Check on China: Gushan Environmental Energy Limited

Like the United States, China is pushing the development of alternative energy sources to reduce the nation's dependence on imported crude. In the face of spiraling oil prices and a domestic diesel fuel shortage, the Chinese biodiesel industry is receiving a lot of attention.

While corn-based ethanol is the most popular biofuel in the United States, biodiesel holds the top spot in China. Biodiesel is a clean-burning ("carbon neutral") and biodegradable fuel produced from feedstocks like waste oil (old cooking oil from restaurants), vegetable oil offal and animal fat, typically blended with standard diesel fuel, then used in trucks, buses, ships and electrical generators. The byproducts of biodiesel production are used in the food, manufacturing and pharmaceutical industries.

Gushan Environmental Energy Limited (NYSE: GU), the People's Republic of China's largest biodiesel producer in terms of annual production capacity, is betting on the growing use of biodiesel and the push toward a more energy independent China. In addition to providing biodiesel to individual retail gas stations, petroleum wholesales and seagoing vessels, Gushan sells by-products from the production process (glycerine, stearic acid, erucic acid, erucic amide and plant asphalt). The company operates three production plants in the Sichuan, Fujian and Hebei provinces and plans to soon add four new facilities in Beijing, Shanghai, Hunan and Chongqing, to more than double its annual production capacity to 400,000 tons by the end of this year. 

Last month Gushan staged an initial public offering on the New York Stock Exchange, raising $173 million (18 million shares at $9.60), though the stock was priced well below the expected range of $11.50 to $13.50. Since then, shares weathered cooling U.S. capital markets and rose to $12.72 on Jan. 3, before slowly falling back to the $9 range. Gushan’s 52-week low is $7. The company plans to use the IPO proceeds to fund expansion efforts and to strengthen research and development.

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