Tuesday, October 21, 2014

Is it twilight or a new dawn for ethanol plant?

By ABBY ECKEL and By DOUG CARDER, Herald Staff Writers | 7/31/2013

With an ear to the ground and an eye on the ethanol plant, Garnett farmer Glenn Caldwell is optimistic his 1,500-acre corn crop will benefit the local economy this year, he said.

Caldwell Farms, Inc. is a shareholder in East Kansas Agri-Engergy, LLC’s ethanol plant in Garnett. Caldwell, owner of Caldwell Farms, thinks the 8-year-old plant will start churning out ethanol this fall after shutting down about 10 months ago in October 2012, he said. But the longtime farmer said he has received no definitive word about the dormant plant’s reopening.

With an ear to the ground and an eye on the ethanol plant, Garnett farmer Glenn Caldwell is optimistic his 1,500-acre corn crop will benefit the local economy this year, he said.

Caldwell Farms, Inc. is a shareholder in East Kansas Agri-Engergy, LLC’s ethanol plant in Garnett. Caldwell, owner of Caldwell Farms, thinks the 8-year-old plant will start churning out ethanol this fall after shutting down about 10 months ago in October 2012, he said. But the longtime farmer said he has received no definitive word about the dormant plant’s reopening.

“[The ethanol plant] is the greatest thing that’s ever happened to this area — to have an end user right here,” Caldwell, 66, said. “If the plant reopens, I’ll give them all [the corn] I have.”

The fate of the plant could be announced as early as Friday, Bill Pracht, chairman of the EKAE board of directors, said.

Pracht is expected to be the featured speaker at Ottawa’s First Friday Forum. The monthly forum is open to the public and starts 10 a.m. at Neosho County Community College, 900 E. Logan St., Ottawa. Pracht is hopeful he can tell forum attendees that the plant is reopening, he said.

The regional corn crop withered under drought conditions last year, Pracht said. The lack of adequate local corn supplies caused the plant — which often received 100 truckloads of corn per day, according to the plant’s YouTube video — to cease operations last fall, he said.

“Most of it is corn availability, that’s 100 percent of it,” he said. “Last year there wasn’t enough corn available within 100 miles of Garnett to bring in here at a decent price to make the plant work.”

Caldwell, who returned to the family farm in 1975 after serving in the U.S. Air Force, concurred with Pracht’s assessment.

“The plant stayed open as long as it could last year, and encouraged farmers to bring all the corn they had, but there wasn’t enough corn locally,” Caldwell said, “There was corn available at great distances, but freight got extremely high, so [EKAE] wouldn’t have made enough to even break even.”

Cloud on the horizon

The reopening of the plant would be a good thing for the City of Garnett and surrounding areas, Pracht said, but a move by a group of concerned shareholders might cause some difficulty.

A press release from Clean Energy Capital, the plant’s largest shareholder, read “The Concerned Shareholders of East Kansas (Concerned Shareholders), led by Scott Brittenham, CEO of Clean Energy Capital, LLC, East Kansas’ largest shareholder, are taking actions to reconstruct the company’s board of directors and institute a strategic blueprint to guide future operations,” according to gardneredge.com.

“A series of financial and strategic missteps by the existing board of directors” could have been avoided had the board “anticipated and adjusted to changing market conditions,” Concerned Shareholders said in the press release.

“The current board may have been adequate for the start of East Kansas, but changing market conditions now demand different skill sets on the board,” Brittenham said in the release. “The plant shut-down could have been averted through clearer vision, sound business decisions and better policy-making by the board. The new directors we’re recommending have the risk management and ethanol industry experience necessary for tackling the challenges that have mounted.”

Pracht said he isn’t worried about being ousted and that Brittenham is only worried about himself, not the well-being and growth of the plant.

“He’s wanting to oust the board that’s been elected every year since 2005,” Pracht said. “We’ve had some turnover on the board, but he’s an activist shareholder — he doesn’t have the same long-term outlook that those people locally do. Activists are here for short-term benefits and are not concerned about the entire company.”

The press release said that the concerns are not just those of Brittenham’s, but of other concerned shareholders. Pracht said he doesn’t believe that to be the case.

“It’s mostly just one person,” he said. “There are very few people who have those same concerns. He says that he has those [concerns] at the top of his list, but the No. 1 thing is himself. We are very confident that [ousting the current board] is not going to happen.”

Eight years of ethanol

The plant would have celebrated its eighth anniversary in June, Pracht said. Not only does the plant produce ethanol, it also is a producer of distiller grain and corn oil, according to the EKAE’s website.

The ethanol plant, in addition to providing jobs, boosted the local economy, Pracht said.

“[The plant] is a big economic driver for this part of the state as far as anybody who’s involved in agriculture, whether you’re a farmer or livestock producer,” Pracht said. “It’s [also] a grain elevator so we benefit from additional fertilizer sales and seed sales to grow corn in our plant. It’s a huge economic driver for that, for all those purposes.”

According to EKAE’s YouTube video, the plant brought many jobs to the area and even drew former Garnett residents back to their hometown. When the plant was forced to close last year, many of those people lost their jobs, Pracht said.

“[The plant] brings 35 to 36 good paying jobs, and about 23 of those people are laid off today,” he said. “[Reopening the plant] will bring them back into the workforce as well.”

The plant is an important utility customer for the City of Garnett, Joyce Martin, Garnett city manager, said.

“The plant is one of our largest water users, and I’ve been in contact with the officers still at the plant to make sure we are prepared if they do reopen,” Martin said. “We will need to ramp up the water plant, make sure we have enough chemicals to handle the larger volume.”

Citing customer confidentiality, Martin declined to say how much water the ethanol plant used, but she said city water is not diverted from nearby reservoir supplies specifically for the plant.

“We’ve heard they may reopen, possibly by mid-September, but nothing official,” Martin said. “The plant was a great community partner and did support a lot of local activities. In addition to being a good utility customer, the plant was a good employer.

“And, contrary to what some people think, they do pay property taxes,” Martin said. “When we issued industrial revenue bonds [as an incentive to help build the plant] they only covered certain portions of the plant, and not the tanks and new building. The plant has continued to pay its taxes, even while they haven’t been in operation. The plant’s reopening obviously would be really good for our economy.”  

Pracht said he’s confident that the plant will reopen, thanks in large part to the larger amounts of rainfall this year, but also in part to the plant’s financial strength.

“The rain we’ve got, and the rain this part of the area has gotten in the last couple weeks, and if we get another good rain spell this year, it’ll probably be enough to open,” he said. “There’s much greater [amounts of corn] than last year and better odds of the plant being able to run ... ”

The presentation Pracht plans to give at the First Friday Forum will talk about the past, present and future of the plant, as well as address the possibility of the board of directors being ousted by concerned shareholders, he said.

“We’re always glad to talk about our company and the success story it’s been,” Pracht said. “And the one it’s going to continue to be as we go on.”

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