Aventine Renewable Energy Holdings: Beyond fad

As American consumers continue to feel pain every time they pull up to a gasoline pump, renewable energy remains a popular talking point. The question is when will there be more action than talk, and when will investors in companies making such alternative fuels as ethanol reap a bumper crop of benefits in share price.

Ethanol obviously has grown beyond a fad as an energy source, and Aventine Renewable Energy Holdings Inc. (NYSE: AVR) is one of the biggest producers and marketers in the United States. The company was established in 1981, giving it a marketing strength absent from many of its recently arriving competitors. Little goes to waste at Aventine: while its strength is ethanol, the company also produces and markets biodiesel and such byproducts as corn gluten feed and meal, distillers products, carbon dioxide and brewers’ yeast.  

With plants in its hometown of Pekin, Ill., and another in Aurora, Neb., the company’s annual production capacity is around 207 million gallons. Planning for another plant in Indiana, along the Ohio River, is under way, and will bring the eastern Corn Belt into the company’s domain in late 2008 or early 2009.

Including its marketing alliances, the company marketed and distributed 697 million gallons of ethanol in 2006, or nearly 13% of the total volume sold last year in the United States. Customers include Royal Dutch Shell plc (NYSE: RDS.A), Marathon Oil Corporation’s (NYSE: MRO) Marathon Petroleum, BP plc (NYSE: BP), ConocoPhillips NYSE: COP), Valero Energy Corp. (NYSE: VLO), Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX).

Since its July 2006 initial public stock offering, Aventine Renewable Energy’s shares have fluctuated substantially, following the ebb and flow of negative and positive news reports about alternative fuels. Other than for a few days after its IPO priced at $43, investors haven’t seen the stock trading anywhere near that level, with shares most recently idling in the $13-$16 range. During its first quarter as a public company, Aventine’s board authorized a $50 million share-repurchase plan.

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