Chris Damas

VeraSun Energy:Buyout Candidate, If Obama Wins

I'm afraid you'll have to do your own research and come to your own conclusion on whether ADM should make an offer for VeraSun. Your professor would not appreciate someone doing the work for their students.

I note ADM will announce it's first quarter on November 4th so you can get a better appreciation of what the company's status and plans are. They say they are pursuing advanced biofuels with ConocoPhillips but don't give any detail.

Since writing the piece above, the Wall Street and major bank credit meltdown triggered the Paulson $750 billion "bailout" plan, and both stock markets and commodity prices have declined sharply. A number of deals have probably gone off the table due to fears of a global recession and/or lack of financing.

On the other hand, we have seen gross crush spreads on corn ethanol turn positive (before overhead, taxes and interest on debt). New crop corn is bid $3.55-70/bushel at VeraSun's plants which is almost half of what they said their cost would be for Q3. I think ethanol is seasonally weak this time of year as production overtakes the mandate, but should firm up when the 2009 10.5 billion gallon mandate kicks in for 2009.

November delivery at Chicago EtOH recently went higher than RBOB for the first time in over a year.
Tempering my enthusiasm for US ethanol is the fact the devaluation of the Brazilian real from 60 cents at the beginning of September to about 42.5 cents will give them a big incentive to export excess ethanol, especially through the Caribbean loophole.

On the positive side, Obama seems likely to get into the White House and there is also the possibility of a Democratic hat trick (President, House, fillibuster-proof Senate).

Which could mean corn ethanol producers and all the businesses they support will be coddled and protected like an overly-protected nephew or niece is supported by a rich relative.

VeraSun Energy:Buyout Candidate, If Obama Wins

Verenium doesn't look like it is in such good shape. I have a problem when the CEO is being paid $41,000 per month while the company is losing money.

The VeraSun plants are in the midwest far from the biomass that the VRNM process would typically use, such as wood waste. So I don't think BP would be interested.

Add to the possible suitor list, Abengoa Bioenergy.

VeraSun Energy:Buyout Candidate, If Obama Wins

Nowhere in my article do I say VeraSun's survival depends on an Obama win. Read it again.