Gas to Liquid
Commencement of Operations Started 28/12/2006
The strategy of GTL Resources plc is to produce liquids such as methanol and ethanol from stranded gas, corn and other feedstocks with quality counterparties. GTL manages all aspects of a project: finance, feedstock supply, production and marketing.

In line with its strategy of seeking to develop and exploit markets for alternative fuels, GTL has, since the beginning of 2001, concentrated primarily upon developing methanol projects, principally in Australia, and, more recently, ethanol project work. The Board has recognised the strategic benefits of acquiring a cash generative asset on a shorter time scale than the typical methanol construction time of three years. In furtherance of this strategy, on 6 September 2005 GTL Resources acquired a controlling interest in Illinois River Energy (IRE) to build an ethanol plant at Rochelle, Illinois, through its wholly owned subsidiary, GTL USA, which has been established for the purpose of investing in ethanol projects in the USA. GTL USA has invested in IRE by way of a subscription for units of IRE pursuant to the Unit Purchase Agreement.

This project has the advantage that the Plant is expected to produce revenues on a shorter time scale and at a significantly lower capital cost than the methanol plant in Australia.

The Company intends to further expand within the ethanol industry in the United States or other suitable markets by selective acquisition of low cost production facilities. The Company sees itself as a potential consolidator of ethanol plants in a particularly fragmented market.

FT Tip
GTL Resources, an Aim-listed company. It raised money to build an ethanol plant in the US. Raw materials costs have risen but the price of ethanol has gone through the roof. The earnings potential should be spectacular.

New Plant

Construction started at Rochelle, Illinois site in September and production from the 50 million gallon per annum ethanol plant is expected to commence in the fourth quarter of 2006. Following unusually mild weather in Illinois the project has progressed well and is on schedule and on budget. Whilst the Companys main efforts centre on the successful delivery of the US ethanol project at Rochelle, the potential expansion of that site to 100 million gallons is being investigated. In addition and consistent
with GTLs stated strategy for the expansion of its interests in the ethanol industry, other ethanol opportunities have also been identified and will be analysed. Pictures Of The Site Under Construction March 27, 2006 http://www.illinoisriverenergy.com/html/construction.html


Arden
http://gtlresources.com/documents/ArdenAnalystResearchNote.pdf
http://www.gtlresources.com/documents/ArdenAnalystResearchNote.pdf
BBC News Item On Ethanol
http://news.bbc.co.uk/nolavconsole/ukfs_news/hi/newsid_4940000/newsid_4948400/bb_wm_4948456.stm

Ethanol Priceshttp://ethanolmarket.aghost.net/
Ethanol as a Transportation Fuel
http://energy.ca.gov/afvs/vehicle_fact_sheets/ethanol.html

Annual report for 2006
http://www.gtlresources.com/documents/GTLAnnualReport2006_001.pdf
Pics from Ethanol Producer Magazine of GTL's plant.
http://ethanolproducer.com/plant-images.jsp?plant_id=302&image_id=59
Commencement of Operations Started 28/12/2006
http://www.gtlresources.com/
Economics of Ethanol
http://www.ces.purdue.edu/extmedia/ID/ID-339.pdf
2 July 2007 GTL Resources FY pretax loss narrows, plans 13 mln stg placing to fund expansion
http://moneyam.uk-wire.com/cgi-bin/articles/200707020705014067Z.html
GTL Web Site
http://www.gtlresources.com/

as you have previosuly stated many, many a time cynic

indeed i have, just as i regularly warned about BFC, SUB, EME, ELP and a few others ..... but equally praised the likes of DOM, RTN, PFC, POG etc

i can see your point of view and i might be looking to invest more in D1 - I m expecting some profit taking in the near future as the news flow dries up.
But i still believe that the money that will be made by GTL in the next few years will justify a much higher SP and thats why Im still holding.

