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Aventine, Verenium on the Ropes

Reality is starting to catch up with prospective cellulosic ethanol producers. I felt like this was bound to happen, but the poor economy is making it happen faster than I expected. I expected some plants to be built, and then they would bleed red ink for a while before declaring bankruptcy. But many are running into trouble before breaking ground on a plant:

Time Running Out For Aventine

Late Monday, Aventine Renewable Energy Holdings (nyse: AVR – news – people ) announced it didn’t expect to have enough capital to cover an upcoming $15.0 million interest payment due April 1 on an outstanding senior unsecured 10.0% fixed-rate note or to pay $24.4 million due to its engineering and construction contractor, Kiewit Energy. It also said it may need to seek Chapter 11 bankruptcy protection if it cannot raise the cash.

Aventine was also delisted this week from the New York Stock Exchange:

NYSE delisting ethanol producer Aventine

The NYSE said the Pekin, Ill.-based company’s market cap fell below its required $15 million level for 30 consecutive days. The exchange recently relaxed the rule from $25 million because of market volatility and decline.

While “Aventine has had a cellulosic project underway since 1990“, I don’t believe they had announced a facility. Verenium, on the other hand, had been in the news for an announced $300-million cellulosic ethanol plant in Florida. The only problem is, they need $300 million:

Auditor questions Verenium’s ability to continue

An outside auditor for Verenium Corp. said in a filing Monday that the advanced biofuels company may have to “curtail or cease operations” if it cannot raise additional capital. Verenium, in an Ernst & Young audit opinion included in a year-end report filed with the Securities and Exchange Commission on Monday, said its operating plan and existing working capital deficit raises doubt about its ability to continue.

“We continue to experience losses from operations, and we may not be able to fund our operations and continue as a going concern,” Verenium said in the filing. The company said it will need additional capital to fund operations, including about $300 million to complete its commercial cellulosic ethanol plant with BP.

In a related story, I am announcing my plans to build the world’s largest algal biodiesel plant in Texas. But I will need someone to loan me $800 million so I can build the 20 barrel per day facility.

As I noted in an essay last month, capital costs for the proposed Verenium facility are quite high relative to comparable corn ethanol plants which are themselves struggling to survive. I speculated that Verenium would be not be able to make cost-competitive ethanol, and would only survive via mandate. Looks like even that may have been too optimistic.

In the long run, though, I stand by my assessment that conventional cellulosic ethanol will never be viable. I just wonder how many tax dollars we will throw at the problem before it is widely recognized.

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March 26, 2009 - Posted by | Aventine, bankruptcy, cellulosic ethanol, Verenium

50 Comments

  1. “In a related story, I am announcing my plans to build the world’s largest algal biodiesel plant in Texas. But I will need someone to loan me $800 million so I can build the 20 barrel per day facility.”

    I too have an algal biofuel plant in development ~ and I know mine will work. I plan to bury the algae and wait 175 million years. All the energy inputs required for the reforming process will be free.

    Comment by Wendell Mercantile | March 26, 2009

  2. “In a related story, I am announcing my plans to build the world’s largest algal biodiesel plant in Texas. But I will need someone to loan me $800 million so I can build the 20 barrel per day facility.”

    I too have an algal biofuel plant in development ~ and I know mine will work. I plan to bury the algae and wait 175 million years. All the energy inputs required for the reforming process will be free.

    Comment by Wendell Mercantile | March 26, 2009

  3. “In a related story, I am announcing my plans to build the world’s largest algal biodiesel plant in Texas. But I will need someone to loan me $800 million so I can build the 20 barrel per day facility.”I too have an algal biofuel plant in development ~ and I know mine will work. I plan to bury the algae and wait 175 million years. All the energy inputs required for the reforming process will be free.

    Comment by Wendell Mercantile | March 26, 2009

  4. In fairness, several petroleum distributors have taken bankruptcie, also, as have many large, well-established retail companies (Circuit City, etc.)

