Weak turnaround this year in Minnesota's ethanol industry

  • Article by: DAVID SHAFFER , Star Tribune
  • Updated: June 23, 2013 - 7:22 PM

Some of the Minnesota-affiliated ethanol producers are making profits again, but plants carrying high debt loads are struggling.

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Purified Renewable Energy, a Buffalo Lake, Minn., ethanol producer

More ethanol producers are making money, but it’s not always enough.

The industry, staggered by high corn prices in 2012, is seeing a modest turnaround so far this year, but ethanol plants with high debts still have a rough road. Meanwhile, two of Minnesota’s 21 plants remain closed — with one of them going on the auction block.

“The industry has gone through some tough times, so the plants are pinching every penny and looking at every possible way to cut costs,” said Paula Emberland, manager of Biofuels Benchmarking, an industry analytics service of the Christianson & Associates accounting firm based in Willmar, Minn.

Three of seven Minnesota-affiliated producers subject to financial disclosure reported modest profits in the latest quarter, up from just two in the previous quarter. Other plants mostly reported smaller losses compared with prior quarters.

One debt-strapped plant, in Heron Lake, Minn., last week asked its mostly local owners to invest more capital. Two other Minnesota-based producers missed payments to lenders.

But Highwater Ethanol of Lamberton, Minn., made a profit for the first time in more than a year.

“We are hopeful it will keep rolling,” said Highwater CEO Brian Kletscher, who also is president of the Minnesota Biofuels Association.

Green Plains Renewable Energy, the nation’s fourth-largest ethanol maker and owner of a plant in Fergus Falls, Minn., also made a profit for the second consecutive quarter, and last month acquired its 10th plant. All of the Omaha-based company’s other plants are outside of Minnesota.

Granite Falls Energy, owned by local investors in Granite Falls, Minn., reported $3 million in net income for the period ending in April, its second profitable quarter after two with losses in 2012.

More than 60 U.S. ethanol plants tracked by Biofuels Benchmarking earned, on average, 9 cents per gallon in the first quarter, compared with a 5-cent loss in 2012, according to data presented last week at Christianson’s annual financial conference in Bloomington.

Most ethanol makers are privately held and don’t disclose financial results. Biofuels Benchmarking privately collects financial data from plants to help them improve their operations. It releases only aggregate data on industry performance.

Emberland said plants not only are cutting costs, but are looking beyond ethanol for profits. In 2009, just over half of ethanol plants were producing industrial corn oil, typically sold to make biodiesel, she said. Today, three of four plants have turned to corn oil production to boost revenue.

“It has become a significant revenue source,” Emberland said, and plants are considering other investments such as adding biodiesel refining capacity.

While Biofuels Benchmarking doesn’t issue industry forecasts, Emberland said ethanol producers are mostly upbeat, and some closed plants are likely to reopen in the second quarter. More plants are doing a better job of hedging their risks in the corn market, she added.

Struggle with debt loads

Plants with large debt loads are having the toughest time in Minnesota.

In Buffalo Lake, one of the state’s smallest ethanol plants, built in 1997, has been shut down since March, when the owner, Purified Renewable Energy, filed for Chapter 11 bankruptcy protection, listing $26 million in debts. The plant, which reopened last year after a 2 ½-year shutdown, is up for auction, with bids due July 31.

Biofuel Energy Corp’s large ethanol plant in Fairmont, Minn., has remained closed since September and the company is exploring strategic alternatives, including the possible sale of the plant and another in Nebraska.

  • Some Minnesota ethanol producers show a profit

    Three of the seven Minnesota-affiliated ethanol producers reported a profit, and most others had declining losses in the latest quarter ending in March or April. Most ethanol plants are privately owned and don’t disclose financial results.

    Quarterly Quarterly

    Company revenue earnings Minnesota affiliation

    Advanced BioEnergy $61.3M –$1.7M Bloomington (hq)*

    Blue Flint Ethanol $48.3M –$51,000 Maple Grove (owner)†

    Biofuel Energy Corp. $89.0M –$4.6.M Fairmont (plant)

    Granite Falls Energy $48.0M $3.0M Granite Falls (hq/plant)

    Green Plains Renewable Energy $765.0M $2.5M Fergus Falls (plant)**

    Heron Lake BioEnergy $35.5M –$998,140 Heron Lake (hq/plant)

    Highwater Ethanol $42.6M $770,082 Lamberton (hq/plant)

    *owns ethanol plants in Huron, S.D., and Aberdeen, S.D.

    †Blue Flint plant in Underwood, N.D., is wholly owned by Great River Energy, a Maple Grove-based electric cooperative that supplies Blue Flint with steam from its power plant adjacent to the ethanol facility. Steam sales are not reflected in figures.

    **also owned eight ethanol plants in other states; figures reflect all plants’ production.

    Source: Company filings with Securities and Exchange Commission.

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