Novozymes looking to build in Illinois

Construction of additional Illinois ethanol production facilities is stymied by the decline in ethanol prices, which has cooled prospective investors.

Aventine Renewable Energy Holdings Inc. said its planned plant expansion in Pekin has been shelved as investors wait for ethanol prices to rebound. Kansas City-based Alternative Energy Corp. has two Illinois plants on the drawing board—one in Kankakee and one in Greenville—but has not begun construction and is still in the “finance stage.”

Aventine stock has dropped 61 percent from a November 2006 high of $26.49 to $10.18 Wednesday.

The company's original Pekin plant has been producing ethanol since 1981 and increased production in January by 57 million gallons a year. But further expansion of capacity by 113 million gallons has been sidelined.  In addition, Aventine is contemplating five more projects with a potential capacity of 565 million gallons, which are also suspended.

Similarly, the stock of Alternative Energy, has plummeted, by 78 percent from a $2.40 high on Oct. 23, 2006 to 52 cents on Wednesday. J.B. Voss, vice president of business management, said Alternative Energy hopes to  build the Kankakee plant first and Greenville will be “phase two.”

Ethanol futures prices have dropped 35 percent year-to-date. Denatured ethanol futures for March 2008 delivery closed at $1.62 per gallon Wednesday at the Chicago Board of Trade.

Kankakee Mayor Donald E. Green said in an interview Wednesday that the city’s predominantly agricultural ecnonomy will see a “huge benefit” from Alternative Energy’s plant. Green said local farmers will sell their corn to the ethanol plant and the plant itself will generate “80 to 100 jobs.” But the greatest benefit could be in tax revenue.

“We as a community want the plant because of the tax base the plant will provide,” Green said.

The city has approved zoning for the plant’s construction in a 248-acre industrial park. He said electricity, sanitation and water needs have all been addressed in preparation. Green and other city officials have seen plans for construction, but nothing has been finalized. However, Green remains optimistic the plant will be built.

“Whether it’s ethanol, steel or microchips, it’s never a sure thing until they dig that first shovel full of dirt,” he said.

Alternative Energy received its permit from the state on June 22, 2007. Since Aug. 31, Illinois has issued 59 permits for ethanol plant construction. Only four plants are currently operational—two owned by Decatur-based Archer Daniels Midland Co., the nation's top ethanol producer, and one by Aventine.

But as the supply of ethanol in the market outpaces demand, skeptical investors are sitting on their money.

“There’s no new money flowing into ethanol plants today,” Les Nelson, director of investor relations for Aventine, said last week.

ADM may offer these struggling companies a way out. ADM announced on Oct. 2 that it will be looking to expand its ethanol production by buying plants now while prices are low.

Alternative Energy might have the inside track for a potential buyout. Four of the company’s five directors previously worked for ADM including the CEO, Mark Beemer, who was at ADM for 12 years. However, Beemer said last week that ADM has not approached Alternative Energy about a potential acquisition. He did not comment on any other merger possibilities.

Nelson said Aventine had not been approached by ADM for an acquisition either. But other ethanol companies have approached Aventine for a potential merger or acquisition, he said.

Both companies expressed confidence in ethanol’s future.

“We would be selling our plants if we didn’t believe in ethanol,” Nelson said. “Ethanol is going to a factor in the market in the long-term, but in the short term, things are iffy.”

Beemer touted ethanol’s prospect as a renewable resource.

“What people don’t realize is that petroleum takes a lot of energy to crack it,” he said referring to accessing its energy potential. “Any type of energy takes energy to produce,” he said.

Beemer sees the renewable energy sector as a bright spot for the next 20 to40 years as technology continues to improve efficiency.

This potential keeps Mayor Green hopeful that the Kankakee plant will soon come to fruition. He said he trusts the board of directors at Alternative Energy and praised their agriculture experience. But for now the financing problem lingers and Kankakee waits.

“You can’t build it until the banker gives you the money,” he said.