A bright ‘Bioenergy’ future
Big fund drive paves way for ethanol plant at Heron Lake

By RAHN LARSON

Bob Ferguson, chairman of the Heron Lake Bioenergy board, weeded out words like "proposed," "projected," and "possible construction" as he started discussing the region’s new 50-million gallon ethanol plant.

"We are definitely in a position where the project is definitely a go," Ferguson said, speaking from the equity standpoint.

Milt McKeown, another board member, added that if all goes well the plant is expected to be in operation by June of 2006.

Although the fund drive started with informational meetings in July, the vast majority of funds didn’t start arriving until the prospectuses went out, about four weeks before the Oct. 20 phase 1 deadline.

Ferguson added that one of the big assets of this plant, from an investor’s standpoint, is the fact that it will be powered by a state-of-the-art "clean coal" technology, rather than natural gas.

"We asked at a lot of meetings, what was their intrigue," Ferguson said. "Their intrigue was that this will operate by coal."

Based on current costs, Heron Lake Bioenergy officials estimate the savings on coal, over natural gas, will be $7 to $8 million per year.

McKeown added that he has heard a number of positive comments about the fact that this plant is not only providing a domestically-produced fuel source, but is also being operated by a domestically-produced fuel.

Meanwhile, Heron Lake Bioenergy is entering phase 2 of the fund drive, meaning investors can still get a 5% share bonus if they sign up before Dec. 14. (The previous incentive was a 10% share bonus.)

Total equity stands at $28 million, with a projected goal of $38 million. But Ferguson and fellow board member Milt McKeown said they aren’t concerned.

The project’s general contractor, Fagen Inc. of Granite Falls, will contribute to the project. Plus, Ferguson said it’s likely that current investors will increase their stake, and it’s possible that additional new investors will climb on board before the Dec. 14 deadline.

At this point, there are 744 investors for the project and the average amount is $35,000, with a $20,000 minimum.

Investors were asked to put 10% of their investment into escrow, with the remaining funds due sometime in February/March 2005.

The next step
Meanwhile, Ferguson and McKeown are looking forward to a very busy winter, as preparations begin for the new plant.

The most important hurdle remaining is the approval from the Minnesota Pollution Control Agency. Ferguson and McKeown noted that the Heron Lake Bioenergy staff has been in weekly contact with the organization.

To date, every one of the MPCA’s requests have been met. In addition, McKeown noted that officials from the MPCA made a site visit a few weeks ago, which included a public forum. He added that it was a very successful event.

The time line anticipates an MPCA permit to arrive sometime in February. But Ferguson noted that there are no guarantees things will move that quickly.

Meanwhile, Heron Lake Bioenergy officials are busy getting other details in place. Now that the equity drive is nearing the end, there will be meetings with at least three potential lenders for the project.

In addition, organizers will soon be lining up grain procurement agreements with area elevators. There have been discussions with five elevators and two of those have already committed to the project.

Ferguson said it’s possible that as many as four elevators will eventually sign procurement agreements.

One other task awaiting the board is the hiring of management positions. Ferguson expects that to occur a month or two after a lender has been identified.

The goal is to have all of the key details in place by the time the MPCA hands down its permit for the project. That way, construction can begin as early in the spring as possible.

"We would like to start construction on March 1," Ferguson said.

Positive feedback
Both McKeown and Ferguson said the project’s support should be taken as a very good sign.

"I have been impressed with the response we got from our equity drive, not only from producers but also private investors," McKeown said. "And we’ve seen tremendous support from local investors."

Ferguson added that the project has attracted investors from across the entire southern half of the state.

"It is astounding to see the response from places like Mankato, Rochester and all across the state," Ferguson said. "It’s been huge."

Ethanol Project Facts

• Initial project cost estimate: $ 97 million.
• Plant capacity: 50 million gallons per year.
• General contractor: Fagen Inc. of Granite Falls.
• Area grain purchases: 18 million bushels of corn per year.
• Other production: 160,000 tons of distillers dried grains with solubles per year.
• Expected employment: 38 full-time workers.
• Estimated starting wages: $10 to $14 per hour.
• Estimated first-year payroll: $1.8 million.
• Construction expected to begin: Spring of 2005.
• Estimated construction completion: June of 2006.
• Estimated equity drive completion: December, 2004.