Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.ibd From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Headline Article Date: Mon, 16 Nov 92 12:56:07 EST Message-ID: <6.1992Nov16.125608@AmeriCast.com> 11/16/92 Companies In The News High Plains Runs On Growing Demand For Ethanol In Fuel John A. Jones The Clean Air Act went into effect this month, re- quiring low-polluting gasoline to be sold in 40 U.S. cities in the winter months to reduce carbon monoxide emissions - brighten- ing the outlook for High Plains Corp. High Plains is the only publicly traded company whose sole business is making ethanol, which reduces pollutants and raises octane levels in gasoline. Based in Wichita, Kan., this company is one of the largest pro- ducers of ethanol west of the Mississippi. Investor's Business Daily, Energy - Alternate Sources ranks 31st, based on six-month stock-price performance with added weight given to recent months. In this series, leading companies within the group are reviewed. Ethanol, distilled from corn, was origi- nally promoted as a way to stretch the U.S. fuel supply and reduce dependence on imported oil. But Charles A. Mills, execu- tive vice president at Anderson & Strudwick Inc., a brokerage firm in Richmond, Va., says it's more important now as the most effective way to reduce carbon monoxide emissions. Cuts CO Gas Up To 30% A fuel mixture of 10% ethanol and 90% unleaded gasoline reduces carbon monoxide by 25% to 30%, according to the Environmental Protection Agency. High Plains, founded in 1980, reported a surge in earnings this year as production picked up and ethanol prices rose on expections of greater demand. New regulations later in the '90s will require reformulated gasoline to be used year-round in nine major metropolitan areas, to limit the release of smog-forming chemicals. Earnings for the fiscal first quarter ended Sept. 30 jumped 2,400% to $705.2 million, or 25 cents a share, from $17 million, or one cent a share, a year earlier. Sales rose 23% to $7.67 million from $6.25 million. For the fis- cal year ended June 30, earnings rose 115% to $2.05 million, or 73 cents a share, from $943,000, or 34 cents a share, the year before. Sales rose 31% to $30.2 million from $23.1 million. Long-term debt at fiscal year-end was $19 million or 76% of total capital. Rising Price Boosted Earnings Chairman, President and Chief Executive Stanley E. Larson, who has headed the company since 1985 and been a director since 1980, said earnings grew because of higher fuel ethanol prices. The gain far outweighed some difficulties at the company's plant at Colwich, Kan., which produced only 3.8 million gallons in the la- test quarter, compared with 4.5 million the previous quarter and 3.9 million a year earlier. Larson said the plant is again run- ning at a rate of 19 million gallons a year, and will be expanded to more than 20 million gallons by the end of 1992. The company expects demand for ethanol to rise with the implementation of the 1990 Clean Air Act requirements. It also predicted "moderate de- creases" in its grain costs because of the near- record harvest. Larson announced the company has signed a contract with the state of Nebraska which will give it $5 million a year in marketable state excise tax credits for five years, if High Plains builds an ethanol plant in Nebraska. He said the company is exploring vari- ous ways to finance the plant. Raymond G. Friend, chief finan- cial officer, said the plant would cost about $30 million - and Nebraska's incentive program would pay for $25 million of it. Controversial Vapor Issue Larson and Friend said the Clean Air Act and the role of ethanol in reformulated motor fuels have become controversial, in part because of a technical issue over vapor pressure. The Environmen- tal Protection Agency for 15 years has given ethanol-blended fu- els a waiver from normal vapor pressure limits, on the ground that ethanol's benefits in reducing tailpipe emissions offset a slight increase in the fuel's volatility. Last March, the EPA indicated it could not certify ethanol blend for use in the sum- mer gasoline program, Friend said. But corn growers and the ethanol industry persuaded the White House to take another look. On Oct. 1, President Bush announced a compromise that allows ethanol fuel to be used in six of the nine cities in the summer program, opening up 30% of that market. Friend said oil companies also resisted ethanol, because they prefer to use a methanol additive derived from oil. But industry chemists now are studying various ways to reformulate gasoline to meet standards in effect after 1997. "Our ethanol produces four pounds, or half as much vapor pressure as MTBE (the methanol com- pound)," Friend said. "That's going to be very desirable for the oil companies." Ethanol also results in higher-octane fuel, he added. "The only thing holding it back now is that it's not quite economical with MTBE, which is made from cheap, imported oil feedstocks," he said. "But ethanol outperforms MTBE, and we expect some sort of tax benefit for (ethanol), principally be- cause of its domestic source." Friend indicated that these issues now seem to be coming out in favor of the ethanol producers. Tuesday: Wheelabrator Technologies This article is copyright 1992 Investors Business Daily. 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