Company Report: Permolex International
Permolex International Ian Armitage talks to Doug MacKenzie, CEO of Permolex Ltd about how his company is aiming to grow internationally through biofuel production

When you think about the energy industry, you tend to think big. You think of multi-billion-dollar industries such as nuclear, oil or gas. However, it is the ethanol industry that is the fastest growing energy industry in the world today. The US ethanol industry, which consists of 115 plants operating in 19 states, is particularly strong. Dozens more plants are under development and are due to come on line in 2008 and 2009. This will see ethanol production increase to nearly twelve billion gallons.

Fuel ethanol production in the US has been warmly received, as it generates jobs and wealth by processing domestic resources such as corn or woodchips into clean burning transportation fuel.

Thousands of jobs, increased farm income, and large tax receipts follow. Costly petroleum imports are also replaced by American-made fuel.

Emerging as a global leader in the production of ethanol and other bio-fuel products from multiple feedstocks, Permolex has set its sights on tapping onto this lucrative market. Owned by BMG Limited Partnership and Meluna Investment S.a.r.l., an affiliate of Citigroup Venture Capital International Growth Partnership, L.P, it has two main operating companies, with facilities in Red Deer, Alberta (Canada) and Volney, New York (US).

Unique integration
The Red Deer plant, run by Permolex Ltd, operates a unique value-added grain fractionation facility located in Red Deer, Alberta, Canada. The facility is the first of its kind in North America using feed grade wheat in its initial stages of production. The plant's design incorporates leading edge technologies and processes to capitalize on the benefits of integration of three traditionally independent manufacturing processes, namely a flour mill, a gluten plant and an ethanol plant. This unique integration allows the by-products of one process to be utilized as feedstock for the next process.

"Our Alberta facility produces bakery flour, vital wheat gluten, fuel grade ethanol and livestock feed," explains Doug MacKenzie, CEO of Permolex Ltd. "It also has the potential to produce higher protein vital wheat gluten as well as other grades of ethanol, and the remaining by-products can be further processed to produce incremental revenue streams."

New era in ethanol production
Permolex produces a fuel grade ethanol that is used as a gasoline additive. Ethanol blended fuels have proven to reduce tail pipe emissions, increase octane levels and reduce green house gases. Permolex produces ethanol at both of its facilities - one in Alberta and the other in Volney, New York, which will come on-line in 2008. The Volney plant, will annually use approximately 41 million bushels of corn as a feedstock to produce 114 million gallons of ethanol each year. This will be used as a clean-burning gasoline additive and extender to help states like New York comply with federal clean air mandates.

The NEB plant is located at Riverview Business Park, about 25 miles north of Syracuse. The 420-acre complex was formerly a Miller Brewery. Much of the brewing infrastructure is being renovated and adapted to 'brew' ethanol. Construction began in the summer of 2006, with production coming on-line in Spring 2008.

Why New York? Well, it is an excellent business opportunity, which stems from the banning of MTBE by New York legislators. When that happened, the state began its search for a suitable oxygenates replacement for its gasoline supply. Ethanol became the fuel of choice even though it needed to be shipped from out of state. That will soon change with the addition of Permolex's brand new ethanol plant.

"In New York we are trying to develop a whole new market," Doug continues. "The facility will enable us to participate in a market which is potentially huge. The ethanol production from the facility will assist in meeting national and provincial renewable fuel targets and the plant grain supply will be drawn from the local community, which will have positive economic impacts."

MacKenzie, who has a degree in nuclear physics, began his career in the oil industry. However, he questioned his choice of profession after being forced to continually have to implement downsizing programs. He entered the ethanol field and never looked back.

Standing out in a growing market
Permolex is looking to differentiate itself in the biofuels market, developing multi-product, multi-geographic and multi-feedstock options. The biofuel industry is not just growing in the US or Canada; it is growing around the world. The future is looking bright, both in terms of the environment and in terms of encouraging substantial development of ethanol.

"The word is that 25 years from now you will see a four or five fold increase in production," says Doug. "It is an exciting time." Mr. MacKenzie wants to see Permolex continue to grow internationally, with the company becoming increasingly opportunistic, looking at a number of facilities around the world to buy or merge with. "In addition to global expansion, we are also looking at progressive internal initiatives such as replacing our use of natural gas with biomass for process energy and becoming carbon negative in our operations," he adds.

In the current environment, even dedicated oil men like President Bush are talking up ethanol and the reality of climate change. There has also been a movement to make ethanol more widely available as a primary motor fuel rather than selling it as just an additive.

"The gasoline industry has to be converted to allow blending to take place," concludes Doug. "That is actually happening these days and will allow for much more wide-scale blending of ethanol across the country." Strange that we are going full circle and returning to ethanol -Henry Ford's original 'Model T' was designed to run on ethanol.

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