CVEC prepares to double its production capacity

Product diversification, employee education are key factors in Chippewa Valley Ethanol Company's long-term strategic plan
By | February 01, 2002
Considering Chippewa Valley Ethanol Company's landmark performance in 2001, it came as no surprise when the Benson, Minn.-based cooperative signed 240 new investors last fall and, within weeks, comfortably raised 45 percent of the equity it needs to double its nameplate capacity. Soon, CVEC will join Corn Plus and EXOL as Minnesota's third 40-plus mmgy ethanol plant.

When Ethanol Producer Magazine visited CVEC late last month, the coop was moving forward with the expansion, even as the state was considering cutting its ethanol producer payment by 10 percent (see article on page 9) and ethanol prices nationwide remained marginal. CVEC General Manager Bill Lee said the cooperative's 18-person board has a unique vision for CVEC and believes the time to invest in the plant's future is now, while the industry is expanding at a record pace.

"Together, we have prepared CVEC both offensively and defensively," Lee explained. "A good company readies its offense in good times and takes a strong, defensive position when markets aren't so favorable. An ethanol plant must be able to walk through the valleys of pain and survive. We want CVEC to be strong enough, and diversified enough, to do that."

Certainly, CVEC is among the nation's most progressive dry-mill ethanol plants. While last year's ideal grind margin (high ethanol prices coupled with low corn prices) had the greatest impact on CVEC's profitability, the cumulative effect of continued improvements in operational efficiency - new records in production, yield and energy efficiency - was significant to the plant's bottom line as well.

Expansion project
For several months, Lee said, the CVAC board and CVEC plant managers discussed various expansion alternatives and associated levels of risk. A key factor in the group's final decision was, in fact, President Bush's denial of the California waiver and other supportive market trends that surfaced last year. In August 2001, the cooperative's shareholders voted "overwhelmingly" to expand the number of shares the cooperative could issue from 12 million to 20 million, and in doing so, endorsed the board's plan to proceed with CVEC's expansion. The cooperative's equity drive has already raised nearly half of the total cost of expansion, Lee told Ethanol Producer Magazine. Most new investment dollars came from existing shareholders, which are still mainly farmers.

Beginning in March, CVEC will begin its expansion. Design-builder Delta-T will provide the process design; Delta-T built CVEC in 1996 and, at one time, had an ownership stake in the plant before it became "100 percent co-op-owned," Lee said.

As reported in The Energy Independent newsletter in December, Adrian Galvez, formerly Delta-T's director of engineering, has been hired by CVEC as a technical manager. Galvez, a respected engineer and 22-year veteran of the corn processing and ethanol industries, will oversee most aspects of CVEC's expansion.

"With the expansion," Galvez said, "CVEC will integrate design techniques that are very similar to Delta-T's original design. Again, it will be a zero-process affluent design. . . I can also say we will be installing a thermal oxidizer."

Expanding and upgrading the plant is nothing new at CVEC. Among other projects in 2001, a sixth cooling tower cell was added to the plant, providing additional cooling for the fermentation process in warm weather, helping CVEC maintain higher production rates.

"Diversification" and "innovation" are more than just clich buzz words at the Benson plant. The cooperative is clearly committed to increasing the diversity of its operation as a "key strategy" towards building long-term performance.

"We're not going to sit still," said Kelly Davis, CVEC quality manager. "We want all kinds of products coming out of this plant, not just fuel alcohol."

Glacial Grain Spirits (GGS), the cooperative's industrial alcohol division, is in integral part of CVEC's long-term plan to market diverse products. GGS produces an alcohol that is within a specialty niche market, Lee said. "And it's our highest value product," he added. The cooperative recently installed a drumming operation in its load-out facility capable of filling 55-gallon drums. CVEC, along with its industrial alcohol partner, Corn Plus, commissioned the commercial expansion of the GGS facility last winter, and began production again in April. In September 2001, GGS also began selling denatured alcohol. The co-op now produces four different types of denatured alcohol and plans to expand its line further, as market conditions for these products are expected to improve, Lee said.

Co-products & marketing
CVEC's DDGS is effectively marketed in dairy, beef and poultry applications (with increasing efforts being pursued in the swine market) both in Minnesota and out of state. The plant also produces wet distiller's grain and condensed distiller's solubles. CVEC takes great care in achieving co-products with a high degree of specificity, and it has paid off. The plant has customers on the West Coast that solely request their DDGS, Davis said.

CVEC is a founding member of Renewable Products Marketing Group, LLC, a company formed by Minnesota ethanol producers to cooperatively market ethanol. Other members include Corn Plus, Denco, Heartland Corn Products and Al-Corn. Together they market well over 130 mmgy, making it the biggest marketing block of Minnesota ethanol producers.

Educating for the future
CVEC was instrumental in developing the Process Plant Technology Program at Minnesota West Community & Technical College in Granite Falls, Minn. The first students to complete the program recently graduated and two of the recent grads are now employed at CVEC as utility operators.

The Process Plant Technology Program was born as a partnership between the college, Minnesota Corn Processors of Marshall, CVEC and the state of Minnesota to produce trained technical workers for the agricultural processing industry.

Mitch Miller, CVEC's manager of operations, said he helped start the program not only to help CVEC build a skilled work force locally, but also to better train existing employees.

"Almost all of these graduates will be picked up by ethanol producers or other local industries, Miller said. "The program gives these students the tools they need to contribute to the industry sooner and it puts their careers on a fast track."

The fact that CVEC and other industries have been extremely cooperative in developing and operating the program demonstrates their hunger for trained technical personnel. American Crystal Sugar's Moorhead facility examined the curriculum and has reportedly asked to become a partner in the program as well. And Fagen, Inc., a Granite Falls, Minn.-based design-build firm, has expressed interest in program graduates to work in the start-up phase of its newly-built plants.

Giving students the skills they will use in their future careers is an important element of providing a technical education, Miller explained.
CVEC's partnership with Minnesota West Community & Technical College is another example of its progressive company philosophy: "(CVEC is). . .a socially responsible company committed to honesty, integrity and respect in its relations with customers, fellow employees, suppliers and its local and global community." The co-op and its board share a vision that looks far beyond today's market, and into the future of ethanol production. On behalf of the industry, we commend their efforts and wish them continued success.