RPT-Iowa venture capitalist sours on ethanol

(Repeats with correct story USN at the end of paragraph 8)

CHICAGO, Oct 24 (Reuters) - A venture capitalist in Iowa has scrapped plans to consolidate several farmer-owned ethanol plants amid a dramatic drop in profits throughout the industry, said one of his executives on Wednesday.

"We've concluded that in the current environment, the economics of each plant are so uncertain that it's going to very difficult to value them and we won't be successful with our plan," said David Miles, chief executive of Countryside Renewable Energy, which was formed in 2006 by investor John Pappajohn.

Initially, Countryside had wanted to buy at least six ethanol plants using $500 million in debt financing and $300 million from an initial public stock offering. The plants had a combined production capacity of about 300 million gallons, Miles said.

Countryside dropped that plan some time ago and instead focused on buying two ethanol plants, with possible additions or an IPO in the future.

Countryside will close permanently at the end of the month.

"We still believe in the ethanol industry long term," Miles said. "We think an opportunity for consolidation will come but it's not clear when it will come."

Over the past year, U.S. corn prices have increased sharply, making it more expensive for ethanol producers to buy the feedstock, while ethanol prices have fallen, thus squeezing the profits of ethanol producers.

As a result, at least four companies, including major producer VeraSun Energy Corp VSE.N, have postponed building new ethanol plants that would have had a combined capacity of 250 million gallons. [ID:nN17306324] [ID:nN16184707]

However, the leading U.S. producer of ethanol, POET, has said it has no plans to cut production or halt construction on new plants. [ID:nN16291839]