SOURCE: Vega Biofuels, Inc.

February 17, 2012 11:40 ET

Vega Biofuels Provides Update to Shareholders

NORCROSS, GA--(Marketwire - Feb 17, 2012) - VEGA BIOFUELS, INC. (PINKSHEETS: VGPR) provides the following Shareholder Update.

Dear Fellow Shareholders:

I would like to thank you for your continued support during the past few months while we've been working with DTC. We are confident that this matter will be resolved soon. We will have an announcement as soon as we get the word from DTC.

The business of the Company is strong. We are continuing to move forward with implementing our Business Plan. The alternative energy sector has exploded worldwide. The emphasis on the development of renewable and alternative energy creates significant opportunities for Vega Biofuels.

Worldwide concerns about climate change and energy security, together with the increased cost of traditional energy sources, have resulted in an increased focus on renewable and alternative energy sources. At the same time, advances in technology have made renewable and alternative energy more cost-efficient and desirable. National, state and local governments are providing increased incentives for the development and use of renewable and alternative energy sources, and, in some instances, are even mandating their use. We are happy to be working with both the state and local government on the construction of our manufacturing plant in Cordele, GA that will utilize torrefaction technology to produce bio-coal from timber waste.

It is my understanding that there has been a lot of chatter on the message boards lately about whether or not bio-coal made from timber waste using torrefaction technology is possible. It is important to remember that those that doubt what we are doing and make negative statements about our ability to produce bio-coal have a personal agenda that does not include Vega being successful. It is also important to remember that we are on the cutting edge of an alternative energy source and there are bound to be people that doubt what we are doing. I would like to share some information with you about torrefaction technology and how it is being viewed around the world.

The most common woody biomass based fuels used in this way include dried wood chips, wood pellets and torrefied wood (a.k.a., bio-coal). But of these three, only bio-coal can be used as a drop-in substitute for thermal coal, with little if any modification being required to existing coal-fired boilers and coal feeding systems.

Torrefaction technology is gaining in popularity all around the world. The bio-coal that will be produced at our South Georgia plant is the best solution for coal-fired power plants interested in renewable sources, specifically in Europe where power companies have been mandated to produce a certain amount of their power from alternative sources.

Recently, a European power company completed a test using bio-coal made from black torrefied wood chips. The objective was to co-fire the bio-coal together with fossil coal. The outcome of the test was successful, meaning that a combination of the bio-coal and fossil coal has been used in an existing coal-fired power plant. There was no need for prior modification or investment to the existing coal-fired station and the bio-coal was processed through the existing fossil coal handling chain.

For some time, thermal coal-fired power plants all over the world have been under pressure to reduce emissions of carbon dioxide (CO2), sulfur hexafluoride (SF6) and other toxic substances. Burning bio-coal will solve this problem. In the European Union (EU), the carbon tax is already playing a major role in stimulating the use of renewable fuels, such as bio-coal. Because this tax scheme adds 20% to 30% to the cost of burning thermal coal in the hundreds of utilities, cement plants and other industrial users of thermal coal throughout the EU, these users have an incentive to pay a premium for bio-coal. They are now reducing their tax exposure or selling carbon credits to reduce thermal coal costs, and to offset the premium they pay to their bio-coal suppliers. This places Vega Biofuels in a perfect environment for success.

Günther H. Oettinger, European Commissioner for Energy, recently stated, "Europe's energy sector is on the threshold of an unprecedented period of change. Secure energy supplies and affordable prices are crucial for our growth, job creation and quality of life. There is no time to waste if we are to ensure a brighter future for our energy market."

We feel that we are in the perfect position to take advantage of the energy situation in Europe and other parts of the world. We have surrounded ourselves with top engineers and industry experts that have experience in working with torrefaction technology. We have a contract with a local timber company to provide the necessary raw timber waste. We have entered into a lease on a building that will house the manufacturing plant. We are working with local, state, and federal governments on the many resources and incentives they have to offer. We have entered into an agreement to sell our product to a European utilities broker. We have secured interim financing for the plant, and are in discussions with two major funding sources concerning funding for the total build-out of the plant. We look forward to the completion of the plant and the ability to take advantage of the energy situation in Europe and around the world.

The time is right for Vega Biofuels.

Thanks again for your continued support.


Michael K. Molen
Vega Biofuels, Inc.

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