IsThisRight

Whatever Happened to Those Ethanol Companies?

The premise that 'revenue' is decreasing is a misunderstanding of the source of the revenue; and of margins.

While having their plants under construction, PEIX had the cash flow to buy and sell ethanol as a marketeer. Revenue and MARGINS from production was the driver of long-term value.

Re-starting the plants will again drive the value of the company; not the pass-thru dollars of ethanol reselling. Now mind-you, that this reselling business kept the management eating while the plants are in BK, but nevertheless, I rather take the production of fuel and WDG and the higher margins resulting, than judge the company on the top line dollar figures.

Verasun's Screw Up

Tim, VSE management was rated "to be sharp in a difficult operating environment" because they had overbought corn and decided to sell the surplus at a high price. The very next quarter, they stand to loose 3-5X what they had earned before. Does it not feel like betting at a casino?

Like you, I had judged their 'operating' skills in merging two companies, building bulk supply to be able to optimize distribution thru unit trains, and becoming efficient with low volume production (355 million gallons per quarter).

Hopefully, they will step away from the casino table, rather than raising the ante by more bets- by their own filings, 4Q will also be similar impacted.

It will take sometime to work thru this as they have just added $.70/gallon to the cost of their plants( $100M lost over 1.4B gallon production). At 10% interest, this is a 7c cost to every gallon of ethanol that they sell until they can repay this debt.

I think that they have just made themselves a take-over candidate. May be someone will value their plants at $2.50 per gallon? ADM, or an oil company like BP to the rescue?

Are We at the Bottom of the Ethanol Barrel?

Everyone tries to find the rational of the ethanol stock price in the process of how ethanol is made and /or in how much comparative energy ( fuel gain) is created. All good arguments when there is a stable market and one is setting a comparable price to other stable fuel.
However, the bounce in these ethanol stocks can be best understood this way:
1/ In a "credit crunch" environment, the "squeeze" came from the speculators trying to trap the companies while their cash flow is constrained. The constraints are from the construction obligations and lately the price of corn.
NOW, since PEIX has shown that a) they can generate cash (EBITDA $12M) even at the high price of corn b) they are at the end of their construction plans (3Q08) and c) they finally have a CFO who can look under all the rocks of the financial contracts.... for all these facts, now Wall St can start pricing the stock on its relative value to oil/gas, without the 'squeeze' from the SHORT speculators.

Incidentally, except for ADM who has a lot of cash, most ethanol CORN plant construction will be done by 2008!!! The scarce about corn will be over soon.

It's Now 'Official': Ethanol Is a Scam

Bravo, for the 'scam' story. Let's turn off ethanol and buy more oil, while we go wild on using more gasoline!

What is your alternative plan, Mr Perry, PH.D?

The Case Against Ethanol

You know that there is a bit on bashing when the easiest number to verify is wrong "Ethanol is at $2.00 when corn is at $6.00".
Ethanol ( as of 3/26 noon) is at $2.47 while corn is at $5.48.
A price difference of $3 versus $4 is a LOT.

Now for the other facts:
1/ "The corn used for ethanol could be used for feeding the poor" Question is : would the corn be grown at all if there is no ethanol sales to supplement oil-based gas?

2/ "Ethanol uses as much energy as the coal, oil and natural gas that it takes to make the ethanol".
Question is : why is it we do not turn coal or natural gas into gas?
So taking coal or natural gas energy and CONVERTING it to fuel to put in a car is ingenious!
3/ "The cost of subsidies pf $1-$1.38...'
a) My understanding is that the CORN ethanol subsidy is 50c a gallon. It goes to the REFINERS to kick start their investments to build the infrastructure to store/mix/distribute ethanol. Now this infrastructure is partly USABLE for cellulosic ethanol in the future.
b) the $1-$1.38 is to have the ethanol industry do the research/development/b... new plants for ethanol which will not depend on corn.

So first the author of the article blames the use of corn, then votes again approach to develop ethanol with other than corn.
OK, let's hear your POSITIVE proposal on how to solve the energy challenge. I will start first : I am all for conservation=driving less, buy smaller cars. Any other ideas to burn LESS OIL BASED GAS?

Ethanol: Three Developments to Watch

Which company makes the FOAM needed by the fire houses across the contry. As an investor, this is the type of info I need. Think for the summary of ethanol news.

Larry Kumins: Ethanol Use May Peak Soon

Going from 5% to 10% is Half-way there.... not two-third.

Why is it doubtful that the car industry and the consumer will not accept E85?