US Bio-ethanol shares slump as effects of mid west floods become clearer - Bill Gates cuts biofuel investment 50% .. renewable energy dreams fade ..
The midwest floods have had a dramatic effect on the steadily declining share price of US ethanol producers reflects the loss making industry with shuttered plants and shattered dreams.
Shares of Archer-Daniels Midland (ADM) fell US$ 3.76 = 10% today to US$ 33.52,
VeraSun Energy (VSE) lost 63 cents = 12% to and sank to a new low of US$4.70
BioFuel Energy (BIOF) lost 94 cents = 24 % (gulp) trading at US$2.96 , below $3 a share for the first time.
On top of this Citigroup have said that US government regulations may change in ways that divert some of the corn inventory currently ear-marked for alternative fuels back to the the food chain, because of rising concerns on food prices... and an election is due soon.
Readers might like to re-examine a post Friday, June 16, 2006 Dot Corn Boom : Vera Sun IPO soars when it was pointed out that the IPO issue price ," ... put(s) a value on the company of 200 times its annualized earnings from the March Quarter 2006. Compare that with (say) 50 for Google."
This was followed by Thursday, June 29, 2006 Will the investment boom in ethanol from corn feed the bulls ? when Aventine Renewable (AVR) was launched , initially priced at US$37 the IPO increased by 1 Mn to 8Mn shares and the offer price to US$43. Yesterday they closed down 26 cents = down 5.25% @ $4.69 ... not a happy time for those who bought into the Ethanol dream.
We revisited US ethanol stocks again last year Thursday, October 04, 2007 US Ethanol glut, shuttered plants, shattered dreams
Pacific Ethanol, Inc. (PEIX NASDAQ) (who have yet to make any profits) was another boosted biofuel stock riding on the back of an investment by Bill Gates - he took up 27% of the stock - 5.25 MN shares at US$16 a share ,a total investment of US$84 Mn. "Bill Gates is invested in one of the hottest growth sectors in the stock market." said CNN Money at the time. They IPO'd at the same time as Vera Sun and Aventura and Pacific shareholders have seen the same one way helter skelter slide ...and yesterday they closed @ US$ 2.37 down a hefty 41 cents = down 14.75% .
Very sensibly Bill tells us , he has been selling his stake down which started (IHT) in November 2007 by converting the original preferred stock to 10.5 million common shares and selling off began in May and continued in the first days this month (June 2008) . So he has cut his holding by at least a half (June 4th report) .... taking a big hit selling between US£3 and US$4 a share. At best these sales have recovered US$10 Mn. and he is left with stock worth half that from the original US$84 Mn investment.
All of which makes a bit of a mess of Dubya's plans for sidelining the Saudi black gold... and also the very much oversold cellulosic ethanol ,derived from biomass ***, a fancy name for vegetable matter, corn stalks etc., Now with corn over US$7 the absurd economics of corn based ethanol become hopelessly uncommercial - as pointed out -US Midwest Flooding cuts crop prospects - corn prices hit record high
Federal law requires that the U.S. nearly doubles the amount of ethanol it uses annually to 7.5 billion in 2012 from 4 billion gallons in 2006. There are said to be some 130 ethanol refining plants working today in the US , and as many building...
Hmmmmm... Looks like good news for Brazilian ethanol refiners from sugar cane.
PS : *** If you want to see the bullshit that passes for promotion of scientific nonsense visit the Xethanol website (XNL : AMEX) and read this , and note it was published on April 1st 2008, and certainly do NOT buy their stock...." For the three months ended March 31, 2008, the company reported a net loss of $2.0 million, or ($0.07) per share, as compared to a $5.5 million net loss, or ($0.19) per share, for the same period of the prior year" and they add this interesting note to the quarterly results. "Because of the continued high prices for corn and gas, on May 1, 2008 the company temporarily ceased production of ethanol at its Blairstown plant to reduce its operating losses."