Ord Talk

First one in the pool!

Well, well, well. I see the recession/ depression and I choose not to participate. I hear the drumbeat of the sheeple and I choose not to dance. The piper is demanding his due and the fat lady is warming up in the wings of the Health Spa on the Hill. Wheeeeeee! What a ride!

Here is a likely scenario for the ethanol plant here in Ord. Vera Sun owns 16 plants, 14 in production and 2 almost in production. Only 2 of the 14 plants are 50 million gallon plants; the rest are 110mmg plants. Based upon reviewing past audited annual reports and 10K’s, the Ord plant was one of the most productive plants in the entity. Now Chapter 11 is good for two purposes; one is to keep the 14 plants operational until they can get out of the cash crunch that put them in Chapter 11 Bankruptcy in the first place. The second is to keep the 14 plants operational and staff in place so that management can negotiate a sale of the assets to a third party with the approval of the secured creditors (bondholders). Even if VeraSun goes into Chapter 7, I anticipate that financing will be found to keep the employees employed and in the area so that operations can commence after the sale of assets is complete.

You ask “Who would buy these ethanol plants”? Well lets just say that the plants were built for a $1 and now is not cash flowing with the financing on that dollar. So someone comes in “more than likely a private equity firm” or a oil company like BP, Chevron or Exxon Mobil and buys the company for .50 cents on the dollar. Now the cost of capital is reduced so that plants can operate on a much smaller ethanol to corn gross margin.

Now if you think that this new plant will just send all its staff away and never be in production again is just not a realistic view on the ethanol industry. Congress has mandated that so much ethanol (36 billion gallons?) be produced by 2012 that I don’t think that the Department of Energy is going to let 16 plants that produce 1.5 billion gallons of ethanol sit not producing.

The only real losers here are the common stock shareholders. Even if the company goes on, more than likely the bondholders will wipe out the common stock and start over. You ask who these common shareholders were? They are the local business people, farmers, ranchers, etc that wanted this plant to come to town in the first place. The people that you think “benefited” from the ethanol plant all had a vested interest that is now worth nothing. They took a risk with their own money on this facility. They are also the same people that are and will be investing their own money into the new hospital bonds issues. On a side note, I do find it very amusing that you have already “foreseen” that the hospital bond issue is going to make its way to the tax rolls in the near future. If you have that kind of foresight, I would love to know where the DOW Industrials are going to be at next year this time.

Anyway, I highly doubt that the people on this website saying “I told you so” has ever invested one dime or hour into trying to create jobs for this community. You stand on the sidelines and tell the Economic Development Board, City Council and County Board that you are watching. Well that is all you are doing is watching. Maybe you should ask these boards how you can help as a community member instead of judging their decisions with 20/20 hindsight. It is inherently tough to attract businesses and jobs to small town America without the naysayers such as yourselves. Please prove me wrong by being a volunteer for a community organization or attend the meetings and try to make a difference by asking yourself “What can I do to help this organization to create jobs and growing infrastructure in this community so that our children will have a community that they can be proud of.

Yours truly.

As much as I would like Privy to be right about how it all works out, the ethanol business and the direction of goverment just doesnt look as promising as it did a few years ago for "corn-based ethanol". US produced ethanol fuels yes, but the advancement in other areas of fuel production has just been more successful. Here is a link to an article that may give you an alternate idea of how and where things are headed. Note the restrictions on corn based ethanol mandates and the safety in transportation issue. Unfortunately, it hits pretty close to home.

qteros-25m-funding-and-15x-improvement-yields-cellulosic-ethanol

story.asp

This sounds promising.