VeraSun stock plummets on Chapter 11 fears
Reports say ethanol giant with FD plant is strugglingBy LARRY KERSHNER, Messenger staff writer
VeraSun Energy Corporation has yet to make an official comment relating to reports that it is filing for Chapter 11, but its stock has taken a significant plunge.
The financially beleaguered ethanol manufacturer, which has 17 ethanol plants throughout the Midwest, including one in Fort Dodge, announced Sept. 18 that it was studying ''strategic alternatives'' with Morgan Stanley, which could mean anything from a buyout to a partial sale of assets. Industry talk has stated that the company, which trades as VSE: NYSE, found itself on the wrong side of the corn futures market.
The company, based in Brookings, S.D., has issued no releases or official statements since Sept. 18.
Reports started moving across financial news wires Tuesday when Debtwire, which covers distressed companies from early stages of financial distress to Chapter 11 filings, stated that two unnamed sources reported that VeraSun, one of the largest manufacturers of ethanol in the nation, was filing for Chapter 11.
On Wednesday, a report from Seeking Alpha, an online stock market analysis publication, said VeraSun closed a plant in Linden, Ind. Later the same day, Reuters, an international news service, reported that the Indiana facility would be back in full operation ''in a few days.'' It had been closed, the spokesman who spoke with Reuters said, due to ''poor economics for distilling the alternative motor fuel.''
Multiple calls by The Messenger to reach a spokesman for VeraSun were not returned by press time Thursday.
VeraSun started operations in new Iowa plants on Sept. 5 in Dyersville and Aug. 14 in Hartley. It also has plants in Albert City and Charles City.
In December 2007, it purchased the plants of U.S. BioEnergy, bringing its total refining capacity to 1.6 billion gallons per year.
In 2007, the Messenger reported VeraSun had received a $1 million tax incentive from the state in order to develop the technology to extract corn oil from the ethanol byproduct, distillers dried grain. That oil was expected to be sold to a biodiesel refinery.
The plant said the new process would create 14 new jobs, paying an average of $16.60 per hour at the plant. It would also represent a $30 million investment in processing machinery. The company also received $200,000 from the state's Value Added Agricultural Products and Processes Financial Assistance Program to build a 1,300-ton-a-day corn oil extraction facility in Fort Dodge. Half of the funds were to be repaid within five years on a low-interest loan. The other half would be forgiven if VeraSun created the 14 jobs.
To date, that facility has not been built.
VeraSun posted total revenue of $843.8 million in 2007, a 52 percent increase over the previous year. Net income for the year was $26.6 million.
According to the Associated Press Wednesday, Joseph Gomes, an Oppenheimer Research analyst, said a recent VeraSun management client note claimed the company had not made the (Chapter 11) decision as yet.
The company's third-quarter reports posted losses of between $63 million to $103 million. Prior to consulting Morgan Stanley, VeraSun issued a statement Sept. 16 saying it was attempting to raise $20 million by selling common stock. VeraSun then rescinded the offer two days later, stating that several companies had expressed a ''strategic interest.''
After news of the possible Chapter 11 filing was released Tuesday, VeraSun's stocks fell from more than $1 to 73 cents and to 49 cents on Wednesday. According to msn.com, the stock saw a modest 8-cent climb to $.57 at the end of trading Thursday. Last December, the stock was trading at $17.
Reuters had reported that VeraSun put itself up for sale in September after taking a beating for locking in costly contracts for corn, the main U.S. product for U.S. ethanol. Corn prices have fallen by about half since peaking over the summer.
Market analysts have stated online they doubt VeraSun is at the point of filing bankruptcy after recently rescinding its public stock offering, which would have raised millions of dollars in operating cash.
The company's Web site states that VeraSun focuses primarily on the production and sale of ethanol and its co-products, with a combined ethanol production capacity of 560 million gallons per year. As of March 4, its ethanol production capacity represented approximately 7 percent of the total ethanol production capacity in the United States.
Contact Larry Kershner at editor@messengernews.net.
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kaleidoscope
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11-01-08 10:36 PM
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What I would like to know is why The Messenger doesn't deem the bankruptcy filing by VeraSun Energy breaking news! Fort Dodge invested millions to entice this now failed company to build here. Time to face the hard facts; ethanol is not a stable alternative and we will see similar companies fail in the near future. ICCC has spent millions of tax dollars to promote this industry, too. We are in a recession and if Obama and the his liberal cronies control Congress, we can expect a depression. History does repeat itself.
