AE Biofuels, Inc. (OTCBB: AEBF) has begun construction of an integrated cellulose and starch ethanol commercial demonstration facility in Butte, Montana. The plant, says the company, will use patent-pending Ambient Temperature Cellulose Starch Hydrolysis (ATCSH) enzyme technology to optimize process conditions for multiple feedstocks. Non-food ethanol feedstocks used by the facility are expected to include switch grass, grass seed straw, small grain straw, and corn stalks alone and in combination with a variety of traditional starch and sugar sources. The 9,000 square foot pilot plant facility is expected to be fully operational in the second quarter of 2008.

“This is an important step as we optimize our integrated cellulose process technology for large-scale commercial implementation,” said Eric McAfee, chairman and CEO of AE Biofuels, Inc. “Our technology has been shown to significantly reduce the consumption of energy and water in the production of ethanol, and allows us to utilize a combination of non-food and traditional feedstock inputs. Applications of the patent-pending ATCSH technology may also include licensing or joint ventures with sugar cane ethanol plants.”

In 2007, AE Biofuels acquired enzyme technology from Renewable Technology Corporation and formed its ethanol technology subsidiary, Energy Enzymes. The company’s enzyme technology is designed to reduce operating and capital costs for both cellulosic ethanol and starch ethanol plants and provides a platform to integrate the two processes. AE Biofuels utilizes patent-pending ambient temperature enzymes to eliminate the up-front “cooking” process that occurs in traditional starch ethanol production. The company has three patents pending for the use and implementation of its technology.

According to the company the elimination of the initial cooking and cooling process significantly reduces energy and water consumption. In addition, the cellulose enzyme technology has proven successful in converting multiple lignocellulosic feedstocks, such switch grass, wheat grass, corn, and corn stover, the remaining corn “stalks” that are not currently being utilized as biomass, to ethanol. The multi-activity enzymes are expected to reduce capital and operating expenditures for cellulose ethanol production.

AE Biofuels is currently evaluating sites for large-scale commercial facility construction. The company owns ethanol plant sites in Danville, Illinois and Sutton, Nebraska, and holds options for four additional permitted ethanol plant sites in Illinois.

AE Biofuels recently announced the completion of construction of a 50 million gallon per year biodiesel refinery in Kakinada, India, a port city located in the state of Andhra Pradesh on the Eastern Coast of India, south of the city of Hyderabad. The AE Biofuels plant is connected to the Port of Kakinada by pipeline. In addition, AE Biofuels is currently constructing a refinery and a glycerin upgrading facility to produce and market pharmaceutical grade glycerin in India.

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