Daniel Englander
Another One (Two?) Bites the Dust March 25, 2008 at 1:15 PM
Ethanex Energy, a Kansas-based corn ethanol producer, has “ceased ongoing commercial operations” and fired nearly all of its employees. The company filed an 8-K on Monday stating “in light of its declining liquidity and its inability to obtain interim financing” Ethanex terminated its executive chairman and co-chief operating officers and that it began work “with bankruptcy counsel to prepare for a filing and anticipates filing for bankruptcy protection in the immediate future.”
Where did it all go wrong for Ethanex? The company formed in 2006 and issued a $20 million private placement shortly thereafter. After a successful public offering, Ethanex’s shares were trading at a high of $48 in October 2006. On Monday the company’s stock price hit $0.17. It’s initial plans called for building three 110 million gallon plants based on a proprietary corn fractionation process, which it claimed would produce corn-based ethanol more efficiently by separating fermentable and non-fermentable parts of the corn kernel. That didn’t quite pan out.
In November 2007, Ethanex launched a $220 million bid to buy and expand a 26 million gallon plant in Nebraska. It dropped $170 million in cash, and promised to make up the difference with company stock. After a 10 for 1 split in January, however, the company’s capitalization never recovered. It collapsed late last week after failing to secure $1.5 million in financing. Ethanol company collapse and financing failure are becoming commonplace stories, and highlight the dual problems of feedstock price increases and rising construction costs caused by an unbalanced federal biofuel subsidy and growing demand for raw materials.
Cellulosic companies may not fair any better. Verenium, a Cambridge, MA-based cellulosic ethanol maker, is also on the verge of collapse. As part of it’s 10-K filed on March 17 the company stated “we continue to experience losses from operations, and we may not be able to fund our operations and continue as a going concern.” Verenium has incurred significant net losses for each of the last three years and, perhaps even worse, it’s “losses were attributable to our specialty enzyme business” - the company’s core technology. Most likely this means the company has generated significant losses attempting to commercialize its technology at its 1.4 million gallon Louisiana plant, and that those attempts were ultimately unsuccessful. The company’s deficit stands at $437.1 million dollars.
Tomorrow I’ll look at ethanol production, distribution, and consumption in Brazil to see how they’ve figured it out, while it looks like we’ve significantly misjudged the ethanol game.
Go back to the front page >>
[...] Ethanol here is produced from sugarcane, which is more efficient in terms of energy conversion and density than corn and is also has lower emissions. It’s also much cheaper to process - $0.15-$0.20 a litre for sugarcane versus $0.30 a litre for corn. Despite this, the U.S. maintains a $0.54 tariff on ethanol from Brazil, which was levied to protect domestic producers and refiners. Even with the benefit of trade protection a lot of these companies are starting to fail. [...]
[...] the cellolusic ethanol company that faced close to $440 million in deficits only two months ago, announced this morning it has entered the commissioning phase of its new 1.4 [...]