    It’s been a tough economy.

    Comment by rufus | March 26, 2009

  5. In fairness, several petroleum distributors have taken bankruptcie, also, as have many large, well-established retail companies (Circuit City, etc.)It’s been a tough economy.

    Comment by rufus | March 26, 2009

  6. “I just wonder how many tax dollars we will throw at the problem before it is widely recognized.”

    The Political Class has other plans for your tax dollars. Politicians are more likely to push these economically wasteful ventures through volume mandates, price regulations (eg wind-generated electricity, which utilities are required to buy at above-market prices), and other disguised subsidies. (Ethanol producers will probably end up with bountiful free "cap&trade" certificates to sell to real businesses).

    Net effect will be to obfuscate (for a while) how truly uneconomic ethanol is.

    Comment by Kinuachdrach | March 26, 2009

  7. “I just wonder how many tax dollars we will throw at the problem before it is widely recognized.”

    The Political Class has other plans for your tax dollars. Politicians are more likely to push these economically wasteful ventures through volume mandates, price regulations (eg wind-generated electricity, which utilities are required to buy at above-market prices), and other disguised subsidies. (Ethanol producers will probably end up with bountiful free "cap&trade" certificates to sell to real businesses).

    Net effect will be to obfuscate (for a while) how truly uneconomic ethanol is.

    Comment by Kinuachdrach | March 26, 2009

  8. “I just wonder how many tax dollars we will throw at the problem before it is widely recognized.”The Political Class has other plans for your tax dollars. Politicians are more likely to push these economically wasteful ventures through volume mandates, price regulations (eg wind-generated electricity, which utilities are required to buy at above-market prices), and other disguised subsidies. (Ethanol producers will probably end up with bountiful free "cap&trade" certificates to sell to real businesses).Net effect will be to obfuscate (for a while) how truly uneconomic ethanol is.

    Comment by Kinuachdrach | March 26, 2009

  9. You make a pretty strong case for another bailout! Better not show this to your Congressman, he might hyperventilate. I mean gosh Mickey! you could save these guys for under a $billion. Not even real money in today’s tough economy. Wait till their lobbyist figures this out…

    Oh boy, it’s not looking good, is it?

    Comment by Optimist | March 26, 2009

  10. You make a pretty strong case for another bailout! Better not show this to your Congressman, he might hyperventilate. I mean gosh Mickey! you could save these guys for under a $billion. Not even real money in today’s tough economy. Wait till their lobbyist figures this out…

    Oh boy, it’s not looking good, is it?

    Comment by Optimist | March 26, 2009

  11. You make a pretty strong case for another bailout! Better not show this to your Congressman, he might hyperventilate. I mean gosh Mickey! you could save these guys for under a $billion. Not even real money in today’s tough economy. Wait till their lobbyist figures this out…Oh boy, it’s not looking good, is it?

    Comment by Optimist | March 26, 2009

  12. a side querry–

    some large petro cos.[BP in the case of VRNM,eg.] invested some $millions in the joint venture activity. is this for show?[green advertising]. or are they casting nets on hope–ala Khosla ventures, etc. seems like they could act more prudently with $$$. am i missing some element? XOM, CVX appear more prudent here, even though they could afford $$$ for same purposes.

    fran

    Comment by Anonymous | March 26, 2009

  13. a side querry–some large petro cos.[BP in the case of VRNM,eg.] invested some $millions in the joint venture activity. is this for show?[green advertising]. or are they casting nets on hope–ala Khosla ventures, etc. seems like they could act more prudently with $$$. am i missing some element? XOM, CVX appear more prudent here, even though they could afford $$$ for same purposes.fran

    Comment by Anonymous | March 26, 2009

  14. 20 barrel per day world’s largest algal biodiesel plant in Texas? So that 4.4 million gallon PetroSun plant in Texas last year was an April Fools joke after all?
    http://gas2.org/2008/03/29/first-algae-biodiesel-plant-goes-online-april-1-2008/

