Southwest Minnesota ethanol plant in financial trouble

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.

  • Mike Swan

    Ethanol is ridiculous anyhow – more big ag getting tax breaks to grow corn to put into gas, honestly how did such a stupid idea ever take shape – oh ya, our representatives need to line their pockets as well as those of their college buddies who run big ag.

  • andy

    @ Mike;

    Exactly. Not to mention that it is highly inefficient to produce and the end product hurts your mileage, offsetting any “savings” at the pump. Ugh, ethanol is such a horrible joke – and we have to pay for it.

  • Larry

    And was it your second or third grade education where you learned such logic and honed your argumentative skills?

  • Steve

    I am amazed with the price of oil at what it is today that anyone would not appreciate the fact that there is an alternative to decrease our need for foriegn oil. The reason that someone thought of ethanol was to offer another route than continuing to support the countries in the Middle East who hold us hostage due to oil. The addition of ethanol causes engines to burn cleaner, keep dollars here in the US, and we make it where we would not have to defend the Middle East; does seem to offset the sometime decrease in fuel mileage. By using a higher blend of ethanol you can actually show no loss of fuel mileage or sometimes an increase. Ethanol is just a span of the bridge to energy indpendance that will include many other options. If not ethanol what alternative is there today that decrease the US need for foriegn oil.

  • Robin Herbon

    The arguments that you present against ethanol are weak at best. You regurgitate information that is 30 years old. We are spending Trillions of Dollars throughout the world to give you oil at the pumps. Why not discuss our Defense Budget that is used to protect the Middle East, so we can move oil to America. Or Lets talk about the trillions of Dollars that have left our economy to line the pockets of the OPEC countries?

  • Anthony

    Those anti EtOH or Biofuels comments are terribly cliche and WRONG. EtOH is:

    + Clean burning

    + More energy per pound than gasoline!

    - The volumetric or milage difference is due to Detroit only setting compression ratios for the less energy packed unleaded instead of EtOH. In fact, there are two models in 2011 that have improved compression making the FFV on par for mpg with cheaper fuel and more horse power.

    + EtOH pumps billions of $$ into the US economy instead of Chavez or other US haters. This is huge!

    + By the way, the Federal Tax incentive goes to the Big Oil blenders not the EtOH producers. That has been their dirty little secret all along.

    + When Exxon make $50 bln per quater, why do they still benefit from hidden tax code incentives.

    + And don’t even try the food vs fuel argument… There is significantly more feed stuffs corn, DDGS, CGF, other because EtOH exists than there would be without EtOH. That is a fact!

    Please do your homework instead of repeating the same Big Oil lies over and over again.

  • Alan

    I am very aww struck at how blind people are to what is actually happening here. Bio Fuels are creating an independance for our country. How could anybody have a problem of any kind with that? I know that I’m very tired of being told how much it will cost to go visit my family by some dictator on the other side of the world!!

  • Raoul

    The Progressive movement of liberals do not care about providing so called clean energy, they care about manipulation of world food prices…and the unrest that ensues.

    FACT: Ethanol through corn is an inefficient fuel system that can only exist by tax subsidy. Corn growers are guaranteed a price per gallon by the gov. because of this fact. According to the government’s own data, it takes 10,000 gallons of fresh drinking water to create just one gallon of ethanol. Corn prices have risen 2 x and has risen food prices. Ethanol fuel is a better deal than food for humans? There is a food shortage today in Europe and Asia. Have you seen the corn and wheat buy outs that China did this past quarter?

    Anthony’s comment is not accurate. He writes:

    Those anti EtOH or Biofuels comments are terribly cliche and WRONG. EtOH is:

    + Clean burning

    ( actually the new gov. data shows this is not true)

    + More energy per pound than gasoline!

    ( TRUE but_ cars don’t need 110 octane to run. most can run on 87 octane)

    - The volumetric or milage difference is due to Detroit only setting compression ratios for the less energy packed unleaded instead of EtOH. In fact, there are two models in 2011 that have improved compression making the FFV on par for mpg with cheaper fuel and more horse power.

    ( Wrong again_ 110 octane is typical racecar fuel levels but again, the cost to make Ethanol far outweighs the benefits. Ethanol mileage is 20% LESS than regular gasoline.)

    + EtOH pumps billions of $$ into the US economy instead of Chavez or other US haters. This is huge!

    ( sorry, WRONG again_ the cost of Etoh production has to be subsidized otherwise a gallon of ethanol blend fuel would be three times the cost of regular gasoline. Ethanol by corn removes corn from livestock feed. wonder why meat has doubled in price in the past 5 years?)

    + By the way, the Federal Tax incentive goes to the Big Oil blenders not the EtOH producers. That has been their dirty little secret all along.

    ( WRONG again. Ethanol producers are directly highly subsidized. BTW, Oil is used in 80% of every product we consume, e.g.,cell phone covers, shoes, all plastics, cleaning chemicals, et.

    BTW, the reason for ethanol use was from the lobbying Environmentalists with the Progressive movement, not for cleaner air but to affect food prices world wide. When the Obaba appointed Energy Czar for the EPA claims Co2 is now a pollutant it gave him the power to regulate our energy use..no Co2 means all plant life dies. Co2 is not a pollutant as any HS student knows. The refusal by the administration to let the USA tap our vast oil reserves is causing our dependence upon foreign oil ( 1/3 of our use comes from the Arab states with Canada, Mexico and Brazil providing the rest.

  • Steve

    Rauol must only get his information from data that is supported by big oil.

    Facts about ethanol:

    -Most ethanol plants take 4 gallons of water to make 1 gallon of ethanol and some are now using less than 3 gallons of water to make 1 gallon of ethanol.

    -The corn comes into an ethanol plant on average with 10% protein and after the ethanol process is complete the co-product (distillers grains) is at 30% protein and is packed in a third of the original bushel that the process started with. So 10% protein in a bushel of corn verses 30% protein in a third of a bushel of distillers grains. What would be cheaper to ship a whole bushel or a third of a bushel? So actually the ethanol process resutls in lowering the cost to get the equivilant protein delivered. The reason that food prices went up was the result of the increase of diesel fuel price.

    -The estimated federal tax incentatives for ethanol in 2010 was $6 B and the tax revenue contributions from ethanol was $11B.

    -The reduction of oil imports to the US economy due to ethanol was a savings of $34B.

    -The production of ethanol in 2010 displaced the gasoline refined from 445M barrels of crude oil.

    -Ethanol at higher blend than 10% ethanol (20-30% blend) has been shown no reduction in mileage and actually shows a increase with some cars. With the higher blends the economic impact shared above would increase proportionately.

    -Continuing to just drill can lead to spills and environmental consquences that no one wants. If there is an ethanol spill it does not have any long term environmental impact.

    -You brought up the fact about racing using ethanol and through the venue the cleaner burning effects that ethanol brings has been shown on pit row in both the Indy Car Series and NASCAR.

    Ethanol has lead to clearing the air at the races.

    -Henry Ford built his cars to run on ethanol and called it the “fuel of the future”. With the price of oil today maybe Henry was right we just have been alittle late in listening.