Seeking Alpha
Alternative energy, solar, energy efficiency, grid modernization
Profile| Send Message|
( followers)  

By Jeff St. John

The ranks of biofuel producers facing bankruptcy continues to climb, with Pacific Ethanol (NASDAQ:PEIX) the latest to add its name to the list.

The Sacramento-based maker of ethanol from corn reported last week that its creditors had given it until the end of April to pay them back or renegotiate terms. The company is in default on $250 million in loans and could face bankruptcy if it can’t find more cash or renegotiate.

The past two months have seen Pacific Ethanol shutter three of its five plants in the face of mounting losses. The company last week reported a 2008 loss of $151 million, a decline from 2007 losses of $18.6 million. While the company’s sales grew to $704 million in 2008, up from $461.5 million in 2007, the company’s 2008 cost of goods eclipsed sales for the year, rising to $737.3 million, up from $428.6 million in 2007.

Those figures lay out the challenge facing ethanol companies, with high prices for corn and energy eking away at margins and falling gasoline prices dragging down prices for the fuel they make.

Aventine Renewable Energy (AVR) warned last month that it too may face bankruptcy if it can’t raise cash. The Pekin, Ill.-based maker of corn-based ethanol reported a loss of $47.1 million for 2008, compared to a profit of $33.8 million in 2007.

And VeraSun Energy Corp. (OTC:VSUNQ), another once high-flying corn ethanol maker, filed for bankruptcy in October (see VeraSun Files for Bankruptcy). Last month, top U.S. oil refiner Valero bought out VeraSun’s plants

Whether refining giant Valero can make a go of the business remains to be seen. It bought out VeraSun’s plants for $477 million and said earlier this month that it intended to run them at full capacity despite ethanol’s poor margins. The plants it bought have an annual production capacity of 780 million gallons, or about 7.5 percent of the country’s total.

Times are hard for biodiesel makers as well. Last week, Houston-based Nova Biosource Fuels (NBF) threw in the towel, filing for bankruptcy protection. The company reported a 2008 loss of $42.3 million, compared to a 2007 loss of $19.4 million, even as revenues grew nearly threefold.

Nova Biosource has also seen falling prices for petroleum-based diesel fuel dragging down what it can command for its biodiesel. It reported that its per-gallon sales price has fallen from a peak of about $5 in mid-2006 to less than $3 in late 2008 and early 2009.

Europe’s decision to impose tariffs on biodiesel imports also has hurt U.S.-based biodiesel makers, which export roughly four-fifths of their product to Europe, the New York Times’ Green Inc. blog noted.

Source: Ethanol Woes Continue: Pacific Ethanol Short on Cash, Nova Biosource Files for Bankruptcy