High Plains delays industrial ethanol production
Reuters, Wednesday, March 12, 1997 at 11:46
WICHITA, Kan., March 12 (Reuter) - High Plains Corp
(NASDAQ:HIPC) said Wednesday it is temporarily delaying the
production of its new industrial-grade ethanol, after the
product did not meet one specification in European laboratory
tests.
High Plains said it was notified on March 6 that the
ethanol met all product specifications of a European supply
contract expect for the "organoleptic" test, based on the taste
and smell of the product.
High Plains said previous in-house and U.S. tests indicated
the ethanol met all specifications.
The company has submitted additional samples for testing,
and has asked engineers to evaluate modifications to the
production process.
High Plains said its European industrial-grade customer has
agreed to extend the shipment time under the contract. It said
a recent change in Russian import/export restrictions has
resulted in a temporary oversupply in the European
industrial-grade ethanol market.
High Plains said it has also contacted other prospective
customers for the product.
"We believe that a profitable market exists for our current
product regardless of any delays in delivery under our existing
contract," Raymond Friend, chief financial officer of High
Plains, said in a statement.
Friend said it is unlikely the company will show any
benefit from industrial-grade ethanol in this quarter's
results. It has shifted what would have been industrial-grade
production back to fuel-grade production.
Friend said fuel-grade ethanol continues to be profitable,
and High Plains has taken steps to help protect the company
from further increases in grain costs.
High Plains has pre-sold about 50 percent of its estimated
ethanol production through September 1997, Friend said, and has
sufficient grain contracts and inventories to protect the
margins on those gallons.
"We are currently producing 100 percent fuel-grade instead
of the 83 percent fuel-grade and 17 percent industrial-grade
combination that had been projected," Friend said.
He said current spot ethanol prices have increased slightly
to $1.08 a gallon at High Plains's plant, and the company is
still delivering on several contracts under wintertime prices
of up to $1.40 a gallon.
"We are disappointed in this delay," Friend said of the
industrial-grade ethanol. "It is encouraging that all other
specifications of the product have been met, and we are hopeful
that only minor changes to the process will be needed to allow
us to meet this remaining specification."
High Plains, whose sole business is ethanol, has a
production capacity of 60 million gallons a year.
Shares of High Plains were off 1/8 at 3-3/4.
Copyright 1997, Reuters News Service |
