Biodiesel companies struggle continues

Sep 3, 2010
by DTN

Even before the $1-pergallon biodiesel blenders credit expired at the end of 2009, U.S. biodiesel producers were in a tight economic spot.

The majority of biodiesel producers have shut down, and few were still actually producing.

Now, nine months after the credit expired, a handful of biodiesel companies report significant losses and express doubts about the future of the industry in the latest fiscal quarter, according to documents filed with the U.S. Securities Exchange Commission (SEC) in recent weeks.

The lapse of the credit brought U.S. biodiesel production to a standstill, virtually eliminating an important market for U.S. soybeans.

Recent financial reports show just how much the tax credit means to producers.

For instance, Western Iowa Energy, LLC (WIE) reported a net loss of about $1.3 million for six months in the recent quarter ended June 30, compared to about an $889,000 net loss during the same six months of 2009.

The Wall Lake, IA-based producer idled production and laid off about half of its workforce at its 30-million-gallon plant back in April, according to a company official.

WIE Board President and farmer Bill Horan said the company held out for as long as it could without the biodiesel credit.

Washington, IA-based Iowa Renewable Energy, LLC (IRE), also reported losses in its recent filing with the SEC.

IRE lost about $3 million in the recent quarter that ended June 30, covering nine months. That compares to net losses of about $2.8 million in the same period of 2009.

“Through June 30, 2010, the company has generated accumulated losses of $13,880,505, has experienced significant volatility in its input costs, and undertaken significant borrowings to finance the construction of the biodiesel plant,” the SEC filing said.

The company said that following the expiration of the tax credit, the company went into a “warm shutdown” status while maintaining a minimal crew.

Shutdown reduces expenses

“The warm shutdown has allowed the company to reduce expenses and preserve cash; however, the low sales level has not covered the reduced cost,” the report said. The report said the company is trying to obtain an additional line of credit.

Western Dubuque Biodiesel, LLC (WDB), based in Farley, IA, said in its latest quarterly report that losses are mounting.

The company lost a net $1.8 million for the six months ended June 30. That compares to a net loss of about $1 million during the same time in 2009.

WDB did not produce biodiesel in the first quarter of 2010, but restarted production on April 1 in anticipation of a renewal of the blenders’ credit, according to the SEC report.

“For the three months covered by this report, we produced 1,923,298 gallons of biodiesel and generated net losses of $400,618,” the statement said.

“As of the date of this report, we are not producing biodiesel and have no outstanding biodiesel or glycerin sales contracts or tolling services agreements,” WDB said in its report. “We are currently out of compliance with our loan covenants with our lender, and we anticipate that we will be out of compliance with our loan covenants during the remainder of 2010.”

The nation’s largest biodiesel producer, Ames, IA-based Renewable Energy Group, laid off employees, idled plants and cut employees’ pay to help keep the company afloat back in April.

However, the multi-feedstock biodiesel producer announced an acquisition in July that will expand the company’s use of cooking oil as a feedstock. Cooking oil is less expensive than soy and other vegetable oils.

Renewable Energy Group acquired biodiesel company and marketer Californiabased Tellurian Biodiesel, Inc., and American BDF, LLC, a joint venture between Golden State Service Industries of Irvine, CA, Restaurant Technologies Inc. of Eagan, MN, and Tellurian Biodiesel. — DTN