    Comment by Clee | March 26, 2009

  15. 20 barrel per day world’s largest algal biodiesel plant in Texas? So that 4.4 million gallon PetroSun plant in Texas last year was an April Fools joke after all?
    http://gas2.org/2008/03/29/first-algae-biodiesel-plant-goes-online-april-1-2008/

    Comment by Clee | March 26, 2009

  16. 20 barrel per day world’s largest algal biodiesel plant in Texas? So that 4.4 million gallon PetroSun plant in Texas last year was an April Fools joke after all?http://gas2.org/2008/03/29/first-algae-biodiesel-plant-goes-online-april-1-2008/

    Comment by Clee | March 26, 2009

  17. So that 4.4 million gallon PetroSun plant in Texas last year was an April Fools joke after all?

    Nothing but hype. Go to their website. They are still trolling for funds. They certainly haven’t built a plant. This is par for the course for biofuel hypesters.

    RR

    Comment by Robert Rapier | March 26, 2009

  18. So that 4.4 million gallon PetroSun plant in Texas last year was an April Fools joke after all?

    Nothing but hype. Go to their website. They are still trolling for funds. They certainly haven’t built a plant. This is par for the course for biofuel hypesters.

    RR

    Comment by Robert Rapier | March 26, 2009

  19. So that 4.4 million gallon PetroSun plant in Texas last year was an April Fools joke after all?Nothing but hype. Go to their website. They are still trolling for funds. They certainly haven’t built a plant. This is par for the course for biofuel hypesters. RR

    Comment by Robert Rapier | March 26, 2009

  20. Their website is rather strange. One only sees pictures of algae ponds. Reading the article closer, they only talk of 4.4 mgy of algae oil, not biodiesel.

    Comment by Clee | March 26, 2009

  21. Their website is rather strange. One only sees pictures of algae ponds. Reading the article closer, they only talk of 4.4 mgy of algae oil, not biodiesel.

    Comment by Clee | March 26, 2009

  22. Their website is rather strange. One only sees pictures of algae ponds. Reading the article closer, they only talk of 4.4 mgy of algae oil, not biodiesel.

    Comment by Clee | March 26, 2009

  23. Clee, they have algae ponds. That’s it. The rest is all hypothetical. We could make oil and we could turn it into biodiesel…

    I also have algae ponds at the family farm. They are also full of catfish. I could make biodiesel as well, if I only had a few hundred million dollars…

    RR

    Comment by Robert Rapier | March 26, 2009

  24. Clee, they have algae ponds. That’s it. The rest is all hypothetical. We could make oil and we could turn it into biodiesel…

    I also have algae ponds at the family farm. They are also full of catfish. I could make biodiesel as well, if I only had a few hundred million dollars…

    RR

    Comment by Robert Rapier | March 26, 2009

  25. Clee, they have algae ponds. That’s it. The rest is all hypothetical. We could make oil and we could turn it into biodiesel…I also have algae ponds at the family farm. They are also full of catfish. I could make biodiesel as well, if I only had a few hundred million dollars…RR

    Comment by Robert Rapier | March 26, 2009

  26. I don't doubt that Aventine and probably a few other corn ethanol producers will go Chapter 11, like maybe Khosla's Altrabiofuels. And I have my doubts about viability of cellulosic in near term. Clearly it was over-hyped by DoE to sell Congress on cellulosic mandates – 100 million gallons next year! – in the last Energy Bill (EISA2007). However, you should note that the Verenium auditor's report was for end of year 2008, and they've had financial problems for years. But since the auditor's review BP has set up a couple of partnerships with them & infused them with cash in January, so they are 'off the ropes' for at least a while. See http://www.icis.com/blogs/biofuels/archives/2009/03/verenium-bp-responds.html And they will have their hand in Uncle Sam's pocket very soon for a loan guarantee for their 36 mgy Florida energy cane venture, even with BP's backing. But please give us a Choren update sometime, and please compare their thermochem platform with Khosla's Range Fuels, which seems to be struggling to get a 10 mgy plant built despite raising >$300 million in last 2 years (half of it from Uncle Sam).

