June 24, 2008
Heartland Ethanol Exec Says Credit Crunch Doomed Projects
By The News-Gazette, Champaign-Urbana, Ill.
Jun. 21--ROYAL -- The president of Heartland Ethanol said the credit crunch not the economics of ethanol was the main reason his company abandoned efforts to build seven ethanol plants in Illinois, including one in Royal."The main issue was the ability to finance the project with bank loans," Heartland Ethanol President Walker R. Filbert said. "That came crashing down when the housing industry had its meltdown last August. We've been digging out from that for 10 months for all businesses, let alone ethanol plants."
Heartland Ethanol had planned to build a 100-million-gallon ethanol plant on 65 acres north of Royal. But the company announced Monday it was pulling the plug on that project as well as projects in Griggsville, Vandalia, Gridley, Waverly, Ransom and Mendota.
Filbert said investors in the limited liability companies will receive a percentage of assets proportional to the number of shares they hold. Only 7.5 percent of Heartland Ethanol is owned by local investors in Pike, Adams and Champaign counties, and the Champaign County investors number "fewer than 10," he said.
As for what will happen to the 65 acres north of Royal, Filbert said Heartland Ethanol "might hold onto the property or swap with investors." But he said Heartland Ethanol's majority owners all based in the Knoxville, Tenn., area "are collectively getting out of the ethanol business."
Filbert said some Illinois ethanol plants including One Earth Energy's plant in Gibson City have gotten off the ground. As for proposed plants that haven't gotten that far, "my opinion is those are going nowhere," he said.
No bank is going to lend money for an ethanol plant unless there are circumstances that guarantee a profit, he said.
"We had been waiting nine months expecting the storm to pass, and the storm got worse," he said.
Filbert said he blamed the situation largely on Federal Reserve Board policies that he felt led to an economic slowdown and later to "craziness" in the commodities market.
Once corn broke through the $7-a-bushel barrier, "it started getting goofy," he said.
Herb Osterbur, who sold Heartland Ethanol the ground for the Royal plant, said he's farming the ground under a year-to-year arrangement with the company. He said he was disappointed by news the plant won't be built.
"I know a lot of people are," Osterbur said. "I hadn't heard anything in quite a while."
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