By GEOFF FRANK, Bluffton News-Banner
Wells County Council went on record Wednesday night expressing concern about perceived delays in the ethanol plant proposed for a location at the southwest edge of Bluffton.
The council gave the company behind the project until June 15 to resolve a key financing issue or prompt the county to reconsider its guarantee of partial governmental backing of the project’s bonds in case of default.
Council president Pete Cole was assigned to contact Indiana Bio-Energy LLC to convey details of the message.
The company was asked to have a lender selected for its secondary subordinated debt by the June 15 date. All seven council members supported the motion.
County and city officials reached a tentative agreement Dec. 30 by which the local governments would provide up to $800,000 in an annual support guarantee in case of a default by IBE on the project’s bonds.
The guarantee would be financed mostly by County Economic Development Income Tax (CEDIT) funds and would only be paid in case of a default by IBE on the bond payments.
David Dale, chairman of the IBE board, said this morning that he expects the company will meet the county’s June 15 date.
“That should not be a problem at all,” said Dale, noting that IBE continues to make progress on the proposed plant.
Councilman Jim Oswalt got discussion going on the issue, observing that IBE had urged that action be taken by the governmental bodies before the end of December.
“We were all kind of rushed into making the decision there before the end of the year,” said Oswalt.
Now, more than four months have passed without details being firmed up, it was noted.
Dale had said in mid-March that board members remain committed to building the plant in Wells County, but “the project still will not be possible in Wells County without formal implementation by the County and the City of their indicated support of the bonds portion of the project’s financing.”
The matter has not yet come before county or city governmental boards for formal implementation.
Cole indicated that IBE leaders have had to cancel two behind-the-scenes meetings because of scheduling conflicts.
“We’re dangling in the wind, waiting, waiting for something to happen and I don’t foresee that much is happening,” said Cole.
“And when it does happen, all of a sudden, it’s going to be ‘Let’s go, time is of the essence.’ And, it doesn’t seem to be that important right now,” said Cole.
The council president made it clear that IBE failing to meet council’s June 15 deadline would not automatically cause the county to pull out of the tentative agreement on the partial bond guarantee. It would cause the county to consider such action, however, he noted.
Dale said IBE has been working to obtain the best financing deal for both its own interests and for minimizing the exposure of the local governments in their guarantee.
The company already has its financing lined up for its first mortgage, said Dale.
It is discussing with three sources the $22 million in bonds that will be in essentially a second mortgage position, he noted.
IBE has been somewhat limited in what it can say because of SEC regulations, Dale said.
Significant events of this week were clearly on the minds of the council members Wednesday night.
Central States Enterprises Inc. on Tuesday announced plans to build a new corn ethanol facility next to its grain terminal in Montpelier, less than 20 miles away.
Cole noted that when the tentative agreement on partial backing of IBE’s bonds was reached in December, the ethanol plant would have been the only one in this part of the state.
The Central States announcement indicated its financing partners are in place for the Montpelier facility, and its plans to break ground late this summer were outlined.
If all goes well, the IBE plant would break ground in October, according to an April 24 news release from the company.
Cole sees the risk to the local governments on their partial bonds guarantee increasing with a second plant so close and time rapidly passing.
“The more you drag it out, the higher your probability is to have to make good on that guarantee,” said Cole.
Oswalt indicated that yet another plant is being considered in a nearby area county.
Council member Karolyna Farling also expressed concern. “I think there are a lot of taxpayers who have a lot of questions about this,” she said.
Farling and other council members also pointed to Tuesday’s primary election in discussing concerns of the public regarding the project.
Two-term incumbent county commissioner Randy Plummer, an initial investor in the ethanol project and member of the IBE board, was defeated by former commissioner Scott Mossburg in the Republican primary.
Plummer had previously filed conflict of interest papers to disclose his involvement in the economic development project.
Cole, who has served as the county’s lead person regarding its due diligence review of the project, pointed out that there are several other parts of the project for which he does not have current information.
He was uncertain of progress of steps regarding water and electric supply, air quality permits and wastewater.
Cole pointed out that once IBE gets its financing package put together, it still will need time to work with the local governments and their bond counsel, Ice Miller of Indianapolis, on the partial local government backing of the bonds, in case of default.
The council president worried that any further delays could jeopardize the time frame for IBE’s planned construction start.
Dale said IBE was not surprised by the Central States announcement of plans for a Montpelier facility.
IBE has been aware of the possibility of a Central States project for some time and “the project is no particular concern to us,” said Dale.
There is “absolutely no concern on whether there is enough corn to go around,” said Dale.
IBE already had plans for rail access if corn should need to be brought in. Plans call for a railroad oval on the ethanol plant site that would accommodate up to 300 rail cars so loading and unloading can be accomplished without delaying other train traffic.
Since the last meeting with local government officials on Dec. 30, IBE has announced a number of key details.
Minnesota-based Fagen Inc. has given IBE a signed letter of intent to construct the turnkey facility.
The company has hired an experienced general manager, Edgar Seward of West Burlington, Iowa.
State officials have awarded up to $1.6 million in cash grants and training grants for the project, according to an announcement by IBE on April 24.
The state also is expected to help with infrastructure improvements near the proposed plant site.
A ribbon-cutting ceremony was held last week for an interim office for IBE, located at 969 N. Main St., behind the El Camino restaurant.
Dale said the Central States announcement talked about a facility similar in size to the one proposed by IBE, which will be a 100 million gallons-per-year operation. Both facilities would be among the largest in the United States.
It would take an additional 35 plants of similar size to meet the capacity needed to meet federally mandated standards by the year 2012, he said.
Total costs of the IBE project now are projected at about $160 million, according to Dale.