    Comment by OxyMaven | March 27, 2009

  27. I don't doubt that Aventine and probably a few other corn ethanol producers will go Chapter 11, like maybe Khosla's Altrabiofuels. And I have my doubts about viability of cellulosic in near term. Clearly it was over-hyped by DoE to sell Congress on cellulosic mandates – 100 million gallons next year! – in the last Energy Bill (EISA2007). However, you should note that the Verenium auditor's report was for end of year 2008, and they've had financial problems for years. But since the auditor's review BP has set up a couple of partnerships with them & infused them with cash in January, so they are 'off the ropes' for at least a while. See http://www.icis.com/blogs/biofuels/archives/2009/03/verenium-bp-responds.html And they will have their hand in Uncle Sam's pocket very soon for a loan guarantee for their 36 mgy Florida energy cane venture, even with BP's backing. But please give us a Choren update sometime, and please compare their thermochem platform with Khosla's Range Fuels, which seems to be struggling to get a 10 mgy plant built despite raising >$300 million in last 2 years (half of it from Uncle Sam).

    Comment by OxyMaven | March 27, 2009

  28. In a related story, I am announcing my plans to build the world’s largest algal biodiesel plant in Texas. But I will need someone to loan me $800 million so I can build the 20 barrel per day facility.

    Funny!

    Comment by Dave Cohen | March 27, 2009

  29. In a related story, I am announcing my plans to build the world’s largest algal biodiesel plant in Texas. But I will need someone to loan me $800 million so I can build the 20 barrel per day facility.Funny!

    Comment by Dave Cohen | March 27, 2009

  30. Hey Dave,

    Saw your story over at ASPO. 4th generation fuels? What will they think of next? I can remember a time when a generation would equate to something that had actually been commercialized and improved upon before moving to a new generation.

    It reminds me of a situation in my current job. We have something that looks like Technology 2.0. But we have people trying to design Technology 4.0 when we don’t yet have a working model of Technology 3.0. I recently said “You guys show some vision. Let’s invent Technology 10.0 and just skip the rest.”

    Cheers, Robert

    Comment by Robert Rapier | March 27, 2009

  31. Hey Dave,

    Saw your story over at ASPO. 4th generation fuels? What will they think of next? I can remember a time when a generation would equate to something that had actually been commercialized and improved upon before moving to a new generation.

    It reminds me of a situation in my current job. We have something that looks like Technology 2.0. But we have people trying to design Technology 4.0 when we don’t yet have a working model of Technology 3.0. I recently said “You guys show some vision. Let’s invent Technology 10.0 and just skip the rest.”

    Cheers, Robert

    Comment by Robert Rapier | March 27, 2009

  32. Hey Dave,Saw your story over at ASPO. 4th generation fuels? What will they think of next? I can remember a time when a generation would equate to something that had actually been commercialized and improved upon before moving to a new generation. It reminds me of a situation in my current job. We have something that looks like Technology 2.0. But we have people trying to design Technology 4.0 when we don’t yet have a working model of Technology 3.0. I recently said “You guys show some vision. Let’s invent Technology 10.0 and just skip the rest.”Cheers, Robert

    Comment by Robert Rapier | March 27, 2009

  33. I could make biodiesel as well, if I only had a few hundred million dollars…and several million years.

    Those proposing algae to oil schemes keep forgetting that it will take a lot of money and energy to substitute for what Mother Nature provided free over millions of years.

    Comment by Wendell Mercantile | March 27, 2009

  34. I could make biodiesel as well, if I only had a few hundred million dollars…and several million years.

    Those proposing algae to oil schemes keep forgetting that it will take a lot of money and energy to substitute for what Mother Nature provided free over millions of years.

