The bankruptcy of VeraSun is only part of a larger story: The brief infatuation between Wall Street and Big Ethanol is over. It’s now safe to say that Iowa caucus voters are to blame for a massive waste of money and human energy, which ultimately proved to be a detour on the road to a new energy future.
Heidi Moore at Deal Journal penned the obit today:
Of course, Wall Street’s disillusionment with ethanol goes back further than a month ago. That is because, to Wall Street banks, the sector is haunted by failure. In 2004 and 2005, investment banks brought a clutch of ethanol companies to market. To say their performance has been lackluster is an understatement; all are trading under their offering prices and were doing so even before the credit crunch that began in 2007. Last year, I talked with several prominent energy bankers, one of whom derided the ethanol sector as “a waste of time and capital.” He said ethanol derived from corn costs more to produce than it saves and that it is so corrosive it has to be shipped overland, expensively, rather than running through more cost-efficient pipelines.
And the flow of ethanol IPOs coming to market quickly dropped off. The amount of money raised in clean technology company IPOs dropped steadily for three years in a row. In 2004, 30 renewable energy offerings raised $14 billion in the equity capital markets. That volume fell to $11.2 billion in 2005, and again to $8.4 billion in 2006, according to Dealogic data.
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