Verbio AG (VBK), a German biofuels producer, rose the most in five weeks in Frankfurt trading after saying it’s in talks to expand its straw-to-gas technology as governments promote cleaner transportation fuels.
Verbio climbed as much as 6.7 percent to 2.91 euros, the biggest intraday gain since March 21, paring a 22 percent loss the past four weeks.
The company has earmarked 150 million euros ($198 million) by 2014 to build two straw-to-biomethane plants in Germany and Hungary and upgrade existing facilities, according to Chief Executive Officer Claus Sauter. It’s talking to parties from the energy, agriculture and finance industries to raise investment in the technology it began researching in 2007, he said.
“The shares have suffered strongly during the past weeks so this is definitely good news that produces upside,” Wais Samadzada, an analyst at Montega AG, said today by telephone from Hamburg. Samadzada recommends holding the stock and has a target price of 3.60 euros.
Verbio’s technology turns agricultural waste into natural gas to power cars and trucks. The European Union has a target to get 10 percent of its transport fuel from renewable sources by 2020 in a bid to cut fossil-fuel imports and curb polluting emissions. Verbio last month opened what it said was the world’s first straw-to-biomethane plant and is upgrading facilities.
“If Verbio succeeds in raising efficiency at these plants to at least 90 percent from about 75 percent today, it would be a major boost for their earnings,” Samadzada said. Verbio reported 2011 earnings before interest and tax of 7.6 million euros, a decline of 27 percent from a year earlier.
“The potential to use biomethane from agricultural waste in transportation is huge,” Sauter said in an interview in Berlin. “Diesel is currently double the price of natural gas. We have a technology that works, is cost-effective and sustainable.”
Verbio traded up 5.5 percent at 2.88 euros as of 2:10 p.m. local time. The stock started trading at 15.15 euros on its debut in October 2006.
Verbio generated most of its revenue last year producing biodiesel and ethanol, a motor-fuel additive. It’s now pushing biomethane, a so-called second-generation biofuel that doesn’t require food crops for its feedstock, and its two planned sites in Germany and Hungary will have a capacity of as much as 30 megawatts each.
“Growth opportunities for biofuels that use up food stocks will be limited,” Sauter said. The Leipzig-based company plans to sell the fuel for the same price as natural gas, he said.
“Biomethane as a car fuel offers great potential but has been held back so far as it requires massive investments into infrastructure,” said Aleksandra Rybczynska, a bioenergy analyst at Bloomberg New Energy Finance in London. “Germany, which has a small fleet of natural-gas vehicles and fueling stations in place as well as a favorable support scheme for residue-based fuels, can offer an easier start.”
Verbio has sold biomethane to about 50 natural-gas filling stations, and about 90,000 vehicles in Germany are equipped to drive on the fuel, Sauter said. The company is seeking to raise that number by approaching logistics businesses with trucks that can run on diesel and biomethane, a hybrid set-up tested successfully in Verbio’s own fleet, Sauter said.
“With a biomethane level of 40 percent, you can cut not only carbon emissions but also fuel costs significantly,” he said.
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