By Jeff St. John
U.S. companies making ethanol from corn just can’t catch a break.
Aventine Renewable Energy (AVR) is the latest to face the threat of insolvency. The Pekin, Ill,-based ethanol producer said this week that it may have to file for bankruptcy protection if it can’t raise cash quickly.
The news came along with Aventine reporting a loss of $47.1 million in 2008, down from a profit of $33.8 million in 2007, despite selling a record amount of ethanol — a clear indication of the effect of falling ethanol prices.
Aventine also warned that its cash on hand had declined to $700,000 as of March 12, a big drop from $119.2 million at the end of the third quarter of 2008.
That could make it tough to meet a $15 million interest payment due April 1, or pay the $24.4 million it owes contractor Kiewit Energy Co., despite the fact that it stopped work on building two plants in the fourth quarter.
If Aventine does file for bankruptcy, it would follow the example of corn ethanol maker VeraSun Energy Corp. (VSUNQ.PK), which filed for bankruptcy in October (see VeraSun Files for Bankruptcy).
It looks as if oil refiner Valero will profit from VeraSun’s loss. Valero on Tuesday won a bid to buy seven of VeraSun’s ethanol plants for $477 million, subject to federal bankruptcy court approval, MarketWatch reported. The bankrupt ethanol maker saw a total of $993 million in bids for its 17 plants.
The economic picture for ethanol makers has been grim for some time, and the recent fall in gasoline prices — which are closely tracked by ethanol prices — hasn’t helped matters.
Sacramento-based Pacific Ethanol (PEIX) has shuttered three of its five producing ethanol facilities in the past two months as it seeks to renegotiate terms with two of its lenders, The Sacramento Bee reported earlier this month.
Still, the federal government is so far sticking to its goal of producing 36 million gallons of ethanol by 2022, despite a U.S. Energy Information Administration report showing the nation’s ethanol industry will likely fall short of that goal (see U.S. Won’t Meet Its Own Biofuel Mandate).
That could put refiners and oil companies in a good position to shop for ethanol plants on the cheap, then turn around and get them running to meet that federal mandate.
