Web exclusive posted April 7, 2008 at 10:52 a.m. CST

Raven Biofuels International Corp. and Pure Energy Corp. have announced a proposed merger. The two companies are developing multiple plants using Pure Energy's technology to produce ethanol and furfural from several biomass sources. Furfural is a chemical compound derived from agricultural byproducts, such as corncobs, sawdust, or oat and wheat bran.

Under the proposed terms of the agreement, Pure Energy shareholders will receive Raven shares representing a majority interest in the company and $3 million in cash, which is based on a Raven share valued at $1.85. The combined company will operate under the Pure Energy name and trade under the symbol of RVBF.OB, said Irshad Ahmed, CEO of Pure Energy.

The two companies have a total of four plants under development using Pure Energy's technology, which uses a double dilute sulfuric acid pretreatment to create separate streams of five and six carbon sugars and lignin. The five carbon sugars from the hemicellulose fraction will be converted furfural, while the six carbon sugars from the cellulose fraction will be fermented into ethanol. The lignin fraction, which has an energy content of 8,000 British Thermal Units per pound, will be burnt to provide process heat for the facilities. "We are the first cellulosic ethanol company based on an oil refinery model where the same barrel of crude gives you both fuels and chemicals," Ahmed said. "We view biomass as a raw material created by nature to support both fuel and chemical production."

The company's first project is a demonstration scale facility in the Panoli Industrial Estate in the state of Gujarat, India. The plant will process 145,000 tons of sugar cane bagasse into 5 million gallons of ethanol and 17,000 tons of furfural annually. Ahmed said the plant should come online in the second quarter of 2009.

The company is building full scale projects with about four times the capacity of the Indian plant in Washington, Idaho, Pennsylvania and British Columbia, Canada. The Canadian project will use pine trees killed by invasive bark beetles that have devastated large forested areas in the province, while the Washington and Pennsylvania plants will use wood chips for feedstock. The Idaho plant, which will utilize corn cobs, is expected to be the first of the larger plants completed and operational in the third quarter of 2009.

Ahmed said the furfural market is excellent for producers at the moment. On a weight basis, furfural is three to five times more valuable than ethanol. Chinese imports wiped out the U.S. furfural industry in the 1990s. "We are 100 percent dependent on China for our furfural, and so is the rest of the world," he said. However, the Chinese government has moved against many small, highly polluting furfural producers in an effort to clean up environmental problems prior to the Beijing Olympic Games. That has nearly tripled furfural prices in a matter of less than six months. Furfural is used in the plastics industry in applications ranging from spandex to fiber glass and is also an important corrosion inhibitor and component in pharmaceuticals.

Pure Energy is also looking for partners to license its technology. "We are making our technology available to whoever wants to go build a biorefinery project," Ahmed said. "It is a very simplified technology model where there is a technology licensing fee and a very small royalty."