Thursday, April 9, 2009

Down come the ethanol giants

Nigel Jaquiss reports in WWeek on the implosion of Cascade Grain's new $200 million ethanol plant in Clatskanie and the political process that pushed millions of taxpayer dollars to be lost in the failed plant. The article, "Corndoggle," (ha!) points out that Oregon lawmakers essentially created a market for ethanol in the state with the renewable fuel standard then loaned money to Cascade Grain for the plant's construction only to have it close after operating for just seven months. The company blames the spike in the price of corn for its demise, but Jaquiss sites unnamed sources that say the plant was shoddily built and its product was loaded with sulfates.

It's interesting to point out that Pacific Ethanol (Nasdaq GM:PEIX), which owns the other giant ethanol plant built in Boardman in response to the RFS, is also currently in default on their construction loans. They operated profitably in 2007 but reported a $146,000 loss in 2008 and now have until the end of April to renegotiate their loans, according to a March 31 report to investors. Its chairman and CEO have pumped $2 million into the company to keep it afloat and their annual report is optimistic they can ride out the downturn as their competitors (see above) fall by the wayside.

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