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A new chapter for the industry

Posted: November 3, 2008 at 10:49 AM CST

Typically, writing this blog means I’m searching for a common news theme from the previous week, or previewing what may be coming up during the current week. Sometimes it takes some effort to figure out the “big news” in the industry. This isn’t one of those weeks.

Obviously, the biggest news over the weekend came from one of the nation’s largest ethanol producers. VeraSun Energy Corp. announced that it voluntarily filed petitions for relief under Chapter 11 bankruptcy. “The company suffered significant losses in the third quarter of 2008 from a dramatic spike in its corn costs, reflecting in part costs attributable to its corn procurement and hedging arrangements, and historically unfavorable margins,” a VeraSun press release said. “Beginning in the third quarter, worsening capital market conditions and a tightening of trade credit resulted in severe constraints on the company’s liquidity position.”

The company said it intends to maintain operations during the bankruptcy proceedings, which should begin with a hearing today (Nov. 3).

“[The Oct. 31] filing allows VeraSun to address its short-term liquidity constraints as we navigate historically challenging market conditions while we focus on restructuring to address the company’s long-term future,” said VeraSun Chief Executive Officer Don Endres. “We appreciate the loyalty of our employees, customers and suppliers during this challenging time.”

Of course, VeraSun isn’t the only company hit hard by financial difficulties. It just happens to be the biggest and most well-known. I plan to update this blog throughout the week with news links from mainstream media groups covering the issue.

A few other companies that have recently filed for bankruptcy:

• E3BioFuels LLC filed for voluntary Chapter 11 in late 2007 after mechanical problems plagued the plant outside of Mead, Neb. It was the first “closed-loop” facility powered by methane gas from an adjoining feedlot. It was in production for just six months. E3’s initial bankruptcy filing listed $10 million in assets and $73 million in liabilities.

• Greater Ohio Ethanol, which began operation in July, filed for Chapter 11 bankruptcy in October. The process is playing out in Ohio, and we should learn more this week.

• Renova Energy PLC filed for Chapter 11 bankruptcy protection in late June. The company said in September that it expected to continue operations at its ethanol facility in Torrington, Wyo.

• Central Illinois Energy Co-op Inc. sold its partially constructed plant in Canton, Ill., after filing for bankruptcy in December 2007. The project, which was nearing completion, was purchased by some of its original creditors, including Credit Suisse. The plant’s name was changed to Riverland Biofuels LLC, and hiring was initiated to finish the project in late 2008 or early 2009.

These aren’t the only plants facing difficulty. Local news reports say Glacial Lake Corn Processors, sole owner of Glacial Lakes Energy, is asking its 4,200 co-op members for $11.3 million to get throw a cash flow crisis impacting Glacial Lake’s Watertown and Mina, S.D., plants.

The recent actions could be seen as a sort of market correction. Only time will tell what the next chapter is for the ethanol industry.

-Dave Nilles