LiquidMaize Project

The principals of ThinkBox Group, LLC. (TBOX) along with an experienced team of investment bankers and industry experts have established a business model to produce over 20 million gallons of sustainable biofuels from diverse feedstocks and more than 160,000 tons of co-feed products annually. The result: reduced shipping costs for both biofuels and wet distiller’s grains (WDG), a by-product of biofuel production, lower capital expense and lower operating costs, resulting in higher margins. The $65 million project is scheduled to begin operations in the fourth quarter of 2009.

Under the company and brand name LiquidMaize, LLC (LQM), the team has developed an innovative, sustainable, more profitable biofuels production model that reduces carbon emissions, uses less water, generates energy from nearby animal waste, and utilizes locally-grown next-generation feedstocks, not just corn. The plants will be located near local fuel terminals rather than corn fields. The biofuel will then be “short-hauled” by truck, eliminating the need for capital investment in rail infrastructure and additional tank storage capacity.

The LQM plants are being designed for the future, incorporating an Advanced Biofuel Commercialization Strategy into the company’s business model. In cooperation with Colorado State University and ICM, Inc., LQM integrates alternative feedstocks with advanced bioprocessing technologies to produce biofuels and hi-protein feeds while mitigating risks to the investors.

Birth of a Revolution

The LQM facilities will utilize sustainable, non-food feedstocks as new bioprocessing technologies and feedstock supply markets evolve. The LQM short-haul business model integrates technical, market and strategic business elements into a concise commercialization platform. Future feedstocks include white millet and sweet potatoes (dubbed v 1.5), alfalfa and prairie grass (dubbed v 2.0) and finally algae (dubbed v3.0).
Twenty years from now, energy experts may look back on a series of ThinkBox Group conversations in Washington, D.C. as a turning point in the quest to turn biofuel into a viable replacement for fossil fuels.

It was 2001, biofuel process were significantly below current market levels, causing developers to struggle in their efforts to produce biofuels profitably. Corn prices were destined to take a dramatic jump, further inhibiting ethanol producers’ ability to lessen the nation’s dependence on foreign oil.

But in the halls of the U.S. Capitol Building, ThinkBox partner Daron Coates had an informal conversation about a small amount of money earmarked to assess bringing ethanol to Alabama. ThinkBox Group principals went straight to work on a study that eventually gave birth to an exciting new business model they termed short-haul ethanol™. The Group contracted with the National Renewable Energy Laboratory in Golden, Colorado, on what turned out to be a multi-million dollar cooperative research and development grant.

“We had to figure out how to work within the existing economics of the agriculture, energy and construction industries and sell ethanol and other biofuels at a profit,” said Coates. “We knew we had to reduce the capital investment and the operating costs.”

In the course of their research on sustainable biofuel production and the challenges involved, they stumbled upon a 7.5 million gallon ethanol plant for sale in the Midwest; ThinkBox Group began preparing an acquisition offer before the owners pulled the facility off the market. The ThinkBox partners had become intrigued however by the concept of a small standalone plant, capable of producing biofuels on a “just in time” basis, with little need for costly storage facilities or rail infrastructure.

The Short-Haul Model

The final study included additional critical elements for the success of biofuels in the 21st century. For instance, the team had to solve the obvious problem of where to build the plant. ThinkBox Group hit upon the idea of a sustainable biofuels plant model that could thrive economically by maximizing the production and sale of wet distiller’s grain. In Alabama, Paul Orentas originally assessed the establishment of dairy farms near the ethanol plants, where the high-protein WDG could easily be sold directly to a captive market. (That model is being pursued in various regions in the U.S. today.) However, when ThinkBox partner Grant Hall established a relationship with one of the largest cattle feeders in the nation utilizing a detailed site selection process, an alternative course was clear, and LQM had to go west.

As much sense as this business model seems to make today, it took three years to convince their first investor to provide the funds necessary to develop an 11 million-gallon plant. LiquidMaize was incorporated in 2006, and the plant development process began – working through the tangled avenues of government permitting, construction contracts and buyer agreements.

“One of our advantages was the relationship that Grant Hall had with Joe Spitz, the fourth largest cattle feeder in the nation,” Coates said. “As soon as we had Joe Spitz on board, we got our main investor to commit.” As Mr. Spitz says, “ThinkBox, and in particular Grant, worked really hard over time to prove to me that they were for real and that they had the ability to take this project from a concept to a mutually profitable operation.”

The next step for ThinkBox Group was to staff LQM with industry experts that were proven in diverse fields. ThinkBox Group selected professionals from the project finance, investment banking and ethanol construction industries to ensure that the new venture was operated by those with a comprehensive understanding of day-to-day operations and the requirements of biofuel project development.
The goal was to work toward a comprehensive, fully developed project, which translated into the need for permits and contracts. LQM turned to ICM, Inc. of Colwich, Kansas, an ethanol engineering and construction firm, well known for its expertise. At this time no ethanol engineering firms were designing smaller plants, a critical element of the LQM business model. The development team led by Orentas conducted a detailed venture assessment and finally demonstrated to ICM the advantage of the smaller plant. It required fewer natural resources, including water, could generate energy from nearby manure, and could handle a diversity of feedstocks. “ICM recognized the geographic flexibility of this business model as a significant opportunity for domestic and international business development,” says Paul.

ThinkBox Group next lined up its initial investor by tapping into the George Washington University alumni network. They found an experienced investment banker who happened to share a passion for clean energy and the environment.

Perhaps the greatest challenge in the development of the plant was the complexity of applications for permits at the various levels of government (local, county and state). LQM had to get a construction permit, a site survey, and a Phase 1 environmental survey in advance of the air permit. In addition the Plant required a special use permit and had to get the plant layout approved.

By June 2007, the partners received key permitting for water and stormwater discharge. While red tape caused a bit of a delay in the confirmation of the air permit, it finally arrived in February 2008 – a cause of much celebration among the ThinkBox Group and LQM partners. (Since then, they have also received an air permit for a facility planned for Gonzales, Texas.)

Lamar Groundbreaking

In March 2008 it was time to unveil the Lamar, Colorado LQM plans to the world in the form of a groundbreaking ceremony. More than 150 people – including Gov. Bill Ritter of Colorado – attended the ceremony. The Governor expressed his pleasure at the imminence of an ethanol plant that would create jobs, pump millions of dollars into the local economy, and provide a key piece in his plans for a state that would reduce its dependence on traditional energy by 20 percent within 12 years, Colorado’s New Energy Economy.

Bright Future for Biofuels

Despite higher commodity prices and financial market distress, the principals see a bright future in biofuels. They are establishing relationships with additional financing sources, and the use of ethanol in the U.S. continues to grow and gain wider acceptance. They are also applying the vast experience gained on this project to advanced biofuels such as bio-butanol and cellulosic ethanol, as well as bioproducts and other forms of energy from the sun, wind, waste, and water.

Paul Orentas sums it up this way:

“Clearly we have reached a critical point where every unit of energy is valuable and we, as a nation, need to make energy conservation and sustainable alternatives a top priority. ThinkBox Group is well positioned to provide the complex skill sets needed to further the growth and integration of diverse sources of energy.”