After its shares debuted at $23 in its IPO in June and quickly shot to $30, VeraSun's
Late last week, though, the company unveiled some news that could halt the drop. It said it plans to begin producing biodiesel and was evaluating a location for a large-scale biodiesel facility capable of producing 30 million gallons a year.
This is good news for investors for a couple of reasons. First, by expanding into biodiesel, VeraSun naturally diversifies itself. Ethanol was the darling of Wall Street earlier this year, but it has hit hard times as the price of oil has declined.
Second, the move puts VeraSun in a market that is ripe for extraordinary growth.
A few weeks ago, I wrote about how Archer Daniels Midland's investment in biodiesel stood to pay off because of how the Environmental Protection Agency's new, tighter regulations on sulfur emission from diesel fuel could increase the demand for biodiesel -- which meets the new, lower sulfur requirements.
Demand for biodiesel will also likely surge as DaimlerChrysler
One more reason the plan could benefit VeraSun is because the company plans to produce some of the biodiesel from the oil from distillers' grain -- a waste product of the ethanol production process. In essence, the company will be using the same corn that makes the ethanol to make the biodiesel.
VeraSun is diversifying its energy portfolio, moving into a larger market, and making better use of its resources. All are positive developments that should provide the company a sturdier foundation for future growth.
Interested in other Foolishness about alternative fuels?
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Having gone to college in Iowa, Fool contributor Jack Uldrich has long been a fan of corn. He does not own stock in any of the companies mentioned in this article. The Fool has a strict disclosure policy.