yucaipa Companies and the newly formed Virgin Fuels business unit of Richard Branson's Virgin Group Ltd.
Two more ethanol producers, Iowa-based Renewable Energy Group Inc. and Los Angeles-based Altra Inc., raised $100 million and $120 million, respectively, in 2006.

"If cellulosic takes off, we're not going to see one company and three huge refineries; we're going to see hundreds, maybe thousands, of small refineries and a number of successful companies," Banks said.

Losonoco has sited locations for cellulosic ethanol and biodiesel facilities across the U.S., with plans for biofuels refineries in Florida, Pennsylvania and Washington state, Banks said. Losonoco will begin generating revenue from ethanol produced from a facility the company acquired last year in the southeastern U.S., Banks said.