26/6/06 (The Star)   - BIOFUEL stocks continue to ignite interest in the US. VeraSun Energy Corp, an ethanol producer, made its debut on the New York Stock Exchange in the middle of the month and drove off to a racy start. 

VeraSun's share price closed 30% higher from its initial public offering (IPO) price on its listing day. 

The listing exercise of VeraSun raised US$420mil (RM1.5bil) that will enable the company, which already operates two large ethanol plants, to build two more. Upcoming IPOs of other ethanol companies are therefore also expected to draw large sums of fresh capital to finance their expansion. 

VeraSun now has a market capitalisation of almost US$2bil. It's not all hype. The company reported a net profit of US$13.6mil in its first quarter, and it has large new capacities in the works. 

There is, however, much discussion in the US over the economics in the production of ethanol, extracted from sugar-rich crops, to replace petrol. 

The differences of opinion centre on huge government subsidies for corn - the feedstock for ethanol in the US - and some studies that claim that in the production of ethanol, fuel input is higher than the fuel output. 

According to these estimates, the amount of energy needed by tractors on the cornfields and in running the factories exceeds the output of ethanol. 

This energy loss does not occur in the production of biodiesel - the fuel that can replace petrodiesel. This is, therefore, not an issue that Carotech Bhd faces. 

Carotech's second plant in Ipoh has just been completed and should be full production next month, just in time to contribute to its next financial year that starts on July 1. This spanking new plant doubles Carotech's capacity, measured by crude palm oil input, to 90 tonnes a day. 

Next, it will construct seven new biodiesel plants in Lumut that will raise its capacity by 300 tonnes, or four-fold, to a total of 390 tonnes a day. Carotech has raised bank financing for that. 

Its expansion is not likely to end there. It may pursue continuous expansion, especially as the growth of biofuel demand is a global trend, it has a competitive production technology, and it will have the support of the capital markets.