Tuesday, September 4, 2007

Ethanol Plant Stock Offering Canceled

Organizers of an equity drive to finance a 100-million-gallon-a-year ethanol plant near Akron in northwest Iowa have suspended the effort.

Akron Riverview Corn Processors LLC, a wholly owned subsidiary of LSCP LLLP, which is majority-owned by Little Sioux Corn Processors LLC in Marcus, had intended to sell between $70 million and $100 million in stock to build the plant, according to a filing with the Securities and Exchange Commission dated Aug. 2.

The filing said the estimated cost of constructing the plant was $202.5 million.

Stephen Roe, chief executive officer of Little Sioux Corn Processors, declined Wednesday to comment about the decision to suspend the equity drive.

A news release issued Tuesday said the decision to suspend "further project development" was made because of "market conditions."

If market conditions change, the statement said, the project will proceed, if it is found to be "appropriate and advantageous."
From the Des Moines Register

The next day the Chicago Tribune story was headlined:

Ethanol supply grows; price falls

And had these added comments:

...As the price of the fuel declines, more ethanol projects will be shelved, said Tom Hauser, vice president of commercial agribusiness for CoBank, an Omaha-based bank that specializes in financing agribusiness and rural energy projects.

The price of the fuel on the Chicago Board of Trade is down more than 19 percent from a year ago, at $1.69 a gallon. Prices rose 18 percent last year as demand climbed.

"People are starting to look through the windshield instead of the rearview mirror," Hauser said. "Last year was just ridiculous."

Investors are hesitant to finance the projects as plant construction costs swell and the price of the fuel is sliding, said Todd Swanson of Third Point LLC, a hedge fund based in New York.

The cost to build an ethanol plant is about $2.20 a gallon, up from about $2 a gallon last year, Swanson said.

A 100 million-gallon plant, the size of Little Sioux's delayed project, would cost more than $220 million.

There are currently 128 ethanol plants in the U.S. Seventy-seven plants are under construction and eight are expanding, according to the industry's primary trade group.

Ethanol at the CBOT fell again Thursday as the peak-demand summer driving season ends this weekend.

The Labor Day weekend marks the end of the U.S. summer driving season, which signals a decline in demand for gasoline.

Ethanol is mixed with the more costly fuel to spur profits for wholesalers and meet federal and state clean-air mandates.

Denatured ethanol for September delivery fell 2.9 cents, or 1.7 percent, to settle at $1.69 a gallon at the CBOT.

Sixteen contracts, each representing 29,000 gallons, traded Thursday.

Gasoline futures fell 2.07 cents, or 1 percent, to close at $2.0801 a gallon on the New York Mercantile Exchange.

Conventional gasoline blended with ethanol on a voluntary basis by distributors fell 1.4 percent, to 1.6 million barrels a day in the week ended Aug. 24, according to an Energy Department report released Wednesday.

Gasoline blended with ethanol is required in major cities such as New York and Chicago to meet clean air standards. In other areas, or so-called discretionary areas, gasoline distributors blend more of the additive in order to stretch supplies.