Justice Sirikah

VeraSun Energy Corporation (NYSE: VSE) Idles Three Distilleries

by Justice Sirikah January 12, 2009


  Production has once again come to an undefined,  grinding halt at three distilleries belonging to the second-largest U.S ethanol concern, VeraSun Energy Corporation (NYSE: VSE ). With a collective production capacity of 330 gallons, the Bloomingberg, Albion and Ohio plants were idled in late December on account of sharp rises in corn costs and the general softening demand of end-products.
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  This is the second time that VeraSun has taken such an extreme measure since late October, 2008 when it ceased operations at its $100 million South Dakota-based Linden plant for nearly two weeks.  The firm sighted the same operational reasons following a sharp 58% rise in corn price between January and July last year.

  By the end of October, the company and its subsidiaries had filed petitions for relief under chapter 11 of the U.S Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware, having declared significant losses in the third quarter of 2008. On being asked when the company was likely to resume production, Mike Lockrem, VeraSun’s spokesperson said they had no exact time frame.

  “The company decided this is the best course of action while the crush margin is impaired and while interim financing and other contracts are worked through and finalised”, Lokrem is reported to have said.

  The closure of the plants is the latest of the ethanol industry casualties. Lately the industry, through the Renewable Fuels Association (RFA), pleaded for a bailout worth a billion dollars in order to sustain the current projects. Furthermore, RFA suggested that the forthcoming Obama-administration should come up with a $50 billion federal loan guarantee programme to attract more investment in the ethanol industry.

  Trade of VeraSun shares on the New York Stock Exchange was suspended as of November 3. Its last quoted share price was $0.28 from January 2008 highest of $11. 
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Resources:

1. VeraSun news
2. Verasun Energy Corp. (NYSE: VSE) message board on HotStocked

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