Goldman Sachs Remains Cautous on Ethanol (AVR, PEIX, VSE)

Goldman Sachs lowered its estimates in the ethanol alternative energy patch this morning. This estimate cut is after the Energy Bill has higher CAFE standards that actually makes no change to its bullish call over 3 to 5 years for crude oil and refining.  Goldman Sachs said it retains its cautious views in ethanol with a moderated outlook.  The new bill reduces some near-term downside risks for ethanol crush spreads and ethanol equities but also moderates intermediate upside.  Goldman Sachs now sees an $0.80/gallon crush spread for 2008 to 2011 on higher corn.

Goldman Sachs noted with Pacific Ethanol (PEIX) and VeraSun Energy (VSE) trading above its upwardly revised 12-month targets it maintains a sell rating on both.  Aventine Renewable (AVR) remains neutral.

Aventine (AVR) fiscal estimates trimmed to $0.46 EPS from $0.50; estimates raised for following fiscal year..
Pacific Ethanol (PEIX) estimates trimmed to -$0.22 EPS from -$0.19; estimates raised for following fiscal year.
VeraSun (VSE) estimates trimmed to $0.02 EPS from $0.12; estimates raised for following fiscal year.

Jon C. Ogg
December 20, 2007