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Local Investors Prop Up Cooling Ethanol
By Mr Ethanol | December 7, 2007
CNNMoney:
Harold Newman shuttered his financially foundering ethanol plant in October and then broke ground on one 10 times the size.
“It sounds crazy _ but it appears to be the opportune time to do both,” he said.
Just a few months ago, Newman said, those who had invested in ethanol “made nothing but money.” But the boom has burst, profits have faded and ethanol isn’t the moneymaker it was. Many potential investors are now looking elsewhere.
Newman, 74, of Jamestown, in central North Dakota, made his fortune in the highway sign and billboard business, and to some extent, ethanol. He has weathered the erratic ethanol industry for a quarter-century and remains “absolutely bullish” on the corn-based fuel additive. Others are more skeptical.
“The ethanol industry is getting hit on both ends: Corn prices have gone way up and ethanol sale prices have gone down,” said Stephen Ham, an ethanol analyst at Standard & Poor’s in New York. “Clearly, the margins aren’t what they were a year ago. And being Wall Street types, you look at profitability.”
Ham has ranked top ethanol producing companies _ Pacific Ethanol Inc., Aventine Renewable Energy Holdings Inc. and VeraSun Energy Corp. _ at “Neutral,” noting they have slid 62.6%, 54.3% and 37.1%, respectively year-to-date, while the S&P 500 index is up 3.1%.
Last month, in a sign of consolidation in the industry, Brookings, S.D.-based VeraSun announced a deal to acquire a smaller ethanol-producing competitor, US BioEnergy Corp. Analysts expect both companies to lose money in the fourth quarter.
Topics: Ethanol, Industry, News |
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