IFB Ethanol Blog

Downturn for Cellulosic Ethanol

The next generation of biofuels made from plant cellulose is suffering from the economic downturn the same as the ethanol industry. Cellulosic ethanol is made from such things as crop residue and wood chips and holds promise to help reduce the nation’s use of fossil fuels.

Although refiners must, by law, start using at least 100 million gallons of cellulosic ethanol next year, industry officials say they won’t be able to meet that target or the targets that have been set for the following years.

Investors and lenders for commercialization of cellulosic ethanol are difficult to find and many firms are struggling to stay in business. "Right now at this juncture the biggest barrier we’re facing is financing,” said Gerson Santos-Leon, an executive vice president at Abengoa Bioenergy. “Private lenders and public lenders are not interested. They don’t even want to talk

NYSE Delisting Aventine

The New York Stock Exchange said Monday it will suspend trading of ethanol producer Aventine Renewable Energy Holdings Inc. before the market opens on March 30.

Aventine shares fell 3 cents, or 15 percent, to 17 cents in Tuesday morning trading.

The NYSE said the Pekin, Ill.-based company's market cap fell below its required $15 million level for 30 consecutive days. The exchange recently relaxed the rule from $25 million because of market volatility and decline.

Aventine last week said it may need to seek Chapter 11 bankruptcy protection if it cannot raise sufficient cash in the very near-term.

Valero Buys 7 VeraSun Ethanol Plants

    NEW YORK, March 18 (Reuters) - Oil refiner Valero Energy
<VLO.N> beat out Archer Daniels Midland <ADM.N> in buying bankrupt
VeraSun Energy Corp's <VSUNQ.OB> ethanol plants because ADM was
only interested in buying the entire company, a lawyer for VeraSun
said on Wednesday.
    VeraSun announced on Tuesday that Valero, the largest U.S. oil
refiner, had won an auction to buy seven of its ethanol plants
while three VeraSun creditors would buy the rest of its plants for
a total of about $1.05 billion, topping ADM's bid of $700
million.
    U.S. Bankruptcy Court Judge Brendan Shannon told a hearing in
Wilmington, Delaware on Wednesday that he would approve the sale,
saying VeraSun had held "a thorough and complete auction."
    Valero won the auction with a bid of $477 million, but will
pay about $537 million in total to cover working capital and other
costs. It expects to close the deal in April.

Ethanol Pipeline Announced

In other news, Magellan, a storage and pipeline company, and Poet, a large ethanol producer, announced yesterday a study to build a dedicated 1700 mile pipeline for ethanol only from the Midwest to northeastern US.

Reports: Aventine May File Chapter 11

Ethanol maker Aventine Renewable Energy Holdings Inc said on Monday it was in default on some its debt payments and may need to seek Chapter 11 bankruptcy protection.

The company said it was seeking to raise capital, "including seeking additional debt and equity financing and a potential sale of all or part of the company," but that it could seek bankruptcy protection soon if it those efforts were unsuccessful.

Also on Monday, cellulosic ethanol maker Verenium Corp's auditors questioned its ability to continue as a going concern.

The news from both Aventine and Verenium comes four-and-a-half months after their larger peer, VeraSun Energy Corp, filed for bankruptcy protection.

More Problems for Aventine

Pekin-based Aventine Renewable Energy will have a tough time completing construction on two new ethanol plants in Nebraska and Indiana, according to a document filed with the U.S. Securities Exchange Commission.

Kiewit Energy Company on March 9 cancelled the engineering, construction and procurement contracts for the first phase of construction of Aventine's 113-million-gallon plants in Aurora, Neb., and Mt. Vernon, Ind.

2009: A Challenging Year for Ethanol

Ethanol producers have a tall order in front of them in 2009: They have to produce more ethanol despite a rise in economic pressures and a drop in demand.

“It’s likely to be a tough year. Markets are not in good shape,” said Ron Miller, CEO of Pekin-based Aventine Renewable Energy Holdings Inc.

The federal mandate for ethanol (to be blended with gasoline) rises to 10.5 billion gallons this year — a billion more than last year, Miller said. Despite an increase in the number of U.S. ethanol producers — from nine plants to 176 in the past eight years — not all that capacity is likely to be realized, he said.

“Last year, one of the largest U.S. ethanol producers, South-Dakota-based VeraSun, declared bankruptcy and closed seven of their plants around the country,” Miller said.

In central Illinois, MGP Ingredients announced last month that it will no longer produce ethanol at its Pekin plant, choosing to target the food industry instead.

(Source: Gatehouse News)

Vilsack Endorses Higher Ethanol Blends

Agriculture Secretary Tom Vilsack said Monday the government should move quickly to increase the amount of ethanol allowed in gasoline.

"We can, we believe, move fairly quickly to move the blend rate to 12 or 13% in the interim," Mr. Vilsack told the National Farmers Union convention, adding that it could eventually be boosted to 15% or 20%.

It is up to the EPA to lift the cap. Adora Andy, the EPA's press secretary, said in a statement Friday that the agency will review the request and "act based on the best available science."

FAPRI Projections for Corn Prices

The University of Missouri’s Food and Agricultural Policy Research Institute forecasts that this year’s corn crop will sell for an average $3.74/bushel, down 15 cents from the 2008 crop average but still the third highest price on record. It estimates an average corn price of $3.99/bushel for the 2014 crop and plantings of 89 million acres compared with 86.3 million acres this year. The Institute says the corn price will continue to be supported by the ethanol industry. The federal target for biofuels use is 10.5 billion gallons this year and peaks at 15 billion gallons annually from 2015.

Raising the Blend Wall

The nation’s ethanol producers are urging the Obama administration to raise the 10 percent limit on ethanol in motor fuel to 15 percent or more, a move they hope will create new demand at a time when many distilleries are idle, according to the Washington Post. 

The producers say higher ethanol blends would help create jobs and reduce petroleum imports. Moreover, without a change in the 10 percent limit, ethanol makers say it could be difficult to fulfill a congressional mandate for renewable fuel use and the makers of new forms of ethanol, which rely on raw materials other than corn, could be locked out of the fuel market. 

“This is about jobs, energy security for America, improving the environment and meeting our legal responsibilities under the 2006 energy bill,” said retired Gen. Wesley Clark, co-chairman of Growth Energy, a group of ethanol firms. 

Growth Energy plans to formally request a waiver today from the Environmental Protection Agency to raise the ethanol content of motor fuel to 15 percent. Under the existing 10 percent limit, ethanol production would theoretically top out at 14 billion gallons a year based on current fuel consumption trends, or less because of transportation constraints that limit ethanol deliveries in many parts of the country. 

EPA has 270 days to review, collect public comment and make a decision on Growth Energy's request. In the meantime, it could decide to allow a jump to a 12 percent or 13 percent blend, the group said.