U.S. Ethanol Producer Green Plains Sees Stronger Ethanol Sector

The shakeout in the U.S. ethanol industry in the past year has helped draw stronger players to the business and made producers better able to cope with soft margins, Green Plains Renewable Energy Inc's chief executive said on Thursday.

Since November of last year, several of the nation's biggest producers of the corn-based gasoline substitute have filed for bankruptcy protection as ethanol margins turned negative.

Those margins have recovered to about 10-20 cents a gallon in recent months as corn prices have fallen and because of government mandates for rising usage.

Most producers in the industry that makes about 700,000 barrels per day, or more than 7 percent of the nation's gasoline demand, should be able to survive on margins between about 15-30 cents per gallon, Green Plains' CEO Todd Becker said at the Reuters Global Climate and Alternative Energy Summit.

Green Plains, the fourth largest U.S. ethanol producer by volume, has benefited from the shakeout: the company purchased two plants in Nebraska built by now-defunct VeraSun Energy, which fell into bankruptcy last year.

That acquisition from lender AgStar Financial Services, which had bought six of VeraSun's plants, lifted Green Plains' capacity to 480 million gallons per year.

Green Plains, which earns about 20 percent of its revenues -- that totaled $285 million in the second quarter -- from its agriculture business, is also staying on the lookout for other available plants.

"If the right plant comes up in the right locality -- we're very picky -- we'll add it," he said.

The U.S. Renewable Fuel Standard mandates the mixing of 12 billion gallons of traditional ethanol made from grains like corn into the nation's gasoline supply in 2010, up from about 10.5 billion this year. The mandated target will hit a maximum of 15 billion gallons in 2015.

That growing share of the market has attracted large energy companies, including Valero Energy, the nation's largest oil refiner, which bought seven of VeraSun's plants in a bankruptcy auction.

That has helped the industry mature, Becker said, and was a healthy development for the renewable fuel.

Oil companies such as Exxon Mobil and BP Plc are also investing in next generation biofuels, joining agricultural giants like Cargill and Archer Daniels Midland who are major ethanol producers.

Source : REUTERS