Ethanol plant receives temporary reprieve

Posted at 11:52 AM on March 8, 2011 by Mark Steil
Filed under: Ethanol, Southwest Minnesota

MPR File Photo/Mark Steil

A financially troubled ethanol plant in southwest Minnesota has been given a two-month extension on its line of credit.

In a Securities and Exchange Commission filing posted Monday, Heron Lake BioEnergy disclosed that AgStar Financial Services has agreed to "extend the maturity date for the Revolving Line of Credit Loan and the Forbearance Agreement" for up to 60 days.

In exchange for the agreement, Heron Lake BioEnergy, which lost $17 million over the last five years, paid 50 percent of its deferred interest bill, company officials said.

A dollar amount was not published in the filing.

AgStar officials say they will not declare Heron Lake BioEnergy in default if the company can meet the terms of the latest agreement. Heron Lake owes AgStar about $54 million.

The Heron Lake plant produces nearly 50 million gallons of ethanol a year.

Many ethanol companies are struggling now with very low, or even negative, profit margins. Ethanol prices have moved up recently, but the industry must pay very high costs for the corn it turns into ethanol. Corn prices are over $7 a bushel now on the futures market.

Heron Lake BioEnergy's financial difficulties came to light in a January SEC filing, when the ethanol company acknowledged that it needed additional capital to remain in business. Heron Lake BioEnergy officials also said the company needed to raise $4.5 million by March first to repay a line of credit.

The latest filing doesn't say whether the company was able to raise that money. So far neither Heron Lake BioEnergy or Agstar have responded to requests for comment.

Southwest Minnesota ethanol plant in financial trouble

Posted at 2:39 PM on February 23, 2011 by Mark Steil (9 Comments)
Filed under: Ethanol, Southwest Minnesota

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.

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Nebraska company buys Minnesota ethanol plant

Posted at 4:54 PM on February 17, 2011 by Mark Steil
Filed under: Ethanol

A Nebraska company will buy a bankrupt ethanol plant located near Fergus Falls in northwest Minnesota.

Under a purchase agreement approved today by a bankruptcy judge in St. Paul, Green Plains Renewable Energy will buy the Otter Tail Ag Enterprises ethanol facility for $55 million. The plant, plagued by financial problems from the time it started operation in early 2008, filed for bankruptcy in October 2009.

Based in Omaha, Green Plains operates eight plants producing 660 million gallons of ethanol a year. The addition of the Fergus Falls plant will add another 55 million gallons to the company's production.

In a news release, Green Plains CEO Todd Becker said the Minnesota purchase fits the company's future plans.

"We are continually looking for opportunities to expand production at reasonable valuations and adding this plant to our business is a solid fit for us," Becker said.

Otter Tail Ag defaulted on a $31 million loan with AgStar Financial Services in early 2009. At the time, the company blamed its problems on high corn prices, the main ingredient for making ethanol. The company posted a $21.5 million loss that year.

As part of its effort to reorganize under bankruptcy protection, the company attempted to raise $12 million in equity from investors last summer, but the effort failed.