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Trash-to-Ethanol Producer Backed by Valero Sets $125 Million IPO

Enerkem Inc., a closely held Canadian biofuel company backed by Waste Management Inc. and Valero Energy Corp., is seeking to raise $125 million through an initial share sale in the U.S. and Canada.

The company, based in Montreal, is seeking listings on the Toronto Stock Exchange and the Nasdaq Global Market, according to a filing today. It didn’t say how many shares will be offered or at what price.

Enerkem develops refineries that convert trash into gases, which are processed into ethanol. The fuel will help oil companies meet a U.S. Environmental Protection Agency regulation to blend into their gasoline products 16 billion gallons (61 billion liters) annually of so-called cellulosic biofuel by 2022.

The company estimates that its process may use as much as 140 million metric tons (154 million tons) of the 435 tons of municipal solid waste that end up in U.S. landfills each year.

Enerkem is backed by Waste Management, the largest North American recycler, and the independent oil refiner Valero, and plans to sell them its technology to use in refineries in the U.S.

The company has a pilot plant in Sherbrooke, Quebec, and a demonstration plant in Westbury, Quebec, with annual production capacity of 1.3 million gallons. Its first commercial facility, in Edmonton, Alberta, is expected to begin production in 2013 with capacity of 10 million gallons a year.

Waste Management and another investor bought a minority stake in the Edmonton plant in December for C$15 million ($15.1 million).

Enerkem is developing two other plants of comparable size, in Mississippi and Quebec, according to the filing. The Mississippi project is supported by an $80 million loan guarantee offered by the U.S. Agriculture Department in January 2011.

Replacing Petroleum

Its technology can also convert waste into specialty chemicals to replace petroleum derivatives in the production of hygiene products, paints, plastics and other goods, according to the filing.

The company’s other investors include Rho Ventures LLC and Braemar Energy Ventures. A group of investment banks led by Goldman Sachs Group Inc., Credit Suisse AG and BMO Capital Markets Corp. are handling the offering.

Enerkem will trade under the ticker NRKM on Nasdaq and NKM in Toronto.

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