VeraSun Albion plant to start production

VeraSun Albion plant to start production

	Published : Tue, 30 Oct 2007 16:48 By : Agencies Print this Story

BROOKINGS, S.D. (AP) - VeraSun Energy Corp. said Tuesday it will lift production capacity by nearly a quarter with the startup of a new facility near Albion, Neb., despite a market glut that has plagued the industry in recent months.

The plant is set to come online before the end of 2007 and will have an annual production capacity of 110 million gallons. It will be VeraSun's fifth plant and lift its capacity to about 560 million gallons per year. VeraSun reported its purchase of the biorefinery from ASAlliances Biofuels LLC in August.

The Albion plant's startup news comes less than a month after VeraSun said it would halt construction of another biorefinery, this one in Reynolds, Ind., due to a market glut. The ethanol industry has been hit on both sides, by rising corn prices and tumbling ethanol prices as a result of ethanol overproduction and limited capacity to blend the product with gasoline.

VeraSun has three additional plants under construction and the Albion plant is its third to come on line in 2007.

Wall Street has been urging ethanol producers to scale back expansion plans, and many have listened, including BioFuel Energy Corp., several smaller startups and VeraSun, to some degree. In Iowa, the nation's top corn producer, there have been only two new plant construction starts this year -- the lowest number at this time of year since at least 1999, according to the Iowa Renewable Fuels Association.

Despite lower prices, ethanol is still finding its way to the marketplace, VeraSun's Chief Executive Don Endres said in a statement.

'This startup is significant because it puts VeraSun at more than 500 million gallons per year of annual capacity and is an indication that our company and the industry are continuing to grow,' Endres said. 'As we bring new facilities online, the ethanol being produced is finding its way into the marketplace and continues to be blended.'

Over the longer term, his sentiment may have merit. A Morgan Stanley note on Monday said the firm favored VeraSun because of its 'large scale and potential to emerge as a low-cost producer.' Analyst David Edwards noted that although VeraSun, one of the largest U.S. ethanol producers, faces short-term risks, it's more levered than its peers due to its scale.

Investors sent VeraSun shares down 33 cents, or 2.6 percent, to $12.62 in midday trading. Its stock has fallen more than 30 percent so far this year.