Statewide: February 23, 2011 Archive
In a report filed last month with the Securities and Exchange Commission, an ethanol plant in southwest Minnesota characterized its financial bottom line in a sentence that told of trouble.
"We need additional capital to continue our business."
The Heron Lake BioEnergy plant is one of several ethanol plants in the region facing an uncertain future. Last week, the bankrupt Otter Tail Ag Enterprises facility near Fergus Falls was sold to a Nebraska ethanol company.
The problems for Heron Lake are growing, even though it managed to make a small profit last year, $1.7 million. But that positive news wasn't good enough to reverse the red ink the company has accumulated in the last five years -- more than $17 million in losses.
The SEC filing says as a result of its money problems the ethanol producer that produces 50 million gallons per year "violated certain financial covenants under our master loan agreement" with AgStar Financial Services.
Heron Lake owes AgStar nearly $54 million. The ethanol company's officials concede that they have until next Tuesday to raise $4.5 million "to repay our line of credit."
The company's SEC 10-K paints a dismal future for itself if it can't come up with the money.
"If we are unable to service our debt, AgStar may accelerate all of our indebtedness and may seize the assets that secure our indebtedness, causing us to lose control of our business," Heron Lake officials say. "We may also be forced to sell our assets, restructure our indebtedness, submit to foreclosure proceedings, cease operations or seek bankruptcy or reorganization protection."
Heron Lake is one of the few ethanol plants in the nation powered by coal. State officials have cited it for air and water pollution. Last December, the company paid a $66,000 Minnesota Pollution Control Agency penalty for the problems.
More recently the company has had to deal with volatile corn prices, the main ingredient in making ethanol. Corn prices have moved from just over three dollars a bushel last summer to well over six dollars this month.