    Comment by Wendell Mercantile | March 27, 2009

  35. I could make biodiesel as well, if I only had a few hundred million dollars…and several million years.Those proposing algae to oil schemes keep forgetting that it will take a lot of money and energy to substitute for what Mother Nature provided free over millions of years.

    Comment by Wendell Mercantile | March 27, 2009

  36. Those proposing algae to oil schemes keep forgetting that it will take a lot of money and energy to substitute for what Mother Nature provided free over millions of years.
    That’s part of it. With geothermal we have access to Mother Nature’s treasure chest, don’t we?

    More significantly: sunshine is pretty diffuse @~1 kW/m^2. To get a significant amount of energy in a reasonable amount of time requires a large area, no matter how you slice it. Unless it’s open ocean, large area = lots of $$$.

    Comment by Optimist | March 27, 2009

  37. Those proposing algae to oil schemes keep forgetting that it will take a lot of money and energy to substitute for what Mother Nature provided free over millions of years.That’s part of it. With geothermal we have access to Mother Nature’s treasure chest, don’t we?More significantly: sunshine is pretty diffuse @~1 kW/m^2. To get a significant amount of energy in a reasonable amount of time requires a large area, no matter how you slice it. Unless it’s open ocean, large area = lots of $$$.

    Comment by Optimist | March 27, 2009

  38. open ocean= high cost

    Comment by Kit P | March 28, 2009

  39. open ocean= high cost

    Comment by Kit P | March 28, 2009

  40. open ocean= high cost

    Comment by Kit P | March 28, 2009

  41. I just saw this interesting story today.

    http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil.html

    Any thoughts on whether it’s possible for an investment bank to artificially manipulate the price of oil to such an extent?

    Comment by Gunnar | March 29, 2009

  42. I just saw this interesting story today.http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil.htmlAny thoughts on whether it’s possible for an investment bank to artificially manipulate the price of oil to such an extent?

    Comment by Gunnar | March 29, 2009

  43. Hmm, a very large pipeline company went broke shorting commodities (like Verasun.)

    I guess the pipeline biz is a bad biz, eh?

    Comment by rufus | March 29, 2009

  44. Hmm, a very large pipeline company went broke shorting commodities (like Verasun.)

    I guess the pipeline biz is a bad biz, eh?

    Comment by rufus | March 29, 2009

  45. Hmm, a very large pipeline company went broke shorting commodities (like Verasun.)I guess the pipeline biz is a bad biz, eh?

    Comment by rufus | March 29, 2009

  46. “That’s part of it. With geothermal we have access to Mother Nature’s treasure chest, don’t we?”

    Yes, we do. You could say the energy Mother Nature used to reform algae to oil was geothermal.

    Comment by Wendell Mercantile | March 30, 2009

  47. “That’s part of it. With geothermal we have access to Mother Nature’s treasure chest, don’t we?”Yes, we do. You could say the energy Mother Nature used to reform algae to oil was geothermal.

    Comment by Wendell Mercantile | March 30, 2009

  48. open ocean= high cost
    Nope. A ship. A pump. A separator.

    Feasibility dependent on getting the third item right. Not saying it is a foregone conclusion, but it has potential.

    All other algal biomass schemes are doomed. Algal biodiesel is dead.

    Comment by Optimist | March 30, 2009

  49. open ocean= high cost
    Nope. A ship. A pump. A separator.

    Feasibility dependent on getting the third item right. Not saying it is a foregone conclusion, but it has potential.

    All other algal biomass schemes are doomed. Algal biodiesel is dead.

    Comment by Optimist | March 30, 2009

  50. open ocean= high costNope. A ship. A pump. A separator.Feasibility dependent on getting the third item right. Not saying it is a foregone conclusion, but it has potential.All other algal biomass schemes are doomed. Algal biodiesel is dead.

    Comment by Optimist | March 30, 2009


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