Aventine cites slowdown
in plant construction
US ethanol production forecasts may not be met due to a
slowdown in new plant construction and an end to easy
financing, Ron Miller, CEO of producer/distributor
Aventine Renewable Energy,
told a Bank of America conference September 19 that was
webcast.
"We are seeing some slowdown in new plant construction,"
he said, adding plans for new plants "are not getting new
financing today. The equity markets have dried up."
The arb is so huge that we will see, we believe, in the
coming months, some traction from refiners on using more
ethanol.
--Ron Miller, Aventine Renewable Energy
Miller said US ethanol capacity should hit its expected
6.5 billion gal/year average supply forecast for 2007 (with
an exit rate of 7.2-7.5 billion gal/year) and its 8 billion
gal/year average for 2008 (with an exit rate of 9-10 billion
gallons).
But delays mean the 2009 forecast of an average 10
billion gal/year (exit rate of 10.5-11 billion gal/year) may
not happen. "That 2009 volume certainly would be hard
pressed to get up to 10 billion gallons (average)," he said.
Miller noted current US ethanol capacity is outpacing
demand and that ethanol is being priced around 30 cents
below gasoline. It "is a difficult time for the ethanol
industry," he said. On the plus side, "the arb is so huge
that we will see, we believe, in the coming months, some
traction from refiners on using more ethanol."
Miller noted the "crush margin," or the difference
between the sales price of ethanol and the purchase price of
corn feedstock, has dropped 74.5% since Aventine went public
in June 2006. Aventine's share price has followed suit, he
said, and is down 63.3% over the same period.
The stock closed at $11.68/share September 19, down from
its $40/share value after its IPO.
The US ethanol crush spread declined by $0.05/gal during
the second week of September to $0.92/gal, according to
Credit Suisse, and is now $0.81/gal below last year on a
four-week trailing basis.
Miller said Aventine "remains convinced" a US-wide move
to 10% ethanol-gasoline blending will take place "at some
point." A move to all-E10 represents a 15 billion gallon
market, he said.
A sizable expansion of ethanol blending in the Southeast
is "about 6-12 months off," due to a lack of infrastructure,
said Miller. In California, he said, refiners have indicated
they will not begin blending above the current 5.7% level
until 2010.
Created: September 24, 2007
