Ethanol, as anyone who pays attention to automotive news should know, has been a booming business recently. While the fundamentals that support the industry have improved dramatically in the past year, the sustainability of the
industry's continued progress is unknown. This is according to a
published this week by Standard & Poor's Ratings Services titled "Ethanol Is Hot, But That Doesn't Ensure Stronger Ratings For U.S. Producers."
The political support for ethanol (51 cents a gallon tax credit, the requirement to replace MTBE like pronto) and the increasing gasoline prices are promoting ethanol, but these factors cannot last. Standard & Poor's therefore gives "most projects and companies in the ethanol industry seeking ratings for long-term financing would continue to fall into the highly speculative-grade 'B' category."
[Source: Standard & Poor's]