business

GRANITE FALLS, MINN. - Welders at Fagen Inc. will kick off the new year by using their torches to fabricate parts destined for an ethanol plant in Hungary.

Ron Fagen, the CEO of Fagen Inc., put this western Minnesota town on the national map by building 47 ethanol projects across the United States between 2006 and 2008. His family-owned company generated $2.2 billion in revenue in 2007.

"Corn ethanol has been the best thing that has happened to the farmers since the invention of the combine," said the 61-year-old Fagen, who grew up in the tiny community of Maynard near Granite Falls. "It gives them another market for their corn."

But the U.S. ethanol building boom is over.

"It all came to a screeching halt when our friends on Wall Street manipulated the commodity market," Fagen said, commenting on the volatility of corn and oil prices. Others would argue that it was ethanol's friends and enemies in Washington and state capitals who did the manipulating over subsidies and mandates. The Environmental Protection Agency last month, for example, postponed a decision on a proposal backed by the ethanol industry that would increase the amount of ethanol blended into gasoline from 10 to 15 percent.

Regardless, Fagen has been retooling his business model. The company will finish one more U.S. ethanol plant in Pennsylvania, but Fagen's attention already has turned to other forms of renewable energy -- biomass and wind. Going forward, Fagen said he thinks his business mix will be about 60 percent biomass projects, 25 percent wind energy and the remaining share coming from building other types of industrial facilities.

His company recently landed a job in Texas to construct the largest biomass power plant in the country. The Minneapolis office of Zachry Engineering is the design engineer on the project.

The 100-megawatt plant will serve customers in the Austin, Texas, area. "East Texas has more trees than northern Minnesota," Fagen said, but trees won't be harvested for the new facility. Instead, chips, bark and other wood waste from wood processing plants will be used to fuel the biomass facility.

"We are making use of forestry residue wood to produce electricity, rather than using coal," said Alison Cochrane, a vice president with Zachry Engineering. Work crews will start pouring concrete on the Texas site this month.

Cochrane said that Zachry has worked successfully with Fagen Inc. on ethanol projects before.

Ron Fagen "is a direct, real person, very approachable and upstanding," she said. "His name is on the company. It matters to him the quality of the work being done by his company, which is really representing him."

Going global

Fagen Inc., which was founded in early 1988, is owned by Ron, his wife, Diane, and his sons, Aaron and Evan, who all have leadership roles with the company.

The Fagen name is highly visible in Granite Falls, where Fagen employs about 200 people. The company's strategic direction is set from a modern tan brick headquarters building on the corner of Highways 23 and 212. Granite Falls is a regional center for area farmers who grow corn, soybeans and sugarbeets.

Fagen, an outgoing man with a fondness for World War II airplanes, said that he "stumbled" into the role of becoming a huge contractor of renewable energy projects because he wanted farmers to gain greater control over their incomes by selling their corn for ethanol.

Two decades later, he's part of a larger green movement that's going global. With a business partner from Ireland, Fagen will build an ethanol plant about 60 miles outside of Budapest on the Danube River. "We are now prefabricating pipe in Granite Falls and we are going to be moving dirt in April in Hungary," he said.

He is buying land in Hungary from agricultural giant Cargill and the new ethanol plant will be located adjacent to a Cargill grain elevator that will supply corn for the project.

"If we can show that this works fine, I think we will build more of them in corn country," said Fagen, who added that Europeans are showing more interest in growing corn.

On a recent weekday, Fagen donned an olive green cap that's adorned with airplanes, and he hopped in his red Tahoe to check on fabricating schedules for the Hungary project at his Granite Falls plant. About 90 percent of the Hungary facility's parts will be manufactured in the United States, Fagen estimates, and he hopes to be there when those components are placed on a big ship for transport out of Duluth.

The tremendous spike in U.S. ethanol plant construction pushed Fagen's employment to about 3,700 people by the end of 2007. Now the company's workforce is down to around 1,200 workers.

Diane Fagen, who leads the company's human resources department, said most of the workers who've been laid off are people who travel from site to site to build facilities across the country. Only about a dozen Fagen jobs were cut in Granite Falls as part of the downsizing.

In 2008, revenue dropped about 27 percent to $1.6 billion. Fagen declined to estimate 2009 revenues but Jennifer Johnson, Fagen's chief financial officer, said that the company would show a "good, respectable profit."

Despite the job cuts and slowing sales, Fagen remains an unabashed believer in ethanol and renewable energy.

Jets yes, e-mails no

"We are very close to supplying 10 percent of the motor fuel in this country," Fagen said of ethanol. "Can you imagine if that 10 percent were taken away? What kind of crisis would there be, and what would the prices be at the pump?"

Tom Erickson, associate director for research at the Energy and Environmental Research Center in Grand Forks, said, "We definitely see the use of biomass as a significantly growing area."

Erickson added that the demand for biomass will likely intensify if politicians approve a carbon tax or place a cap on emissions.

"You can combust [biomass] in a boiler to produce electricity or heat. Or you can gasify it, in which you can produce a syngas which is similar to natural gas," Erickson said.

Fagen has stayed close to home to build his business, but he travels frequently on one of Fagen's two Citation airplanes to visit project sites and prospect for new business.

While he's a progressive in promoting alternative energy, he's not a fan of some forms of modern communication.

"I see these people on their computers answering e-mails all hours of the night," so he refuses to use voicemail or e-mails. While he concedes that he prefers the "old-fashioned way" of communicating face-to-face, he's keenly attuned to global and domestic markets.

"I learn stuff every doggone day," he said. And he derives tremendous satisfaction from "seeing something get built."

Liz Fedor • 612-673-7709