Wells County ethanol plant equity drive delayed

By DERRICK GINGERY, Greater Fort Wayne Business Weekly
derrickg@fwbusiness.com

Indiana Bio-Energy is delaying its search for equity investors for a proposed ethanol plant in Wells County until it can find someone to cover about $750,000 in bond payments.

The company must find someone willing to shoulder the risk for 70 percent of the estimated $3.4 million in bond payments for the cost of the plant in case the company defaults on its loans.

Wells County and the city of Bluffton already have agreed to cover part of the cost with County Economic Development Income Tax funding.

Others also have agreed to take on some risk, but about $750,000 in bond payments are uncovered, said company president David Dale. He said the official search for equity investors, initially scheduled to begin January, has been put on hold until that is resolved.

“We have to find that last part or restructure the financing,” Dale said.

The 100-million gallons-per-year plant is expected to cost about $146.8 million. It would use locally-grown corn to produce ethanol, which has become a popular fuel additive.

Construction is expected to begin in mid- to late spring, assuming the financing package comes together, and the plant could be operational by August 2007.

Indiana Bio-Energy had reserved 30 days to allow local investors to purchase a stake in the operation before it is opened nationwide.

About $36.5 million is needed from equity investors, or about 25 percent of the total cost.

Shares will be sold in $10,000 units, but the minimum investment will be $20,000.

Even though the process is on hold, Dale said he has a list of about 50 names of people who are interested in investing.

An independent financial consultant also told Wells County officials there is a viable ethanol market in the Wells County area. That eased County Council President Pete Cole's mind. Although other items, like Indiana Bio-Energy's lack of a business plan, did the opposite.

“I've never run into a situation like that before,” Cole said. “I've seen business plans for ethanol plants in (Security and Exchange Commission) fillings and they were quite detailed. I don't know what is customary in the industry.”

Dale said the company has not produced a formal written business plan because it has never been required to do so and because several aspects of the project have not been finalized, including the plant operator.

Dale said the company is in talks with a general manager, but would not release any names. He said no contract can be finalized until the financing is closed and construction is underway.

“Once we get everything nailed down we can produce a business plan if anyone wants one,” Dale said. “Most critical decisions are still under negotiation.”

The consultant's report indicated the plant's management will greatly determine its success because profit margins will decrease as more plants are built.

“Do they have a future? I think they do,” Cole said.