RE:RE:RE:RE:RE:Doesn’t computeDougInGreen wrote: Firstly thank you for the kind words. There is a very real challenge that Cielo is going to face which has not been discussed at all on this board and that is offtake agreements. This is not an area I have expertise in but was lucky enough to have a conversation with someone who used to work in the agricultural bio-diesel space....
JustLookn wrote:
Hi Doug. I very much respect your posts, I look to yours first. One consideration, I do think there is potential to sell the product at a premium even as supply increases. (While the current market is an artificially created, government mandated market I believe they can change this status.) I have believed this for a while but even Bob confirmed today when he said that municipalities will get paid for feedstock and in turn ‘use those funds to purchase diesel’. I do believe that at every angle Cielo will tie diesel sales into feedstock arrangements. They will bypass the traditional fuel marketing system. Rail companies and municipalities and other green companies may pay a premium to be using a greener fuel, especially if sold to shareholders and taxpayers Part of a bigger green initiative of waste disposal. Imho.
Its an interesting discussion, I've had bit of a debate with an oil/gas guy as well and he raised same issues. His issue is both distribution and market size. Neither bother me. He's thinking like a traditional oil/gas company, to traditional, this will not be a traditional company. The renewable diesel market is currently an artificial market that they will capitalize on to start, but will create and grow so current market size is irrelevant. It will be much bigger than 2%. They will not need to blend, they will sell direct. They will not entirely rely on current distribution methods. Their strategy is to build plants near the feedstock and sell back locally, most likely customers are the same people supplying feedstock, to start. I see them locking in feedstock and sales together in one deal. Newfound money for feedstock for many supplying companies will justify the higher price for fuel, plus the green angle. For example, I see a major railroad announcing both feedstock supply and fuel purchase agreement as a customer relations/marketing initiative. Same with municipalities. So I really believe Cielo will get their premium price, even if they had supply beyond 2%. However if I'm wrong, smaller plants near feedstock will keep costs low, and to your point they will be a low cost producer.