Aventine CFO optimistic about expanding ethanol supply, plans to double production in next year

By Jennifer Lanning Drey

Portland, Ore., Oct. 2 - Aventine Renewable Energy, Inc. chief financial officer Ajay Sabherwal gave an optimistic investor presentation on Tuesday, during which he told listeners that oversupply in the ethanol industry is a "relative term."

He also said Aventine intends to double its production over the next year.

Sabherwal made his comments while speaking at the Citigroup Biofuels Conference - Ethanol on the Cob II in New York.

The CFO believes ethanol is only oversupplied in the United States relative to mandated amounts, not relative to the possibility of a 10% blending of ethanol by all refineries.

"We are not oversupplied in the context of a national 10% blend, which every car can take and every region can take," Sabherwal said.

Sabherwal believes ethanol margins will eventually expand as producers move toward a 10% blend, which will in turn lead their lagging competitors to also increase their ethanol blends. He further believes increased mandates are a possibility.

"How can this position last for long?" Sabherwal asked investors, after asserting that motor fuels are scarce and come with political risks, while ethanol is creating economic value in the United States.

However, Sabherwal admitted that the leveling of supply and demand could take a few years, and in the meantime, he said the company is protecting itself by maintaining a capital structure that can withstand negative margins, he said.

"I think we need to be prepared. We need to be prepared for weak margins for the next year, year-and-a-half, two years," he said.

"We have protected ourselves to ride through rough times with a very strong balance sheet. This is what gets you to be around in tough times.

Aventine is a Pekin, Ill.-based producer, marketer and end-to-end provider of clean renewable energy.

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