Kansas Ethanol Plant Faces Foreclosure
By Dan Margolies, The Kansas City Star, Mo.
May 8–Another ethanol company in Kansas has run into trouble.
The lender that financed construction of Gateway Ethanol LLC’s 55 million-gallon ethanol plant near Pratt, Kan., has moved to foreclose on the facility.
Dougherty Funding LLC, which is based in Minneapolis, agreed to lend Gateway $54.3 million in March 2006. In a complaint filed Tuesday in federal court in Kansas City, it said that Gateway had defaulted on the loan agreement.
Gateway is 62 percent owned by Orion Ethanol Inc., a publicly held company based in Pratt, which is about 80 miles west of Wichita. In an April 17 filing with the Securities and Exchange Commission, Orion said it had received a notice of default from Dougherty on April 11. The notice said Gateway had failed to make payments totaling $2.025 million and had not met various performance standards.
Gateway also secured a $7 million loan from Lurgi PSI Inc. of Memphis, Tenn., which provided design, engineering and construction services for the Pratt facility. Dougherty’s complaint says its loan is senior to that of Lurgi.
The ethanol plant began operating Nov. 5. Orion says the plant has the capacity to process more than 21 million bushels of corn and grain sorghum annually.
Gateway’s default comes shortly after Alternative Energy Sources Inc., a publicly owned ethanol company based in Kansas City, said that it would cease operations unless it comes up with funding.
In March, Ethanex Energy Inc. of Basehor, Kan., declared bankruptcy. Late last year, E3 BioFuels LLC of Shawnee, an ethanol producer with a plant in Nebraska, did the same.
Ethanol producers nationwide have been battered by surging prices for feedstock corn, the source of most ethanol, and lower ethanol prices resulting from oversupply.
To reach Dan Margolies, call 816-234-4481 or send e-mail to dmargolies@kcstar.com.
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