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Non-Tech : $2 or higher gas - Can ethanol make a comeback?
DAR 25.01-5.4%Feb 26 4:02 PM EST

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From: Glenn Petersen4/1/2006 1:18:42 AM
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Some highlights from the Verasun Energy Corporation S-1:

Anticipated gross proceeds: $150 million
Underwrites: Morgan Stanley, Lehman Brothers, and A.G. Edwards

Overview

VeraSun Energy Corporation is the second largest ethanol producer in the U.S. We are also the largest “pure-play” ethanol producer, focusing primarily on the production and sale of ethanol and its co-products. This focus has enabled us to significantly grow our ethanol production capacity and to work with automakers, fuel distributors, trade associations and consumers to increase the demand for ethanol. As an industry leader, we play an active role in developments within the renewable fuels industry.

Ethanol is a type of alcohol, produced in the U.S. principally from corn. Ethanol is primarily used as a blend component in the U.S. gasoline fuel market. Refiners and marketers have historically blended ethanol with gasoline to increase octane and reduce tailpipe emissions. The ethanol industry has grown significantly over the last few years, expanding production capacity at a compounded annual growth rate of approximately 20% from 2000 to 2005. We believe the ethanol market will continue to grow as a result of its favorable production economics relative to gasoline, ethanol’s clean burning characteristics, a shortage of domestic petroleum refining capacity, geopolitical concerns, and federally mandated renewable fuel usage. We also believe that E85, a fuel blend composed primarily of ethanol, will become increasingly important over time as an alternative to unleaded gasoline.

We own and operate two of the largest ethanol production facilities in the U.S., with a combined ethanol production capacity of 230 million gallons per year, or MMGY. As of January 1, 2006, our ethanol production capacity represented approximately 5% of the total ethanol production capacity in the U.S., according to the RFA. In addition to producing ethanol, we produce and sell wet and dry distillers grains as ethanol co-products, which serve to partially offset our corn costs. We expect to operate three facilities with an aggregate production capacity of 340 MMGY by the end of August 2007 and five facilities with an aggregate production capacity of 560 MMGY by the end of the first quarter of 2008.

In addition, we plan to construct two 110 MMGY ethanol production facilities in Iowa and Minnesota, which we expect to be operational by the end of the first quarter of 2008. We refer to these additional production facilities as the Northwestern Iowa Facility and the Welcome Facility, respectively. We expect to commence construction of these facilities in the latter half of 2006 and to finance the construction costs with the net proceeds we receive from this offering and from our cash flow from operations. We intend to replicate our successful construction and production processes at these additional facilities.


Summary results for three-year period ending December 31, 2005:

Revenues
2005: $235.4 million
2004: $186.0 million
2003: $10.9 million

Net income
2005: $253,000
2004: $14.8 million
2003: $592,000

EBITDA
2005: $29.9 million
2004: $37.8 million
2003: $2.4 million

Gallons of ethanol sold
2005: 126.3 million
2004: 101.4 million
2003: 6.5 million

Average gross price per gallon
2005: $1.59
2004: $1.50
2003: $1.28

Over 50% of the Verasun Energy shares are currently owned by the CEO, Donald Endres:

Donald L. Endres. Mr. Endres has served as our Chief Executive Officer and director since 2001. He has more than 20 years of experience in investing in, building, operating and managing successful businesses. In 1985, Mr. Endres founded Special Teams, Inc. and served as its president and general manager until it was sold to the American Express Company in 1995. Special Teams was recognized by Inc. magazine as one of the fastest growing privately held companies in the U.S. on the annual Inc. 500 List for both 1994 and 1995. Mr. Endres subsequently served for two years as president of American Express Special Teams.

In 1999, Mr. Endres became a principal investor and board member of CoEv, Inc., which merged with Tyco International Ltd. in 2000. Mr. Endres also co-founded and served as principal investor and chief executive officer of ExpressGold.com, Inc., an internet payments system company, which merged with CyberSource Corporation in January 2000.

He also served as co-founder and vice-chairman of Glacial Lakes Energy, an ethanol production facility in Watertown, South Dakota, and he is an investor in and board member of Badger State Ethanol, an ethanol producer in Monroe, Wisconsin. Mr. Endres serves on the board of directors and on the executive committee of the Renewable Fuels Association and was recently awarded the 2005 Ernst & Young Entrepreneur of the Year Award for the Minnesota, South Dakota and North Dakota region.

Mr. Endres earned a bachelor of science degree in animal science with minors in computer science and economics from South Dakota State University. He was recognized by South Dakota State University’s College of Engineering as “Entrepreneur of the Year” in 2000.


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