Wood Pellets, said he learned that the pellets – fuel made by Corinth – were stored improperly, got wet and caused problems with the boiler. Soffron, a former president of the Maine Pellet Fuels Association, said he followed the situation closely because substandard installations re-flect poorly on the industry and his company’s product. Soffron said he’s “not a fan” of the oil-pellet price spread formula on which Pelletco’s business model is based. It makes the price of pellets much higher than the market price, he noted. “It is enticing,” Soffron said, “but it has the potential to rip off the consumer.” AssumINg oIl stAYs hIgh According to Knight and company financial documents, here’s how Pelletco is set up: The company signs contracts ranging from five to 10 years. That gives Pelletco time to depreciate equipment costs and receive credits for tax purposes. According to documents, Pelletco projects a net loss this year of $366,125. The cost of pellets makes up roughly a third of expenses. Net revenue, from heat sales, is projected at $254,701. To begin to make a profit, Pelletco projects increasing heat sales revenue to $3.5 million by 2016. A key assumption is the price of oil. Pelletco says it can produce heat for nearly 20 per cent less than the cost of oil, at an equivalent of $2.99 a gallon. At current oil prices, making the same amount of heat from a ton of pellets – minus 20 per cent – costs around $350. Pellets can be bought in bulk for about $180 a ton. So there’s a “spread” of $170 a ton between wood and oil – Pelletco’s op-portunity to pay its expenses and make a profit. The spread narrows if oil prices fall. In the oil market, commodity traders buy insurance against price swings, a so-called hedge. But hedging isn’t available for With the volatility of heat prices in the region, Pelletco believes that heating wood pellets and wood chips can save upwards of 20 per cent on a building’s heating cost. Rotary Dryer System Heat Energy Pellet Press Roller Biomass Pelletizing & Energy Systems Pellet Plants | Dryers | Furnaces | Steam Boilers | Thermal Oil Heaters | Cogeneration Dieffenbacher USA, Inc. 2000 McFarland 400 Blvd. | Alpahretta, GA 30004 Phone: (770) 226-6394 | [email protected] www.dieffenbacher.com Dieffenbacher biomass june12.indd 1 Canadian BIOMASS 12-05-17 8:46 AM 17
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