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Friday, September 15, 2006

A Questionable Ethanol IPO Filing: ASAlliances Biofuels

We had another ethanol IPO filing today. Ballas-based ASAlliances Biofuels filed for an IPO today. Someone may want to point out that the ethanol craze is over. The company is a development stage ethanol company in the productions and distribution area of ethanol. The joint bokk-runners were listed as UBS and Lehman; and credit Suisse, Morgan Stanley, and Friedman Billings were all listed as co-managers.

The company lised only 7 employees and is essentially a non-revenue company as far as recent quarters, so it hard to know whatthe street expectations for this issue are going to be outside of "an ethanolplay with a future." is the website. Timing of the IPO and the exact terms are not disclosed. The company website doesn't even say anything about the company and shows a man holding up a small girl with her smiling. They truly have no operating history.

ASAlliances Biofuels will trade, assuming it does trade, under the ticker ASAB.

Here is the "use of proceeds" section (from the company):

Approximately $195 million of the net proceeds we receive from this offering to finance a portion of the construction costs of our planned ethanol plants to be built in Mt. Vernon, Indiana, Tipton, Indiana and McLeansboro, Illinois. The amounts and timing of these expenditures will depend on numerous factors, including the federal, state and local permitting and licensing process, the construction schedules of our contractors, the delivery of goods and equipment by our suppliers and various other considerations typically associated with large-scale construction projects.

Approximately $66 million of the net proceeds we receive in this offering to (1) redeem subordinated notes issued to three of our current stockholders and (2) replace funds not drawn under our subordinated note commitment but dedicated to financing a portion of the construction costs of our first three planned ethanol facilities. In February 2006, we obtained a $62.5 million commitment to purchase subordinated notes which total amount was dedicated to financing a portion of the construction costs of our planned Linden, Albion and Bloomingburg plants. As of June 30, 2006, we had issued an aggregate principal amount of $2.7 million of subordinated notes and used the proceeds thereof to fund the continuing construction of such plants. We anticipate that at the completion of this offering, we will have issued an aggregate principal amount of $62.5 million of subordinated notes. The subordinated notes bear interest at 17% and mature in February 2015. The subordinated notes are redeemable at 104.0% of the principal amount thereof plus accrued interest if redeemed prior to February 2007.

Approximately $11 million of the net proceeds we receive from this offering to make payments to certain of our current stockholders in connection with the termination of agreements relating to the payment of annual management fees and development fees. In February 2006, we entered into a fee agreement which provided certain of our stockholders an annual management fee of $1.5 million for the first six years and $750,000 thereafter. The fee agreement also provides certain of our stockholders with an annual $750,000 development fee for a period of five years. We have agreed to terminate this agreement at the closing of this offering in return for an $11 million payment to certain of our stockholders.

Approximately $8 million of the net proceeds we receive from this offering to repay certain outstanding indebtedness related to bridge notes we have issued to certain of our current stockholders or their affiliates. In September 2006, we obtained a commitment to purchase up to $7.5 million of bridge notes from certain of our current stockholders.


Thomas L. Manuel has served as our President and Chief Executive Officer since August 2006. For the past five years, Mr. Manuel served as founder and managing director of International Strategy Advisors. ISA’s main business was venture capital investing and consulting. Mr. Manuel was a senior executive with Omaha, Nebraska-based ConAgra Foods from 1977 until 1999. Throughout his career with ConAgra, Mr. Manuel was responsible for commodity processing businesses and trading activities, including grains, byproducts, and energy. At his retirement Mr. Manuel was Chief Operating Officer of ConAgra’s Trading and Processing Group, a $17 billion group of businesses with over 40,000 employees. Mr. Manuel has a B.S. in business administration from the University of Minnesota.

George P. Schaefer has served as our Chief Financial Officer and Secretary since August 2006. From December 2002 to August 2006, Mr. Schaefer served as Vice President and Treasurer of NRG Energy, Inc., a wholesale power generation company primarily engaged in the ownership and operation of power generation facilities, purchasing fuel and transportation services to support its power plant operations, and marketing and trading energy, capacity and related products. Prior to joining NRG, Mr. Schaefer served as Senior Vice President, Finance and Treasurer for PSEG Global, Inc., an operator of power plants and utilities from April 2001 to April 2002, Vice President of Enron North America Corp. in its independent energy unit from June 2000 to April 2001 and Vice President and Treasurer of Reliant Energy, International, an operator of power plants and utilities, from June 1995 to June 2000. Prior to 1995, he was the Vice President, Business Development for Entergy Power Group and held the Senior Vice President, Structured Finance Group position with GE Capital Corporation. Mr. Schaefer holds a B.A. in economics from The American University and an M.P.A. in finance from Syracuse University.

