Independent ethanol producers face a tough future

As big oil companies and other players snap up struggling mills at bargain prices, small firms risk being priced out of the market. Heavy debt and rising corn prices add to the squeeze.

Gibson City, Ill — . — A smooth road curves toward the hulking ethanol mill that One Earth Energy will open in June. But the path to profitability might be rocky, as the fledgling company could face much larger rivals that have snapped up bankrupt mills at steep discounts.

Valero Energy Corp., the country’s largest oil refiner, broke into the farm-grown business last month, buying seven ethanol mills and a development site from bankrupt VeraSun Energy Corp. at a 70% markdown.

Other mills could soon be up for auction, after Aventine Renewable Energy Holdings Inc. in Pekin, Ill., filed for bankruptcy protection Wednesday and the recent disclosure that Pacific Ethanol Inc. in Sacramento is struggling to repay lenders after its $147-million loss last year.

By acquiring ethanol mills on the cheap, big oil and other players could undercut firms such as One Earth Energy, which spent $166 million to build a plant for distilling corn into fuel.

Los Angeles Times