BioFuels Journal

BFJ.com Q & A Podcast with Stern Brothers Managing Director John May on the Slow-Down of Biofuels Project Financing

John May, managing director of Stern Brothers & Co., St. Louis, MO, Renewable Energy Finance Group, said there has been a slow-down of financing capital available for new biofuels projects or expansion of existing plants.

May cites the largest factor to be high commodity prices, but he said a close second is the lack of a consistent public policy.

Highlights from the interview:

What needs to change to improve the financial climate?

"That political risk needs to diminish along with corn prices in order for there to be a significant change in the lending climate."

Why is the financial climate challenging for biofuels projects now?

"Equity investors just don’t see returns for inventing in either new ethanol plants or expansions in the near term. There is equity in Europe and the Middle East."

"We’ve been asked to come in and provide bond financing to supplement the bank, but bond financing is not sufficient to fill the major gaps in syndicate funding for these projects."

"A number of banks have liquidity problems as a result of sub-prime, less money to loan."

Is Biodiesel the same as ethanol in terms of financing projects?

"Biodiesel multi-feedstock plants are attractive to both debt and equity lenders. Those biodiesel producers still relying on soy oil going to have significant problems."

Factors Causing Halt of Ethanol Plant Construction/Expansions

• Corn prices are over $7 a bushel.

• Margins are slim.

• Corn plantings are down.

• Recent Flooding has exacerbated the situation.

• Rail infrastructure is still lagging behind production.

• There is real political risk, for the first time. Candidates are debating whether the Renewable Fuels Standard, tariffs on ethanol imports, or credits should stay.

Stern Brothers Renewable Energy Finance Group focuses on the debt side, focus on placing bank debt and tax exempt and taxable bonds to fund the project.

For more information, call May at 314-743-4026.