NEW YORK ConAgra Foods, said on Wednesday high
costs have forced it to withdraw an application to build an
ethanol plant in New Mexico, in the latest sign of difficulties
for producers of the alternative fuel.
"We made a decision to withdraw our air permit application
because of the increased costs for building and operating an
ethanol plant in Clovis, New Mexico," spokeswoman Stephanie
Childs said in a phone interview.
The Clovis plant would have produced more than 100 million
gallons per year of ethanol made from corn.
U.S. ethanol capacity has risen 45 percent since last year
as the government offers millions of dollars in incentives to
make domestic fuel.
But, as costs have risen, several companies have begun to
cancel or delay plans to built plants. Late last year at least
four companies, including Pacific Ethanol Inc, said they were
suspending plans to build distilleries.
Average U.S. profit margins for making ethanol hit a low in
October, when many distilleries were operating in the red.
Margins have since recovered, but many players say profits
will be tough for the next two years as it takes time to build
or expand terminals to transport the fuel to cities.
Childs said current costs of finding water sources to run
the New Mexico plant and construction materials were much
higher than when the company first began the application
process more than two years ago.
Corn costs have also spiked, trading at nearly $5 per
ConAgra had planned to be a minority stakeholder in the
plant, with The Carlyle Group, which makes energy investments
with partner Riverstone Holdings, taking a majority stake.
(Reporting by Timothy Gardner; Editing by Walter Bagley)