Capital markets have a standard response to any crisis, real or perceived. They throw money at it.
Today's crisis topic is energy or, more specifically, petroleum. It qualifies as a real problem.
In the past two months, three of the four leading ethanol producers have gone public or filed the paperwork to do so, based on rising interest in alternative fuels. VeraSun Energy Corp. raised $420 million in an initial public offering last month. Aventine Renewable Energy Holdings Inc. attracted $389.5 million three weeks ago. Hawkeye Holdings Inc. filed IPO papers on May 30, just three weeks after the Boston private equity firm Thomas H. Lee Partners had agreed to buy 80 percent of the company.
Ethanol, a form of alcohol that in the United States is derived primarily from corn, may or may not be the bio-friendly fuel of the future. It recently replaced another additive mixed with conventional gasoline, creating a demand boom.
Meanwhile, the capital markets' response to the crisis has not been limited to mere fuel. Petroleum makes its way into many other things besides gasoline. Just one word: plastics.
Metabolix Inc. of Cambridge, a small firm that has been working on bioplastics for 13 years, on Friday filed initial documents to go public and raise as much as $86 million. The biotech company, which was created by MIT scientists, had revenue of just $2.8 million last year.
But Metabolix has a number of things going for it, including a big commercial ally. The company counts Archer Daniels Midland Co. as a partner in its efforts to produce a variety of biodegradable plastic products from corn.
The companies are building their first commercial facility, which will be able to produce as much as 50,000 tons of plastics from corn each year. Metabolix has the biotechnology know-how. ADM has the corn.
How do you turn corn into plastic? Kernels are soaked and ground up to release starch, which is converted into a sugar. The sugar is fermented using bacteria, and it produces a lactic acid. Water is removed from the acid and the remaining molecules form polymers, the basis for plastics.
Metabolix and ADM plan to employ that process to produce plastics for use as coated paper, film, and molded goods. As the price of petroleum drives up the expense of making plastics conventionally, the biotech alternative becomes more competitive.
Other companies are working on similar projects. A division of Cargill Inc. is using bacteria to turn corn into plastic for food packaging. DuPont is working with partners in Europe to produce other bioproducts that eliminate the need for petroleum.
At a biotechnology industry meeting in Toronto last week, it showed off designer clothing from the likes of Halston and Oscar de la Renta with fabric relying on a biopolymer made from corn sugar.
Don't laugh. When it comes to the petroleum crisis, capital markets are all ears right now.
It's never too late to get a bonus.
Bill Ryan, the chairman of TD Banknorth Inc., was awarded a bonus of $993,145 last week for his work in 2005. It might seem odd to wait until July to award an executive his bonus for work performed the previous year. It might seem even more unusual when you realize the bank reported in March that Ryan and other top executives were entitled to no 2005 bonus because the company failed to reach targets for earnings-per-share growth. Bank officials explaining the about-face said directors ``chose to award a discretionary bonus." It was a reward for TD Banknorth's big acquisition of Hudson United Bancorp last year. The board waited to write the check, making sure the integration of Hudson United went smoothly.
