1. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Copyright (c) 2008 Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved. S&P Credit Drivers for the Ethanol Industry, and Considerations in our Recovery Analysis Mark Habib Associate Standard & Poor’s Mar. 2, 2009 Approved by Sabine Zerarka and Mimi Barker

2. 2. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. The S&P Ratings Services Approach to Ethanol 1.Ratings considerations – “external” and “internal” 2.Variation across the sector – efficiency and leverage help drive the requirements for and realization of breakeven crush spreads 3.Recent rating actions illustrate the variety of risks facing ethanol, and the current context of our ratings 4.Asset valuation and the effect of recent bankruptcies and market developments on recovery analysis

3. 3. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Basic Ethanol Rating Considerations External factors Crush Spreads – largely driven by market determined commodity prices, highly volatile and unpredictable Regulatory Support – policy driven, uncertain longevity and magnitude –VEETC: reduced to 45 cents and renewal risk in 2010 –RFS blending mandate and import tariff Internal factors Fixed Costs – debt service obligations and fixed operating costs Plant Efficiency – conversion improvement can improve marginal economics Liquidity – can be managed, but subject to a variety of risks –Credit markets may tighten exactly when greater liquidity is most needed (i.e. VSE) –Borrowing base revolvers may be available, but in a low commodity environment like now, may be of little use Construction – risk mitigation through fully wrapped EPC contracts with strong liquidated damages provisions, credit worthy counterparties, active management, contingency, etc. Hedging – maintaining a consistent strategy can help mitigate commodity exposure Commodity Basis – partially determined by site selection

4. 4. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Market crush spread based on a generic plant assuming: 1.2.8 gal/bushel 2..034 mmBtu/gal Crush Spreads: High Volatility with a Downward Trend $/gal

5. 5. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Debt service and other fixed operating cost requirements largely drive the breakeven crush spread Debt per gallon across ethanol producers has ranged from $1.15-$1.75 per gallon (unadjusted for capital leases) Amortization profile, interest rate variability, and fixed vs. floating can also drive significant separation SG&A and other fixed operating costs Breakeven Rates Can Vary Significantly Based on Fixed Costs

6. 6. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Crush Spreads Can Vary Marginally Based on Efficiency Corn $/bushelGas $/mmBtuEthanol $/galLo Crush $/galHi Crush $/gal $3.50$5.80$1.75$0.72$0.80 Conversion Efficiency At a given set of commodity prices crush spreads can vary across producers

7. 7. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Ethanol Credits are Exposed to Risks on Multiple Fronts Recent S&P ratings actions: 1) VeraSun cut to ‘D’ 2) Northeast Biofuels cut to ‘D’. 3) Aventine lowered to ‘CCC+/CW Neg’ What drove the above actions? 1) VeraSun was caught out by wrong way bets on corn prices 2) Northeast Biofuels experienced extensive construction and start up problems 3) Aventine was largely affected by overall sector economics as well as the credit market environment

8. 8. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Current Pressing Considerations Key Current Issues: Crush Spread margins have compressed to historical lows Future margins remain unpredictable due to volatile commodity markets Production oversupply vs. RFS mandate Liquidity will be critical until margins improve Prices have moved to a production cost determination rather than substitution price correlation (i.e. correlation with corn rather than gasoline) This creates a commodity dynamic where less efficient producers are likely to exit until production falls in line with demand set by the RFS mandate and discretionary blending

9. 9. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Recovery Prospects have been Handicapped Prior valuations have largely been based on 2007 acquisition prices and sector economics Recent price levels have significantly reduced cash flow expectations –At today’s commodity prices, an asset with low fixed costs and a high conversion efficiency would net a margin of around 7 cents per gallon, yielding a discounted cash flow valuation between 50 and 60 cents per gallon VeraSun bid by Valero indicates the potential for sector distress to further erode asset valuations –We believe Valero’s $280 million stalking horse bid suggests a valuation of about 50 cents per gallon of operating capacity, with significant discounts for plants that are not yet operational Northeast Biofuels’ valuation was driven by a different set of circumstances since construction was not brought to completion

10. 10. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Bifurcated Potential for Continued Sector Fallout Current capacity still exceeds RFS mandate and discretionary blending demand Exit of uneconomic producers could return the market to equilibrium –Remaining suppliers should benefit from improved pricing –Stranded assets may face further downward pressure on valuations –However, potential exists for assets purchased out of bankruptcy to leapfrog existing producers in financial competitiveness as a result of restructuring

11. 11. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Analytic services and products provided by Standard & Poor’s are the result of separate activities designed to preserve the independence and objectivity of each analytic process. Standard & Poor’s has established policies and procedures to maintain the confidentiality of non-public information received during each analytic process. www.standardandpoors.com