Ethanol hopeful GTL Resources hopes to start production this year with a 50 million gallon-a-year plant near Chicago.

AIM-quoted GTL, headed by former Lloyd's insurance chief executive Peter Middleton, hopes to extract substantial annual revenues from the plant, whose construction follows the company's reverse takeover of Illinois River Energy. That deal, funded by a £20 million placing at 1.25p, took bombed-out GTL into the US ethanol business, which is being encouraged by US legislation as offering motorists fuel which is cheaper than petrol and is not imported from hostile parts of the world. While ethanol, as a corn derivative, provides extra income for Mid-Western farmers.

Middleton says GTL is sourcing corn from US food giant Cargill and intends to market its fuel through another company, United Bio Energy. He argues the new plant will be able to produce fuel economically at the equivalent of $19 to $20 per barrel of oil, which now trades at more than $70.

GTL hopes to start producing from the fourth quarter of this year and plans to double capacity to 100 million gallons a year with a second £20 million-plus plant, to be funded if possible with 60 per cent debt and 40 per cent equity. Middleton says the company is reviewing four possible alternative projects to achieve this, adding that the ultimate goal is to produce 400 to 500 million gallons a year, 'putting us into the top league'.

He argues US Ethanol production is expected to reach a plateau in four or five years and says the company is looking at other markets, in particular China. He says GTL is also investigating the economics of using corn stalks to produce hydrogen for future fuel batteries.

Revenues from ethanol production should start to show through in the company's figures for the year to March 2007. That should make a welcome change, after losses of £12.9 million in 2004-005 and a £2.4 million deficit in the six months to last September, and house broker Arden forecasts £4.65 million pre-tax profits for 2007-08.

Since GTL's 30p float eight years ago, its shares have performed disastrously for most of the time, falling to 0.99p in May 2005. They have rallied to 2.65p on hopes for the US project and, if that looks like delivering the goods, they could revive further.

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