Shares of the biofuel maker skyrocket 15 percent today as New Generation signs supply deals from its new facility in Baltimore.

25/03/2009 (CleanTeach) - Lake Mary, Fla.-based New Generation Biofuels Holdings (NASDAQ: NGBF) plans to announce Thursday morning that it has signed its second supply deal this week.

New Generation uses emulsification to produce fuel from biodiesel feedstocks. The biofuel is to be supplied from the company's new Baltimore manufacturing plant and used to run commercial or industrial boilers as a replacement for diesel or kerosene.

New Generation CEO Cary Claiborne told the Cleantech Group after the market closed today that the company has signed a yearlong contract to provide about 370,000 gallons of biofuel to Maryland-based greenhouse Catoctin Mountain Growers, which sells plants and shrubs to retailers including Wal-Mart. The fuel will be used to run Catoctin's boilers.

Just yesterday, New Generation announced a 371,000 gallon yearlong contract with Baltimore, Md.-based Delta Chemical, a manufacturer of aluminum-based water treatment chemicals. The fuel is expected to fulfill 50 percent of the company's energy demand and be used in its Cleaver-Brooks lead boiler.

Shares of New Generation were up more than 15 percent at the close of trading to $0.61.

New Generation didn't release financial terms of the contracts because the value will vary in conjunction with the market price of diesel. Along with a contract signed in October to supply fuel for boilers at Taunton State Hospital, the three deals represent nearly 1 million gallons per year.

The newly commissioned Baltimore facility has the capacity to produce 5 million gallons of biofuel a year when fully operational, and Claiborne said the plant has the capacity to be expanded to 50 million gallons a year if the demand is there (see New Generation Biofuels to build plant in Baltimore).

New Generation is targeting just a segment of the biodiesel market: the fuel to power commercial and industrial boilers. Claiborne estimated the market at 5.2 billion gallons each year in the U.S. And New Generation is further segmenting that market by selling to small industrial and commercial users.

"There are smaller opportunities individually than, say, a power plant, but the decision-making process seems to move a lot faster and the sales cycle is shorter, which means we can get more customers faster," Claiborne said. "For Delta Chemical, we sent them fuel to test on Monday, and a week later we had a contract with them."

The Delta Chemical project will be the first using New Generation's technology in a boiler by Cleaver-Brooks, the largest boiler manufacturer in the U.S. Proving the fuel works in those boilers could help New Generation secure new clients, Claiborne said.

New Generation holds the exclusive license in North America, Central America and the Caribbean to a technology that blends emulsifiers with oil, producing the biofuel without any waste products. That differs from traditional biodiesel producers that use chemical reactions and refine the product to remove glycerin and other substances.

New Generation's fuel can be used in 100-percent blends, whereas most biodiesel is blended with petroleum-based diesel. The resulting fuel has a roughly 30-percent lower BTU content, so New Generationsets its per-gallon price at about 30 percent lower than traditional diesel.

"It's a need out there," Claiborne said. "These companies want to be completely green and renewable, and we help them change their entire fuel supply. Look at Catoctin. They want to be able to go to Wal-Mart and say we're doing our part, we're using a clean-burning fuel" (see Wal-Mart goes local).

Claiborne said the blending process is less capital- and energy-intensive than refining, and it requires less space. The cost is about 25 percent of a traditional biodiesel plant, and the footprint is about one-tenth the size. 

New Generation uses soybean oil currently but has tested its process with waste vegetable oil, animal fats, jatropha, and palm oil. 

Claiborne took over as CEO last week from David Gillespie, who resigned. Claiborne is continuing to serve as CFO. The company has about 10 employees in addition to contractors.

Earlier this month,New Generation announced a private placement of $1.5 million through the sale of common stock and warrants. New Generation Biofuels changed its name from H2Diesel in 2008 (see FirstEnergy to test biofuel from New Generation Biofuels MPOB Palm News on 02/04/2008).