Aventine Crashes: Ethanol Biz Looking Real Ugly
April 9, 2009
The ethanol biz is looking like one of the worst places to be stuck in the middle of the current economic storm. Last week ethanol maker Aventine Renewable Energy Holdings said it was suspending construction of a biorefinery in Aurora, Neb., and extending the construction schedule of a biorefinery in Mount Vernon, Ind. Well, “suspending” and “extending” look like wishful thinking now — on Wednesday Aventine filed for Chapter 11 bankruptcy.
We had already put those two plants on our biofuels deathwatch map, but it’ll be more serious than that for the company, which says it supplied almost 690 million gallons of ethanol to the U.S. in 2007. Aventine had another working plant in Aurora, Neb., and one in Pekin, Ill., and the Wall Street Journal points out that while the company has assets of $799 million, it has $491 million in debt.
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Aventine is by no means alone. At the end of October, VeraSun filed for bankruptcy due to what it said were “worsening capital market conditions and a tightening of trade credit” that led to “severe constraints on the Company’s liquidity position.” The economic crisis was just too much for an industry already beaten up by high corn prices last summer. Around this time last year corn prices were so high that Citigroup analyst David Driscoll predicted that close to three quarters of U.S. ethanol plants, or 123 of America’s 160 operating ethanol plants, were at risk of being shut down.
Aventine’s best bet will likely be finding a big buyer in the fossil fuel market. VeraSun ended up selling its assets to massive oil refiner Valero. Scooping up biofuel assets on the cheap is an easy way for an oil refiner to meet ethanol blending mandates.
Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita. Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol. Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector. On January 20, 2009, Florida Energy & Climate Commission amended RET Grant Agreement S0386 to increase Renergie’s funding from $1,500,483 to $2,500,000. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is renewable, more economical, cleaner, and more efficient than unleaded gasoline. Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.