VeraSun to produce ethanol AND biodiesel from same material

VeraSun Energy (NYSE: VSE - message board), the second-largest ethanol producer in the U.S., is planning to produce biodiesel from oil extracted from a by-product of the ethanol production process.

The company is hoping this will make it one of the lowest cost producers of biodiesel.

VeraSun would be the first company to develop a large-scale, commercial facility for biodiesel production from distillers grains, a co-product of the ethanol production process, creating two biofuels from the same feedstock.

The company says that removing the oil from distillers grains both increases the value of the oil for fuel use, and enhances the resulting distillers grains as a livestock feed by concentrating protein and reducing fat content.

"This opportunity is a natural extension to our business," said Don Endres, Chairman and CEO of VeraSun. "This technology is particularly strategic to VeraSun because it allows us to extend our large and low-cost producer strategy from ethanol to include biodiesel."

VeraSun is currently evaluating locations for a 30-million-gallon-per-year biodiesel production facility, with plans to commence construction in 2007 and begin production in 2008. The company has contracted with Lurgi PSI, Inc. for design and engineering services for the biodiesel facility and with Crown Iron Works Company for oil extraction equipment. As a result of the exclusivity provisions in these contracts, VeraSun expects to be the first to develop large-scale facilities using this technology. The Company has also filed a provisional patent application with the U.S. Patent Office for the process.

According to the National Biodiesel Board, production grew to 150 million gallons in 2006 from 75 million gallons in 2005. The Energy Information Administration projects biodiesel demand will increase to more than one billion gallons by 2010 and double to two billion gallons by 2020, somewhat at odds with a new research report just published by a private sector consulting company.

VeraSun has ethanol facilities in Aurora, South Dakota, and Fort Dodge, Iowa, is constructing a third facility in Charles City, Iowa, and has two additional facilities under development in Welcome, Minnesota, and Hartley, Iowa. In total, these facilities should have an annual production capacity of approximately 560 million gallons of ethanol per year.

The company markets E85, a blend of 85 percent ethanol and 15 percent gasoline for Flexible Fuel Vehicles under the brand VE85(TM).

VeraSun went public in June of this year at $23 per share. The stock now trades in the $17 to $18 range. The company posts its latest quarterly earnings on Tuesday.

For more information:

http://www.verasun.com/