“In our opinion the Federal Government has just been going through a flag waving exercise with biofuels,” chief executive Peter Anderton said in an Australian Stock Exchange briefing.
“The real push in promoting the ethanol industry is now coming from the State Governments, and in particular Queensland and NSW.”
Anderton said that while rising fuel prices had swayed public opinion on ethanol as consumers looked for price relief, traditional fuel companies continued to impose control over the retail pricing structure.
“The Australian ethanol industry is advancing, but certainly not at the speed and growth rate of other countries… It will be up to the industry itself to commit to building extra production capacity as there’s not going to be a lot of support from either the traditional fuel industry or the Federal Government,” Anderton said.
Despite the company’s declared commitment to investing in the US, it passed a recent acquistion opportunity on to potential rival Babcock & Brown Environmental Investments (BEI). But Anderton said this was simply good business.
US ethanol producer Denco – a cooperative owned by Minnesota corn farmers – had agreed to sell its business to a US subsidiary of AAE in mid-November.
But AAE has now sold the rights to purchase Denco to BEI for $8 million in cash and agreed costs relating to the initial negotiation and acquisition process. BEI announced it had raised the capital to finalise the Denco acquisition on Tuesday.
Despite passing on the Denco acquisition, Anderton said that Australian Ethanol is now better positioned than ever to achieve its goals.
“We sold the rights to the acquisition because it was a sensible deal for our shareholders,” Anderton said.
Anderton said that by selling the rights to Denco, AAE had increased its capital base tenfold and was in a much stronger position to complete a US acquisition in its own right with lower debt commitments.
“The Denco deal has provided AAE with a capital base of around $10 million. The company has not had that level of financial strength previously,” Anderton said.
The experience and contacts Australian Ethanol Limited acquired in the process of setting up the Denco acquisition would place the company in a good position for its next US acquisition attempt, according to Anderton.
“There are currently over 92 ethanol projects throughout the US of which 70% are owned by farmer co-operatives,” said Anderton.
Anderton said US corn prices were at market lows, making it likely that farmers would sell their ethanol shareholdings to offset falling profits.
“There are a number of deals which have been presented to us. Many are just as attractive as the Denco deal and can be negotiated quickly,” he said.
