Bond Market Woes Delaying Biodiesel Plants

John Davis

reglogo11.gifThe crisis on Wall Street is having an impact on biofuel production in this country. Iowa-based Renewable Energy Group is delaying building two biodiesel plants, one in Louisiana and one in Kansas, because of the recent trouble in the bond market.

This story in the New Orleans Times-Picayune says the 60 million gallon plant in St. Rose, Louisiana says delays by a former governor in that state helped lead to the problem as well:

The Renewable Energy Group had hoped to use Gulf Opportunity Zone financing to build its $80 million plant at the International Matex Tank Terminals site in St. Rose, but company officials said in a statement that a delay in getting approval for the GO Zone funding resulted in the company being unable to obtain suitable financing.

Construction on the plant began in June, but company officials said the timing of the GO Zone financing, which gives accelerated depreciation to capital investments, was critical to the project.

“Regrettably, our later than expected entry into the bond market prevented us from securing the necessary debt financing to finish the project,” said Jeff Stroberg, chairman and chief executive officer of the company in a statement.

REG was approved for $100 million dollars of Go Zone Bonds last May, but said that then-Gov. Kathleen Blanco did not sign off on the financing until September. By the time the bonds were brought to market, the company officials said the project was unable to get suitable financing.

In Kansas, REG has had to delay another 60 million gallon plant near Emporia, as reported in the Emporia Gazette:

The company cited tightening of credit markets, the difficulty to find funding for biofuels projects and rising commodity prices.

“Our inability to finalize our funding has caused us to stop construction while we wait for the credit markets to improve and search for new financing,” REG Chairman and Chief Executive Officer Jeff Stroburg said in the release.

Company officials say while they are disappointed in the delays, they remain committed to building the plants.