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rocky24
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11-01-08 12:01 AM
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Well you can say what you want but it all comes down to poor management at verasun. Quote “Industry talk has stated that the company, which trades as VSE: NYSE, found itself on the wrong side of the corn futures market.” From what I heard they where trying to speculate the corn futures and they gambled wrong. I personally know of two farmers that played that game some years back and they lost their farms. In my opinion it was poor management. When a local grain elevator buys a farmers corn or beans they hedge it on the stock market. ***********extension.iastate.edu/agdm/crops/html/a2-60.html this site will help you understand what hedging is. Verasun just got caught plain and simple.
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SettheRecordStraight
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10-31-08 11:15 PM
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In addition to the $1.2 million they were given according to the article above, how much did the city pay to build utilities out to them? Oh I forgot.. we can soak coleman district and our other close neighbors to make up the difference!!
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SettheRecordStraight
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10-31-08 10:48 PM
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10/31/2008 10:02:36 PM * VeraSun Energy files voluntary petitions for relief under chapter 11 of U.S. Bankruptcy Code to enhance liquidity (VSE) ***********rttnews****/Content/RTTHeadlines.aspx?Node=B1
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mongococo
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10-31-08 5:55 PM
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I stated 6 months ago that Ethonal was a joke and everyone yelled at me. Well it's here everyone, Ethonal is a joke and a very large govenment scam. I Hope no one has money in the stock which today ended at .48 cents. Verasun preparing for bankruptcy. An outright sale of the company seem less and less likely.
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exdodger
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10-31-08 4:18 PM
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A friend in FD when I was back for a visit said with the price of farmland now days you don't buy yourself into farming. The only way your a farmer is it is left to you. That's a sad commentary.
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exdodger
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10-31-08 4:14 PM
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On the note of land prices dropping a $1000 an acre. You would be amazed how many American Farmers have sold their land in Texas and California and gone to Mexico and other latin American countries. With the price they recieved for their land and the price they paid in other countries they lined their pockets pretty well.And it is still cheaper for them to ship from there to the US than to ship out of California. During the harvest time in Central California truck rates from the west coast double because of more product than trucks. A good example is the Castellini's in cincinatti. Sold there farms, went out of the country and with the proceeds leftover bought the Reds.
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exdodger
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10-31-08 4:07 PM
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Get ready because GM is basing its life on cars like the volt. And more are coming. By the time the economy recovers and more cars and big rigs are on the road to drive demand up the alternative sources will be here. I can't remember exactly but I believe ethanol's break even point because of costs associated and the fact that it isn't very efficient is gas nedds to be above $ 3.09 a gallon. As you see the price come down the demand for ethanol on the east coast goes away. Verasun I believe rails most of its ethanol to the Notheast. So with high corn prices paid and demand down and the purchase of US Biofuels Verasun has put themselves in a bad position.
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bigmac1
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10-31-08 2:14 PM
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What worries me is how much Iowa is staking its future on ethonol. We are spending tons of money and offering tons of tax breaks and what happens when an alternative engery source comes along and the bottom falls out of the ethonol market? I remember all the meat packing plants packing up and leaving town. Remember what that did to our economy?
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hybernation
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10-31-08 11:18 AM
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i don't think prices of things will go down much, if any because they'll be expected to go back up
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hybernation
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10-31-08 11:16 AM
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well i bet the "tate & lyle" plant will be bummed if vera sun closes since they just built it, but i think there's way too many ethonal plants in iowa anyway!maybe if there weren't so many the prices of corn type foods wouldnt be so expensive like corn flakes,& feed corn for people's live stock, etc.
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MisterObvious
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10-31-08 10:15 AM
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And when the election is over and gas prices go back up everything will be all right again. Why are all you doom and gloomers always so quick to be negative? Look at the bright side, food, travel and hard goods will go down because of lower gas prices.
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Cyclone68
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10-31-08 9:31 AM
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Uh-oh. Land prices just dropped another $1000/ac.
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SettheRecordStraight
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10-31-08 12:27 AM
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gee.. could this be the beginning of those reduced tax revenues that the city wont have to pay for the aquatic center?? Hang on to your wallets.
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