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South Dakota-based VeraSun Energy Corp. filed Chapter 11 bankruptcy late last week to protect itself from creditors and help the company reorganize. The company, with five facilities in Iowa, reportedly lost more than $100 million in the third quarter due to high corn costs and low ethanol prices.
Monte Shaw, executive director of the Iowa Renewable Fuels Association, said the industry is struggling. But VeraSun's financial crisis should not be viewed as the beginning of the end for the industry, he added.
"It's a very ugly environment for ethanol producers (right now)," Shaw said. "But every industry goes through tough times. ... The Iowa ethanol industry will continue to be here and grow."
Shaw said VeraSun got caught buying too much $6.50 to $7 per bushel corn earlier this summer. That was OK when ethanol prices were near $3 per gallon, but when ethanol prices followed crude oil and plummeted by nearly half, it was a recipe for disaster.
VeraSun produces 550 million gallons of corn-based fuel a year in Iowa. The company has 16 distilleries nationwide, including two in Northeast Iowa: Charles City and Dyersville.
The company announced Monday it plans to continue operating during the bankruptcy proceedings. It won court approval to pay outstanding employee checks, suppliers for post-petition goods and services and for supplies delivered on or after Oct. 11. VeraSun also said it received commitments for up to $215 million in debtor financing. Shaw described the proceedings as a pre-packaged bankruptcy.
"The financing package approved today (Monday) allows VeraSun to maintain operations and continue supplying its customers," said Don Endres, VeraSun's CEO, in a statement.
Shaw said there have been five or six financially-strapped ethanol plants that have been temporarily or permanently shuttered recently in other parts of the county. However, he would be "shocked" if that occurs widely in Iowa.
Bruce Rastetter, CEO of Hawkeye Renewables, said his company is weathering the financial storm. The Ames-based ethanol producer is the second largest in the state at 435 million gallons. It has plants has plants in Iowa Falls, Fairbank, Shell Rock and Menlo.
Rastetter said a combination of certain price-protection maneuvers and adequate liquidity shielded the company from financial ruin. However, he said it wasn't as good of summer as hoped.
"Clearly the volatility of the markets is a challenge for everybody," Rastetter said. "Hawkeye looks forward to doing business and honoring our contracts."
Contact Matthew Wilde at (319) 291-1579 or matt.wilde@wcfcourier.com.
To see more of the Waterloo-Cedar Falls Courier, or to subscribe to the newspaper, go to http://www.wcfcourier.com/. Copyright (c) 2008, Waterloo-Cedar Falls Courier, Iowa Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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