Rising corn, construction prices force Idaho ethanol project into bankruptcy; Nebraska project is idled

Rising corn prices from flooding, and rising construction prices, have caused the construction halt at the Wahoo, NE ethanol project and a bankruptcy filing by US companies controlled by Renova Energy.  Renova had not yet completed construction of a 20 Mgy corn ethanol plant in Heyburn, Idaho, but the company said that it had secured additional financing, would restructure its financing, and move forward with the business. The company’s construction costs increased from an initial projection of $45 million to more than $60 million.

Meanwhile, as many as 4 million acres of corn production have been lost as a result of Midwestern floods, putting further pressure on the 2008 corn crop, which was projected at 11.7 billion bushels by the USDA prior to flooding. July corn futures stood at $7.34 per bushel.

Renova background

In January, Renova completed a review of cost overruns of up to $13 million in the construction of its Heyburn plant, which drove overall project cost to as high as $59 and resulted in a liquidity shortage and suspension of the company’s shares on the London AIM exchange.

The company has halted work on project development due to the cost overruns, and is negotiating with existing investors and lenders as well as potential sources of new financing.

Recently, Renova has been active in securing joint ventures in Argentina for soy-based biodiesel. Vicentin SAIC, Glencore, Aceitera General Deheza, Bunge and Repsol are among other companies that will construct four new biodiesel plants with over $135 million in invested capital.

The Argentine federal government increased the export tax on soybeans, soy products and corn, but exempted biofuels from increases. This move is expected to spur exports of Argentine biodiesel and ethanol to the EU and the US. The province of Santa Fe, which hosts most of the major biodiesel plants, has additional incentives in place. Argentina has a 5 percent biofuel mandate in place for 2010.

Wahoo background

In recent weeks speculation had mounted that E85 would halt construction of the 110 Mgy Wahoo Ethanol facility, where construction had been previously slowed by weather. Lavista Sun reported that Wahoo Economic Development Director Doug Watts said that rising corn and natural gas prices made the plant unfeasible.

Washington Group International announced last November that it had been awarded the procurement, construction, commissioning, and start-up service contracts by E85 for three 110 Mgy ethanol plants in Wahoo, Neb., Red Oak, Iowa and Council Bluffs, Iowa. WTotal project cost of $750 million was reported by E85.

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