RE:RE:RE:RE:Doesn’t compute 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.
Before I go any further check this link out: https://www.canadianfuels.ca/our-industry/fuel-distribution/
The fuel delivery network in Canada is 100% controlled by the major fossil fuel companies. If you create any kind of renewable diesel or bio-diesel you need to sell it to them and beyond what those companies are required to have in their distribution network I can't think of any reason why they would pay a penny more for renewable diesel than it costs them to produce regular diesel.
To your point of dealing with governments, part of the reason I am so bullish on Cielo is that since they are solving a very real problem of removing waste that governments can't properly deal with, that governments have the power to simply increase the amount of renewable diesel required in pipelines to meet the capacity that Cielo produces. I also believe that Cielo will capture nearly 100% of North American bio/renewable diesel sales. There is a slight issue with the fact that its municipal governments who have to dispose of waste and the mandates for bio/renewable diesel in the pipelines I believe is federally mandated, but the waste streams they convert are such a global problem that I believe the federal government will support this.
As far as things I don't know. I have no idea how the American fuel distribution network works. I have no idea why someone was willing to pay above market rate for regular diesel to get Cielo's renewable unless they had to. I don't know anything about how the new carbon tax structure in Canada works. Maybe you can sell at a premium because the carbon credits offset the premium? I don't believe any of this has been explained to investors and there has been no justification from management as to why they feel the price they got for 900,000L of biodiesel one time is predictive of what the price will be as supply increases.
So my concern is simply supply and demand. If they supply more than is required to be in the pipeline they won't be able to sell it at a premium to traditional diesel. On the other hand their costs are so low that they can sell it significantly below their target price and still be incredibly profitable, which is why I feel confident that no matter how it shakes out that Cielo will turn huge profits. Assuming the technology works it's more of a question of will my 20k ish shares (my fund is only 5 figures) be worth millions in 10 years or tens of millions.
Anyway just some food for thought. I am highly skeptical of managements predictions and take them with a big grain of salt. Given the circumstances it actually doesn't bother me. The company can go ahead and say whatever they need to if that's what it takes to get enough funding to bring this technology to market. I figure you only get the chance two or three times in your life to invest in companies that are going to change the world and this certainly seems like one of those opportunities!
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.