Bankrupt ethanol producer VeraSun loses more than expected

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By The Lincoln Journal Star

VeraSun Energy, the bankrupt owner of ethanol plants in Nebraska and elsewhere, announced a loss even bigger than it predicted last week on revenues that were up almost 400 percent from a year ago.

The company’s third-quarter revenues were $1.084 billion, and the loss was $476.1 million, compared to net income of $7.8 million for the 2007 comparable period.

The net loss for the third quarter reflects non-cash charges of $384.5 million, which includes $263.3 million arising from impairment of the company’s goodwill and $121.2 million from impairment of long-lived assets.

The goodwill impairment charge came from the company’s evaluation of the value of goodwill that was recorded as a result of the acquisition of ASA OpCo Holdings, LLC and US BioEnergy Corporation, which included three ethanol plants in Nebraska, at Ord, Albion and Central City.

The long-lived asset impairment charges relate to the impairment of property, plant and equipment, economic development bonds, corn procurement agreements and non-compete agreements.

Last week, the company said it expected to lose $464 million, which was four times what it predicted earlier.

The company filed for chapter 11 bankruptcy protection three weeks ago.   After VeraSun locked into prices for its feedstock for the third quarter, corn went into a sharp decline from almost $8 per bushel to less than $5 per bushel in mid-August

“We are working diligently to secure financing in order to maintain operations during these unprecedented, difficult market conditions,” said VeraSun CEO Don Endres. “Ethanol margins continue to suffer while our industry continues to increase capacity at the same time as demand for transportation fuel is being reduced. In order for the U.S. to realize the vision of reducing reliance on foreign oil it needs to raise the allowed ethanol blend in the existing car fleet and support the move to more Flexible Fuel Vehicles.“

The company’s gross losses consists of a loss on derivatives of $118.6 million and a mark-to-market loss of $40.1 million.

The company has obtained commitments from certain lenders, subject to specified conditions, for debtor-in-possession financing of up to $215.0 million to provide liquidity during the chapter 11 reorganization process.

The company’s ability to continue as a going concern is subject to a number of risks and uncertainties that described in detail in the Quarterly Report on Form 10-Q filed by the Company with the Securities and Exchange Commission.

The company has 16 production plants in eight states.