Ethanol and old George.
http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/vNRc41oRuuP0.asf

thanks for the link spitfire but im trying to find the actual report. On Ardens website it says it constructed one and released it on the 26th of march. Thats what im looking for

Has everyone rann away? Been away for couple of days,no posts since March 31.

chesney
Waiting patiently, no floods no earth quakes, no tornados at the plant so must be producing loads of the stuff, revenue and profit just waiting for the rise and waiting and waiting.

funny you should mention that Driver I was wondering if the plant was near any areas that are particulalry tornado prone!
Just got the new Arden Report through - I'll update on any interesting points after I read it through today -GDP.

Well good/bad news in the 1st line.
GTL have hedged both their corn and ETHANOL. And theyve hedged the Ethanol at $1.90, well below todays price. We know the corn has been hedged at $3.5 which creates a net cash flow per share of 20.4p (Cash yield 13.2%), if the prices achieved were however at todays prices the net cash flow per share would be 28.3p (Cash yield 18.3%).

for every 3$ of corn 1$ of DDG is produced (currently being sold at $130 a tonne),

Expanding the plant will, although many of the existing buildings can be used, cost around the same amount as the entire plant originally cost to build. (Est.$107mil)
Takes 18 months to expand.

They've got a graph which creates a peer comparison for GTL based on the S.P and mrkt.cap of each company to create a $/gallon of production comparison.
GTL is therefore currently trading at 2$ per gallon of production compared to Renova - 3$, US BioEnergy $2.5, Pacific Ethanol $3.1 and VeraSun $2.9

This translates into a 40% discount at equity level to GTL's peers. (Based on an SP of 150 p = $3 dollars a share)

GDP, thanks for your summary of the Arden report (somehow I have still been too lazy to look at it myself!)

I'm not surprised that IRE has hedged its ethanol sales. It's only prudent, and were there to be further drops in the price of ethanol then we'd see why. At today's price of 210, it would only have to drop 10%, which could quite easily happen if there was a situation of oversupply for any reason.

That peer comparison chart proves what we have suspected all along. I wonder why RVA is valued so highly in comparison.

Running my old set of calculations again, using Arden's figures:

So if the IRE plant gets 2.8 gallons ethanol per bushel of corn:

Ethanol price hedged at $1.90 per gallon: 1.9 x 2.8 = 5.32

Sutract cost of corn $3.50 per bushel = $1.82 gross profit per bushel.

Work that back to profits per gallon of ethanol, i.e. divide by 2.8 and you get: 65 cents gross profit per gallon of ethanol.

0.65 x 50 million = $32.5 million gross profit (on turnover of $95 million; we are ignoring sales of by-product DDS, and any unhedged or overshoot production for the purposes of this model).

Hazard a guess at the running and admin costs; smaller company RVA seems to cost about $3.6 mil a year. Call it $6.5 for IRE?

$32.5 - $6.5 leaves $26.5 mil pre-tax. That's 13.25 mil, and about 9.28 mil after tax. Of which GTL owns an 85% share, which is 7.9 mil

..........................

7.9 mil divided by 23 mil shares gives EPS of 34p

According to Arden, EPS will be more like 20p (so I stand corrected). However, my model was essentially EBITDA and not net earnings, which was the main drawback in my calculations.

20p a share ain't bad - so the stock should be at 200p or above, right, if we assume PE 10 is reasonable?(

Thanks GDP for the info. Are you able to post a link to the new report (or forward - I'll send you my private email address)? When I checked GTL's website just now I could only find the old one from 2006. Thanks in advance.


PDYOR, etc.

Soul - I spent a long time searching for the report online with no success and so got a contact to have a go and they have since sent me sent a paper copy through - sorry i cant be more helpful.

Okay, thanks anyway!

I notice Arden are still showing the original 2008 EPS of 11.6p, but dated as 26th March Recommendation, would be good to see them update it to 20p.

A month or so back I sent an E Mail to Arden questioning the 11.6p EPS, strangely enough I didn't receive a reply. (Can't blame them really)

Thank you GD Potts for posting the Arden report, like you I couldn't find it on the web either, you must have better contacts then me.

been away,where have the posters gone?

chesneywilliam
Still here still waiting.

more bad news in todays, or ot could have been yesterdays times saying that meat prices in the US are soaring as a consequence of ehtanol being used.