RE:RE:Doesn’t compute
Ptinvestor99 wrote: Your selling price should be min what they already have a contract for (1.67), and if fuel costs are going up as predicted, that selling price will increase as well. I think then you can use cielo's share of jv at 30% till they recoup their costs (then cielo takes 50%)
Price will go down as they produce more fuel. That's just supply and demand. The price right now is dictated by the fact that fuel distributors at least in canada are required to have a certain percentage of bio-diesel mixed in. If that wasn't the case there would be no market for biodiesel at all as the oil companies certainly aren't going to pay more for diesel than it costs them to produce.
If we stick to looking at Canada we are trending towards needing 1 billion liters a year in bio-diesel. As supply increases with more and more plants they will create an over supply beyond what the oil companies will buy and will have to look to other ways to sell their fuel. That being said on a billion liters of fuel at a conservative 0.40 cent profit still gives them 400 million in gross profit, and that's just in Canada!
The price they can charge will come down as supply increases but it's still going to be a horrendously profitable venture. I find managements estimates to be overly bullish over the short term, but hey maybe that's the kind of forecasting it takes to get a 16 year project that's going to change the world to completion.