Joel A. Stone has served as our Chief Operating Officer since June 2006. From September 2005 to June 2006 Mr. Stone served as Chief Operating Officer of Abengoa Bioenergy Corporation, an ethanol production company. He served as an independent consultant working for nutritional food product manufacturers from September 2004 until September 2005. Mr. Stone served as Vice President of Operations of Balchem Corporation, a manufacturer of microencapsulated food ingredients and nutrients, from April 2001 until August 2004; and previously served as Vice President of Operations for Opta Food Ingredients for 11 years. During the 1980’s Mr. Stone participated in the design, startup, and operation of three fuel ethanol facilities. Mr. Stone holds a B.S. in Chemical Engineering from Virginia Polytechnic University and an M.S. in chemical and biochemical Engineering from the University of Pennsylvania.

Steven H. Durham has served as a member of our board of directors since our inception. Mr. Durham was a founder of ASAlliances Biofuels, LLC. In 2003, Mr. Durham founded and became Chairman of Americas Strategic Alliances, LLC, a merchant banking and investment firm focusing primarily on and facilitating strategic investment opportunities in the United States, Mexico and Canada. He has been actively involved in the financing of multiple ethanol plants. Prior to the formation of Americas Strategic Alliances in 2003, he was chairman and chief executive office of S.H. Durham Enterprises, LLC which invested in equity positions of privately and publicly held companies. In the early 1970’s, Mr. Durham was the founder of Durham Resources, an investment management enterprise with interests in an architectural-engineering company, natural gas distribution company, health care company, ownership of multiple banks, a land development company and investments in multi family real estate. Mr. Durham holds a B.S. in business administration from the University of Nebraska.

Kevin W. Kuykendall has served as a member of our board of directors since our inception. Mr. Kuykendall is a Principal of American Capital Strategies, Ltd., a publicly traded mezzanine and private equity fund, where he leads the firm’s energy investing efforts. Prior to joining American Capital Strategies, Ltd. in 2003, Mr. Kuykendall spent seven years in the Principal Investments Group of Enron Corp. Mr. Kuykendall holds a B.B.A. in finance from the University of Oklahoma and an M.B.A. with a finance concentration from the University of Texas at Austin.

Tony Lent has served as a member of our board of directors since our inception. Mr. Lent is a founding partner of US Renewables Group (“USRG”), a private equity fund he formed in 2004 which invests in renewable power and fuels. Prior to the formation of USRG, Mr. Lent co-founded EA Capital, a financial advisory firm focused on investment in clean energy and natural resources. Mr. Lent holds an M.B.A. from the Haas School of Business at University of California at Berkeley, and a B.S. in biology from Tufts University.

Todd A. Overbergen has served a member of our board of directors since our inception. Mr. Overbergen joined the D. E. Shaw group in February 2004 to participate in the formation of Laminar Direct Capital, where he currently manages the energy investment portfolio. From December 2000 to April 2003, Mr. Overbergen was a principal at Duke Capital Partners LLC, a merchant banking subsidiary of Duke Energy Corporation focused on mezzanine, equity, and senior debt financing in the energy industry. From 1998 to December 2000, Mr. Overbergen was a director in Arthur Andersen LLP’s global corporate finance group, where he co-led the national business services practice and provided investment banking services on mergers, acquisitions, and private market capital raising of debt and equity. From 1995 to 1998, Mr. Overbergen was a manager in the corporate restructuring practice, where he provided advisory services in distressed situations across a broad range of industries. Mr. Overbergen previously served on the board of managers of EnerVest Olanta LLC and the board of directors of Cougar Hydrocarbons Inc. Mr. Overbergen holds B.A. degrees in accounting and finance from Texas A&M University.

Well, that's all but this company has no operating history.

Jon C. Ogg
September 15, 2006

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