BioFuel Energy delays opening of two ethanol plants; cites labor, building materials shortage

In Colorado, BioFuel Energy said that the start of operations at its two ethanol plants would be delayed to the end of the second quarter, due to building material and labor shortages. Each plant will have 115 Mgy in corn ethanol production capacity. The company said that total project cost for its plants in in Wood River, Nebraska and Fairmont, Minnesota is between $313 and $323 million. BioFuel Energy’s construction costs are roughly 30-40 percent below industry averages, according to sources.
In a note to investors, Raymond James analyst Pavel Molchanov reaffirmed the Market Perform rating on the company’s stock, saying that “While a nuisance for BioFuel, delays in the construction of ethanol plants are not altogether uncommon, especially given the notably tight ethanol construction marketplace.”

Molchanov added, “More meaningful for the company (and for all other U.S. ethanol producers), however, is that despite record oil prices and a healthy rebound in ethanol prices, the recent spike in corn prices to 11-year highs – stemming from a severe demand-driven market tightening – has left our outlook for the crush spread and hence profitability truly bleak, at least for the next 18-24 months.”

A significant number of ethanol plants have been delayed or canceled in recent months, but typically because of ethanol margins rather than labor shortages. Two ethanol plant projects in Illinois recently stalled due to the recent downturn in ethanol margins or opposition by local officials. In Iroquois County, the Global Renewable Energy plant was rejected narrowly by county officials. Heartland Energy’s proposed 55 Mgy plant in Pike County plant is unable to secure financing.

In other cancellations, Aventine Renewable Energy canceled a plant expansion in Pekin, and Alternative Energy has faced financing delays for its proposed plants in Kankakee and Greenville. The Pekin project would have added 113 Mgy in production capacity.

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