In a latest indicator of the squeezes facing conventional ethanol refiners, startup Panda Ethanol (OTC: PDAE) today canceled its plans to raise $140 million in debt (see Cleantech.com's $140 million for cow-powered ethanol.)
"Our board of directors just did not feel that the valuation that was coming back reflected the long-term value of the stock," Bill Pentak, director of corporate communications and investor relations told Cleantech.com.
"Sometimes the best deal is the one you walk away from."
The timing was bad. In the three week period leading up to deal pricing, some publicly traded ethanol stocks lost more than 20 percent of their market value, the company noted.
"This was clearly not an advantageous time to be out in the financial markets raising capital," noted Todd Carter, CEO of Panda, in an [ed.: under] statement.
The funds from the proposed offering were to be used for construction of a 115 million gallon-per-year ethanol facility in Yuma, Colorado.
The company says it remains committed to the project, has purchased the land the project will eventually be sited on and will continue to seek financing once market conditions improve.
"We look at this as a delay. It's not necessarily the delay we wanted. But there are a lot of companies experiencing the same market conditions we are," said Panda's Pentak.
Panda says it believes current market conditions are temporary. In its favor, it cites the high price of oil, an increasing supply of corn that will moderate feedstock prices, positive blending economics and "firm bipartisan support at both the state and national level."
"We think the fundamentals of the industry are strong. We think the market has been responding to the high price of corn, but our position is that an equilibrium price will be found," said Pentak.
"These are just growing pains for an emerging industry that's coming into its own."
Some believe profits will disappear soon from the corn ethanol industry, if they haven't already (see Cleantech.com's Corn ethanol unprofitable by 2008, says Iowa State and Ethanol sector slapped on bad VeraSun earnings.) Yet recently, ethanol maker The Andersons posted encouraging quarterly numbers (see Good ethanol news from The Andersons.)
Panda Ethanol is developing six 115 million gallon-per-year corn ethanol projects in Texas, Colorado, Kansas and Nebraska. Four of them are to be fueled by 1 billion pounds of cattle manure per year—much like E3 BioFuels, which just started producing limited quantities at its first plant in Nebraska (see Cleantech.com's Cow powered ethanol plant enters production.)
In a filing last month, Panda said it expected its gasification process to give it a "material operating cost advantage" and save it $11 million a year that would otherwise be spent on natural gas, and enable favorable tax and other advantages.
"Those who can be efficient and those who can be the low cost producers will have competitive advantage over those who are not," said Panda's Pentak.
E3 claims a remarkable net energy balance (the amount of energy in the fuel compared to the amount of energy required to produce it) of 65:1, compared to an average of 3:1 elsewhere in the ethanol industry. Panda has not yet shared its anticipated energy balance figures.
Panda says it's in the process of getting an independent third party to verify the accuracy of its models to date.