Ethanol Problems

Gateway Ethanol LLC , of Pratt, Kansas, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in Kansas. It lists liabilities between $50 million and $100 million. This action followed foreclosure proceedings brought by its main lender, Dougherty Funding LLC. The main unsecured lender is Cargill.

There have been some other ethanol bankruptcies and closures (Ethanex Energy, Inc., Renova Energy PLC, and Alternative Energy Sources Inc.) but this is the only operating plant to file in 2008. According to at least one report, at least a dozen plants are in discussions with advisors as to whether bankruptcy may be an option. BioFuel Energy Corp. is reported to have lost $46 million in corn, ethanol, and natural gas hedges in July and August. From its web site it appears that two plants under construction were not completed until September 16th, so it is difficult to know how it lost so much money in the markets. Share value in that company has dropped from a high of $7 to 47 cents.

— James Pray

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About James Pray

Attorney with BrownWinick Law Firm in Des Moines, Iowa.
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