In the Public Eye

Earth Biofuels stacks the deck with two major celebrities-Oscar winner Morgan Freeman and musician-biodiesel advocate Willie Nelson-and celebrates its new public status with a Wall Street investor party.
By Robert Reed | January 01, 2006
It's 5:30 p.m., and a cocktail party with roughly 100 guests has just begun in a formal meeting room at the posh Four Seasons Hotel in New York City. Judging from the location and the attendees' attire-Brooks Brothers suits and designer dresses-you can safely assume this is a Wall Street-type crowd. The guests mingle and chat with drinks in hand as others arrive. The group waits with a certain sense of anticipation, glancing occasionally toward the far end of the room, where a stage has been set up with a podium and screen. Projected on the screen is the opening slide for a presentation that's about to begin. The slide, complete with a backdrop image of a verdant landscape, reads, "Earth Biofuels: Better Living Through Biodiesel." The company's Chairman, Dennis McLaughlin, takes the stage … and, on Nov. 15, biodiesel industry history is made.

Indeed, the scene that unfolded marked a major milestone in the evolution and legitimization of biodiesel as a new American industry. Jackson, Miss.-based Earth Biofuels Inc. formally announced to the Wall Street community that the company had started trading on the Nasdaq (OTCBB) stock exchange under its new and official ticker symbol, EBOF, thus making it the first-ever publicly traded biodiesel company. And though, from the perspective of alternative fuels advocates this alone was quite momentous, the executives and analysts in attendance-representatives from Goldman Sachs, Smith Barney, UBS and other financial heavyweights-were lured to the event as much by the investment opportunity as by the chance to meet the company's new board members: actor Morgan Freeman and singer Willie Nelson.

The last time Biodiesel Magazine spoke with Earth Biofuels CEO Tommy Johnson (October 2005 issue), he indicated that the company was actively-even aggressively-seeking to grow the business, which encompasses everything from bean crushing to retail truck stops, through expansion and acquisition. Having successfully courted Freeman and taken the company public (by way of a reverse merger), Johnson and McLaughlin were in a position to approach both Nelson and his business partner Peter Bell. Bell is the founder of Distribution Drive, an Addison, Texas-based biodiesel distribution company with an exclusive on the BioWillie brand. Nelson accepted a seat on the board, Earth Biofuels received its new stock symbol, and the pending acquisition of Distribution Drive was well underway. Hence, the makings of a Wall Street party.


BioWillie
The Red Headed Stranger, a.k.a. Willie Nelson, officially joined the Earth Biofuels board of directors Nov. 10, just five days before the party. Though Nelson had been involved with the industry since January 2005, as the namesake behind his venerable brand, the national media responded as if it was a hot new scoop. Because, in one way, it was. Journalists were eager to point out the discord, so to speak, in the tone of this story. The thought of Nelson in the corporate board room was rather ironic, given the famed singer's anti-establishment image. The reality of the story, though, offered yet another testament to the virtues of biodiesel and its capacity for one and all to find common ground.
Conveniently enough, the investor event coincided with the Country Music Awards (CMAs), where Nelson would be performing. His appearance at the party, albeit brief, got things rolling when, on behalf of the company, McLaughlin and Johnson presented the singer with a green Earth Biofuels guitar to commemorate his joining of the board.
"First of all, I'm happy to be a part of Earth Biofuels," Nelson said, after accepting the guitar and thanking McLaughlin and Johnson. "I think this is the future," he continued. "It's going to help us a lot as far the environment is concerned, helping the farmers, helping the truckers … just a lot of people who are glad to get involved with the biodiesel business. Because it's going to keep us from being so dependent on foreign energy that we can think about growing our own fuel. So I'm very happy to be a part of it, and thank you.

Following Nelson show departure for the CMAs, the Earth Biofuels directors took the stage for the official presentation. As a special guest, the company had flown Miquel Dabdoub to the event. A professor from the University of São Paulo, Brazil, Dabdoub is a strategic partner in the company's business, providing expertise and proprietary biodiesel technology for the construction and design of production facilities.

McLaughlin gave the keynote address, which outlined the corporate structure, explained the relationship between Earth Biofuels and its parent company, Apollo Resources International Inc., and highlighted the need for biodiesel as a domestic fuel resource.

"The U.S. is importing approximately 2.5 million barrels of oil each day from the Persian Gulf," McLaughlin stated. "Prior to the most recent Gulf War, the U.S. was spending $50 billion each year maintaining a military presence in the Gulf just to maintain stability in the region. From March of '03 to June of '05, the United States has spent $204 billion on the war in Iraq with a continued monthly expense of $5.2 billion. In the last 28 months, the U.S. has imported 2.1 billion barrels of oil from the Middle East. I think everyone knows pretty clearly why we're in the war that we're in. And if the necessity of it is derived from the value of oil, and if you look at the amount of money we've spent on the war divided by the number of barrels of oil that we've brought into this country since it started, it comes out to $97 per barrel."

McLaughlin's impassioned speech succinctly and articulately outlined the consequences of a flawed energy policy and the subsequent case for biodiesel. From what was gathered, many of the investors in the room were hearing this for the first time.

Next, Johnson presented the specifics of Earth Biofuels' business strategy, detailing the basic economics of producing and selling biodiesel and citing the subsidies and tax incentives that give it an edge in the marketplace and ultimately increase profitability. He described the plans for expansion, from Mississippi and Oklahoma to Texas, Tennessee, and other areas of the Southeast. In particular, he referenced the deal to acquire Distribution Drive, along with the BioWillie brand, which was completed weeks later on Nov. 29. Lastly, pursuant to a segue, Johnson presented plans for Earth Biofuels technology.

"One thing that has been a barrier to the market for biodiesel or ethanol is the cost of the technology," Johnson said. "To that end, we're building our own technology company to build our own plants. We intend to purchase the technology rights of professor Miquel Dabdoub for our own business, and also to license them under an exclusive agreement to other U.S. companies."

At last, Dabdoub stepped to the podium and, despite a thick Portuguese accent, offered a rather clear and concise presentation that recounted more than a decade of research and development in the field of biodiesel technology, citing studies conducted with the world's largest automakers, not to mention Coca-Cola's world fleet.

The success of the event could be gauged by different sets of criteria. The fact that a publicly traded biodiesel company with a star-studded board of directors pitched its business to Wall Street's top echelon is deserving of a certain measure of credit all by itself. The number of photos snapped of investors and their companions standing with Nelson and Freeman (however many hundreds were taken) could be yet another measure, as those photos will be a constant reminder of their evening spent with Earth Biofuels. But the weightiest measure of the event's success by far would have to be the investment capital. And though it was not divulged who bought what, interviews with those in attendance in the weeks that followed revealed that early investments totaled in the low seven figures. In other words, the event was a million dollar baby.

Robert Reed is a California-based freelance writer. In October, he authored another Biodiesel Magazine exclusive feature on Earth Biofuels, titled "The Biodiesel Game Plan."
 
 
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