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REGI: Its Biomass-Based Diesel, Market Strategy and Business Model


The alphaDIRECT Insight

With more than 20% market share, REGI is the largest biomass-based diesel producer in the United States, converting low value waste, fats and oils into high quality diesel fuel referred to as renewable biomassbased diesel. REGI differentiates itself by having a strong supply chain with the ability to collect and deliver waste oils and fats to its different facilities. We believe a key competitive advantage is the ability to deliver a quality product meeting all certifications required together with their comprehensive distribution network and facilitating customers supply in many different locations. Furthermore, we believe the company is well positioned to leverage next generation products with a robust technology roadmap. In our view, REGI delivers consistent financial returns by directly aligning economic and environmental benefits and by targeting state markets like California and executing its strategy on a large industrial scale.

Shawn Severson: I’d like to thank you, Randy, for taking the time to speak with us today. Initially, I’d like to cover an overview of Renewable Energy Group with a brief review of your market strategy. Before we get started, I would like to remind investors that this report includes links to supporting documents within the text. Randy, could you start by giving us a brief introduction of yourself?

Randy Howard: Yes, Shawn. I was blessed with a diverse 32-year career with Unocal 76, a major oil company. During that career, I held positions as Vice President of Refining, and Vice President of Supply, Trading and Transportation as well as President of Unocal’s Geothermal business. I was also the President of Unocal’s North Asian upstream business, which was a large natural gas production company based in Thailand. I retired when Chevron purchased Unocal and shortly thereafter, a friend of mine connected me with this small, biodiesel start-up company called Renewable Energy Group (REG).

REG was looking for a board member with some petroleum background.  I was aware of renewables. As a chemical engineer by background, I had done my own energy balance that showed that biodiesel gives you approximately 6x the energy in the product that it takes to make it, well in excess of other renewable biofuel options.  So, in 2007 I joined the Board of Directors of REG. That year, we made approximately 50 million gallons of biodiesel and ten years later we made nearly 500 million gallons. From a position on the Board, I’ve seen REG, with its great management team, grow ten-fold.

In July of last year, our former REG CEO resigned, and the Board asked me to step in as the CEO. At that time, we were in the midst of a major transition to expand our renewable diesel technology, a technology more like that used in an oil refinery.  My experience is complementary to help us grow our renewable diesel platform.