I have a piece in today’s Toronto Star about SunOpta Inc., which to the best of my knowledge the only pubicly traded cellulosic ethanol play in Canada (possibly North America). Its chairman and long-time CEO, Jeremy Kendall, who steps down from his CEO post next month to focus on strategic development, says the company’s 5-year plan targets revenue growth from ethanol production and the sale of processing equipment at $650 million by 2012, up from just $4 million today. As well, its bioprocess group — which is now an operating subsidiary — will look at doing an initial public offering in two to three years.

Kendall, unlike many commentators I’ve read, commends U.S. President George W. Bush’s ethanol goals as outlined in his State of the Union address — that is, reducing U.S. gasoline consumption by 20 per cent over the next decade by replacing it with ethanol. While critics of the plan focus on the problems with using corn as an ethanol feedstock (i.e. food impact; farmer’s subsidy; price; poor energy return, etc.) and label Bush’s strategy as simplistic, Kendall sees it as a way to force the commercialization of cellulosic ethanol processing as an alternative. Corn, he points out, won’t even be able to supply half of what the U.S. needs to meet Bush’s annual ethanol production targets. The only obvious — and inevitable — way of meeting the expected supply gap is to begin using agricultural residue, wood waste and dedicated, non-food crops that don’t require irrigation and fertilizers.

This is an interesting company to watch, given that “ethanol” only represents about 1 per cent of its $750 million (U.S.) in annual revenues. SunOpta’s main business is as a producer and distributor of organic food products. So if the ethanol side does begin to see substantial growth, it makes sense to spin the business out with a public offering. What’s also interesting is that of the five institutional analysts who cover this company, the two U.S. analysts have “buy” and “outperform” ratings, and the three Canadian analysts have “holds” and “sell.” It shows how much weight the U.S. guys are giving to the ethanol strategy, given the tremendous political will behind ethanol in the United States. It also shows that the Canadian guys may be missing the boat, or just slow to get on board.

For some detail of SunOpta’s cellulosic ethanol projects in the U.S., Canada, Europe and China, click here.

UPDATE: I stand corrected. Turns out there is one other publicly traded Canadian company focused on cellulosic ethanol — Lignol Innovations. The Vancouver-based company orchestrated a reverse-takeover in October and got itself a public listing on the TSX Venture Exchange. The reason I missed it is because Lignol only started trading four days ago — go figure! And its timing was impeccable. Since Bush’s State of the Union address the stock has jumped 50 per cent to $1.15 (so far today).

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