Lignol Energy Corporation V.LEC

Revenue Model and Near-term Valuation

[TheRock07]

The link below is from a lignin conference presentation in 2010 in which lignin products are reviwed and a revenue model is considered ( see slide 21 )

https://www.epoverviews.com/oca/Michael%20Lake-SEBC%204Aug10.pdf

Note that the model uses prices of $2 per gal for ethanol and $1500 per ton for " green " ie high performance lignin products.
The illustrative cellulosic refinery produces 30 million gal of ethanol and 50,000 tons of lignin.
When used as a fuel, lignin adds another $7.5 million to ethanol revenues.
When used as high perf products, lignin adds $75 million to ethanol sales to boost total revs to $135 million..

Note that Lignol has more efficient extraction processes than that of the presentation model.
As a consequence, Lignol's proposed biorefinery will produce 55,000 tons of lignin along with 20 million gals of ethanol ( about 6 lbs of lignin for every gal of ethanol versus about 3.6 lbs for the presentation model ).

Using the above unit prices ( note tho that ethanol is about $2.50 per gal now ), Lignol's proposed biorefinery will generate about $122.5 million in annual sales , when lignin is produced as HP-L lignin derivatives.

Of course, Lignol has patents which will generate significant cash flows as well.

But, considering a stand-alone ,single cellulosic biorefinery producing both ethanol and HP-L lignin, at production rates identifed in Lignol's engineering study, Lignol's market cap would be about $250 million , at the peer value of two times annual sales.

Variations above and below this would be driven by cash costs of production.

A simple model that I use assumes that HP-L sales will pay all production and operational costs , leaving ethanol production as pure cash flows.......in this case, $40 million per year of free cash flow.

At a conservative 7.5 times annual cash flow, Lignol will have a fair value market cap of about $300 million , on its first ethanol biorefinery.
Patent royalties will be additional to this.

The current market cap is less than $10 million.
Assume 100 % additonal dilution, and the upside is still a factor of 15.

Which is why I see a Reggie home run here............but will we get taken out before then ?

[2guys]

Nice find TheRock07.  Good to read some information regarding HP-L Lignin and the potential market for it.I would really like for Lignol to have a similar Power Point Presentation on their website showing their process, the market potential for their products, and where they stand to their peers in commercializiation and possibly becoming the first profitable ethanol producer in the world

[birchjunk]

The price information in that link is very realistic and perhaps a bit low for 2011.Its very obvious now that Lignol is just 4-6 weeks away from final validation of its HPL product line-up.Initial results have met expectations, and so more product was sent to new customers along with new products to the same customers.This is the final step before the big move, which will come this summer.All of