Robert Capella

New Milford, PA (USA)
Role(s):
Select

Titan Biofuels

Find More Startups Startup
Location: New Milford
Industry: Energy
Year Founded: 2008
Number Employees: 1-10 people
Description: Introduction to Titan Corp. This narrative is intended to introduce the companies that are part of the Titan Consolidated Corporation. Who is Titan Corp.? Titan is a family of three Pennsylvania Corporations. First Titan Capital; is the owner of all intellectual property and patents on inventions. It is also the investment arm for future investment of profits from the subsidiaries. Next Titan Express is the property arm of the family. Titan Express operates fuel outlets for the corporation. These include truckstops, convenient stores and restaurants. Last is Titan Biofuels; the producer of biofuels and owner of grants from various government entities. How did Titan come into existence? Four years ago Richard Smith became involved with alternative fuels, a New York Corporation located in Binghampton N.Y. Mr Smith partnered with an aging owner of a fuel delivery company. They had the foresight to see the future in renewable energy and the necessity to reduce the US dependency on foreign oil. At Alternative Fuels Mr. Smith put his chemical Engineering skills to work designing and building a large scale fuel plant. This plant utilized the current technology of producing bio Diesel fuels. Mr. Smith, a fifteen year veteran worker for the New York State Department of Transportation along with his partner established several industry contacts, including customers and suppliers. They acquired all required government permits to operate their facility. While working for Alternative fuels Mr. Smith began to realize that the current industry processes could be improved along with the product they produced. He began the design of a new process. He acquired the basic equipment he needed to test his theory. Mr. Smith’s partner, in his late 70’s began having health issues. Over the next two years he underwent two major surgeries. He decided to exit the business world. This caused an amicable dissolution of the partnership on December 31, 2008. Mr. Smith then located a large garage in New Milford PA. to continue his experimentation. He developed a production plant requiring a very small fraction of the space that current producers require. He needs less manpower and less electricity than the current producers. Aren’t there government incentives for renewable energy? The US Government has offered a $1.00 rebate for each gallon of renewable fuel for several years. Pennsylvania has recently offered a seventy five cent per gallon rebate and has licensed Titan to be eligible for this. Furthermore Pennsylvania has awarded Titan and Mr. Smith a one million dollar grant to research using algae as a raw material. What do you use for raw material. The proprietary process developed and owned by Titan uses scrap used vegetable oil as a raw material. The competition uses pure virgin oil. There is a considerable cost difference enjoyed over the competition between eighty cents and one dollar fifty cents depending on which Titan supplier you compare to. Because this is waste oil it will not climb as quickly as the cost of corn or soybean virgin oils. Is there any cost advantage in your patented process over the competiton? There is a considerable advantage Titan has over the current market. Currently producers encounter a more than fifty cent per gallon conversion cost. Ten cents of this is for chemicals required to treat the oil. Titan’s conversion costs are three cents per gallon that includes one cent for a chemical. Furthermore the average biodiesel producer realizes an 85% yield in their process whereas Titan is experiencing a 91% yield in its proprietary process. Is there any quality advantage with your process? While normal biofuels cloud and coagulate at forty degrees Fahrenheit, our product does not do this until fourteen degrees Fahrenheit. This allows us to meet new cold flow specs being adopted without adding additional chemicals. Furthermore due to an additional step in our process we meet the spec for renewable biofuels rather than the spec for bodiesel. This means our product is so pure it can be used 100% in a diesel engine without any engine modifications. The current production has to be either two percent or twenty percent mixture of biofuels to standard diesel. Our product runs much smoother than the low sulfur diesel produce being sold under clean air specs and actually burns cleaner than the current product. What the environmental factors you have to comply with? Really, none. First diesel fuel s not combustible as gasoline is so it can be transported without the permit requirements gasoline haulers face. Furthermore our raw material is vegetable oil. There are no storage requirements or license requirements. In fact if a truckstop takes a delivery of standard low sulfur diesel and experiences a spill it will have a problem that it has to report, address, and pay for. If our product spilled the government would not even care. What is your plan to enter the market? The current garage is inadequate. It is on a residential main street in New Milford PA. The current pilot plant is processing 500 gallons per hour. While it can be refined to process 1,200 gallons per hour, this will not take full advantage of the void in the market we see today. We have drawings for equipment that will produce fifty million gallons per year taking only twice the realestate footprint we currently occupy, or fifty two feet by eight feet. There are two strategies available to us. The first is to locate a suitable situation to continue production with the pilot plant and develop the customer base to construct the larger production plant. We would have to advertise and draw customers to us. Any bump in the customer trucks coming in will interfere with our sources of raw materials and the level loading of our production. We also could end up needing storage capacity. The second is to lease a currently available truckstop. We can process renewable fuel (R100) and pump it straight into our retail pumps. The pricing we offer to the public can be attractive so the traffic will come to us. Then this location can be a base to supply other outlets. Since we have access to a delivery fleet we can offer free freight to anyone within 25 miles. This will save our customers an additional four cents a gallon. If we have a customer order and not show up on time, we simply pump the fuel into our tanks for sale at retail. Thus having complete control of production output. We can level load our production and avoid paying overtime and holding inventory for sale. So why isn’t everyone doing this if you can make so much money? The current technology requires virgin oil at $2.30 per gallon. We use waste oil priced between $.75 and $1.54 per gallon delivered. They experience an average process yield of 85% and we experience an average yield of 91%. They require $ .10 per gallon in chemicals. We use $.01 in a single chemical. We are moving from NY to PA to take advantage of $.75 per gallon rebate that tops at $1.9 million. When this rebate is exhausted there is a $.05 per gallon rebate available only to Titan. Our entire processing cost is $.02 per gallon versus $.40 per gallon for the competition. Rack prices for Diesel was $1.35 on March 21,2009. Furthermore the current process our competitors use does not meet the new cold flow specs without even more additives. To Recap. Current Competition Titan Sell Price 1.35 1.35 Raw Material 2.30 1.54 Process yield 85% 91% Finished Raw Cost 2.71 1.69 Chemicals .10 .01 Processing cost .40 .02 Less average rebate -1.00 -1.05 Total Cost per gallon 2.21 .67 Margin at 3/21 market -0.86 .68 The above margin is generated from selling to the wholesale market. The average margin on truckstop sales is .07 per gallon. If we sold our fuel through a truckstop we would actually have a margin of $.75 per gallon on R100 of we sold a 30% blend we would enjoy a $0.27 per gallon margin per gallon. That is a 400% improvement over the competition of other truckstops. Remember the competition cannot compete with our process because we have patent protection. Can’t these renewable fuels also be used for home heating fuel oil? Certainly. Our strategic plan includes attacking this market. We have a truck principally suitable for these deliveries. Our financial projections do not include any of this activity in the first year. Though with our cost structure we could enter the market a few percent below the competition. We could offer a cash and a credit price with very different per gallon prices encouraging the customer base to pay us on delivery. Since the homeowners typically pay between three hundred and one thousand dollars to fill their tanks a few percent is important to them. We should build a cash on delivery business with substantial volume, very quickly.