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VeraSun to auction off Central City, Ord ethanol plants
Staff and wire reports
SIOUX FALLS, S.D. — VeraSun Energy Corp. is putting seven of its ethanol plants, including ones in Ord and Central City, up for auction as part of a bankruptcy court financing agreement.
VeraSun needs up to $12.3 million in additional funds to maintain its work force and plants in Ord and Central City, as well as Albert City and Dyersville in Iowa, Woodbury, Mich., Hankinson, N.D., and Janesville, Minn., through April 30, according to a filing approved on Thursday by a federal bankruptcy court in Delaware.
“As part of the agreement, the lender is calling for a sales process by auction,” VeraSun spokesman Mike Lockrem said on Friday.
The debtor-in-possession agreement with lender Agstar Financial Services calls for the auction to begin on March 16 with closing of sales by March 31.
All seven of the plants to be auctioned were obtained by VeraSun as part of the company’s March 2008 buyout of St. Paul, Minn.-based US BioEnergy Corp. A Marion, S.D., plant that was also part of the US BioEnergy deal was not part of the Agstar agreement because it was financed by a different lender, Lockrem said.
VeraSun, the nation’s second-largest ethanol producer, filed for Chapter 11 bankruptcy protection on Oct. 31 as credit markets froze and commodities such as corn and oil become extraordinarily volatile.
The Sioux Falls, S.D.-based company owns 16 biorefineries with the total capacity to produce 1.4 billion gallons of ethanol annually, or about 13 percent of the country’s total capacity. But only four — Charles City, Fort Dodge and Hartley in Iowa and Aurora in South Dakota — remain operational, with the rest idled until market conditions improve.
Lockrem said the company hasn’t made any announcements relating to its other plants, including the one in Albion.
In November, VeraSun announced it had received an unsolicited takeover bid, just hours after the nation’s biggest producer, Poet LLC, said it was in talks with other companies about buyouts. Neither Poet nor VeraSun will say if the two are negotiating a deal.
“This auction process is unrelated to that,” Lockrem said.
Nebraska Ethanol Board Administrator Todd Sneller said on Thursday, before the filing was approved, that he expected the plants’ new ownership to become more clear within the next week.
He stressed that the plants’ “hot idle” mode allowed them to be ready to start up quickly.
“That is an operational status that is distinctly different from a shut-down plant,” Sneller said.
VeraSun sent letters of rejection of grain contracts to 1,400 people in December, many of them farmers in the Ord and Central City areas, according to a U.S. Department of Agriculture meeting last week.
That left those farmers unpaid for corn they delivered to the plants on contract, though VeraSun had not yet rejected its contracts for February and March as of last week.
The Central City and Ord plants have a combined annual production capacity of about 146 million gallons of ethanol and grind about 55 million bushels of corn per year, according to the ethanol board.
VeraSun, founded in 2001, went public in June 2006 in near-perfect market conditions. Corn was cheap, gas cost a bundle, and refiners were clamoring for more ethanol to use as a cleaner-burning alternative to the additive MTBE.
But skyrocketing corn costs began cutting into ethanol producers’ profits, and many tried to use hedging to control costs. Hedging sets future prices for corn sellers while helping buyers avoid the risk of volatile price swings by letting them lock in at a set cost.
After VeraSun locked into prices for its feedstock for the third quarter, corn went into a sharp decline from almost $8 per bushel to less than $5 per bushel in mid-August.
The company in mid-September tried to raise $20 million in a public offering but later scrapped that plan and retained Morgan Stanley to help it evaluate “strategic alternatives” involving anything from a buyout to a partial sale of assets.
Trading of the company’s shares on the New York Stock Exchange was suspended on Nov. 3.
VeraSun needs up to $12.3 million in additional funds to maintain its work force and plants in Ord and Central City, as well as Albert City and Dyersville in Iowa, Woodbury, Mich., Hankinson, N.D., and Janesville, Minn., through April 30, according to a filing approved on Thursday by a federal bankruptcy court in Delaware.
“As part of the agreement, the lender is calling for a sales process by auction,” VeraSun spokesman Mike Lockrem said on Friday.
The debtor-in-possession agreement with lender Agstar Financial Services calls for the auction to begin on March 16 with closing of sales by March 31.
VeraSun, the nation’s second-largest ethanol producer, filed for Chapter 11 bankruptcy protection on Oct. 31 as credit markets froze and commodities such as corn and oil become extraordinarily volatile.
The Sioux Falls, S.D.-based company owns 16 biorefineries with the total capacity to produce 1.4 billion gallons of ethanol annually, or about 13 percent of the country’s total capacity. But only four — Charles City, Fort Dodge and Hartley in Iowa and Aurora in South Dakota — remain operational, with the rest idled until market conditions improve.
Lockrem said the company hasn’t made any announcements relating to its other plants, including the one in Albion.
In November, VeraSun announced it had received an unsolicited takeover bid, just hours after the nation’s biggest producer, Poet LLC, said it was in talks with other companies about buyouts. Neither Poet nor VeraSun will say if the two are negotiating a deal.
“This auction process is unrelated to that,” Lockrem said.
Nebraska Ethanol Board Administrator Todd Sneller said on Thursday, before the filing was approved, that he expected the plants’ new ownership to become more clear within the next week.
He stressed that the plants’ “hot idle” mode allowed them to be ready to start up quickly.
“That is an operational status that is distinctly different from a shut-down plant,” Sneller said.
VeraSun sent letters of rejection of grain contracts to 1,400 people in December, many of them farmers in the Ord and Central City areas, according to a U.S. Department of Agriculture meeting last week.
That left those farmers unpaid for corn they delivered to the plants on contract, though VeraSun had not yet rejected its contracts for February and March as of last week.
The Central City and Ord plants have a combined annual production capacity of about 146 million gallons of ethanol and grind about 55 million bushels of corn per year, according to the ethanol board.
VeraSun, founded in 2001, went public in June 2006 in near-perfect market conditions. Corn was cheap, gas cost a bundle, and refiners were clamoring for more ethanol to use as a cleaner-burning alternative to the additive MTBE.
But skyrocketing corn costs began cutting into ethanol producers’ profits, and many tried to use hedging to control costs. Hedging sets future prices for corn sellers while helping buyers avoid the risk of volatile price swings by letting them lock in at a set cost.
After VeraSun locked into prices for its feedstock for the third quarter, corn went into a sharp decline from almost $8 per bushel to less than $5 per bushel in mid-August.
The company in mid-September tried to raise $20 million in a public offering but later scrapped that plan and retained Morgan Stanley to help it evaluate “strategic alternatives” involving anything from a buyout to a partial sale of assets.
Trading of the company’s shares on the New York Stock Exchange was suspended on Nov. 3.
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| Technology, financing, enrollment growth not new to GICC objectives | Local/state briefs |
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