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eResearch Stock of the Week: Innovente Inc
Stock-of-the-Week: Innovente Inc. (TSX-V: IGE)
By Bob Weir
Viewpoint
Innovente Inc., a Quebec-based company, markets a process (the SHOC™ process) that turns organic waste into biomass with a high calorific value. The Company recently completed a 4,600 square meter facility (a BEFOR plant) to produce biomass pellets, and purchased a 5MW cogeneration plant, to be relocated to Quebec, to generate electricity using the biomass pellets. This cogen plant is expected to be on stream and producing electricity for Hydro-Quebec, under a 25-year supply contract, by December 1, 2012.
Innovente hopes to build and operate at least ten BEFOR plants, some with cogeneration facilities, over the next ten years. A key challenge for the Company will be to arrange financing for future facilities (approximately $7.5 million for a BEFOR plant and $17 million for a co-generation plant).
The SHOC™ process uses a number of different types of organic waste such as manure, agricultural sludge, forest residues, municipal sludge, pulp and paper sludge, and crop waste. In its initial stage, the carefully-controlled bio-drying process reduces the moisture content of the material from about 65% to 50%. The final drying process reduces the moisture content to approximately 15%. The dried organic waste is turned into biomass pellets which are sold under the name BEFOR. These pellets have a high calorific value and can be used for the production of either electrical or steam energy. The Company estimates that the SHOC™ process uses only about one-sixth of the energy used in conventional fossil fuel-based drying techniques, thus providing its process with a significant competitive advantage.
Innovente has a short history as a public company. It was incorporated in 2004 and went public in late 2010. The stock is closely held and the share float is small. Average daily volume since the stock began trading on the TSX Venture exchange is 8,100 shares.
The Company’s three potential sources of revenue are:
(1) Revenue from the reception of organic waste.
(2) Revenue from the sale of BEFOR pellets.
(3) Revenue from the sale of electricity or steam from cogeneration plants when they are built.
Bob Weir is Managing Director, Research Services of eResearch
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