South Bend, Ind., hopes New Energy will restart

By Susanne Retka Schill | February 25, 2013

Two auction liquidators got a deal when they successfully bid $2.5 million for the 102 MMgy New Energy Corp. ethanol plant in a bankruptcy auction Jan. 31. The two successful bidders were Maynards Industries, based in the Detroit area, and Biditup Auctions Worldwide, Los Angeles.

The new owners aren’t saying whether they plan to liquidate the plant, but locals are hoping there is a chance that they will arrange for a new operator. Ethanol producers in the region, however, aren’t expecting that to happen as the current negative margin environment that is expected to continue for some time is making current operators very cautious. The age of the coal-fired plant and potential environmental permitting issues related to the use of coal and possible water issues, would add to the hesitancy, an ethanol industry insider noted. While the location near Chicago would be an advantage because of its proximity to markets and rail transportation, it most likely was a disadvantage this year. The drought-driven short corn supply has hit many plants on the fringes of corn country, and likely put the northern Indiana New Energy plant at a disadvantage for corn sourcing this year.

Indiana’s longest-running ethanol plant, New Energy began operating in the mid-1980s and had been upgraded to produce 100 MMgy by 2006. The company was put up for sale and the workforce reduced by 25 percent in mid-2011, at which time Russ Abarr, president, said the owner and his family decided that New Energy no longer fit their business plan.

In early November, the company announced it was idling, with the hope of restarting when margins improved. At the time, Abarr recalled a layoff in the mid-1990s due to an economic downturn. “Ninety-six was a pretty challenging year with the corn crop, corn prices,” he told Ethanol Producer Magazine. “Everybody was terrified that corn actually reached $5 a bushel. Most people would be thrilled if it got down to $5 a bushel now.”   A week later, the company filed for Chapter 11 bankruptcy which culminated in the Jan. 31 auction.

Kevin Allen, reporting for the South Bend Tribune, wrote that the winning bidders were seeking an operator for the plant. He also wrote about the potential impact on the local economy if the plant does not reopen. The plant typically had employed 85 to 90 people with a payroll of about $7 million, he wrote, paid local taxes totaling nearly $600,000 in 2012 and purchased about 35 million bushels of corn annually, worth more than $240 million at current prices. The company represented nearly half of the revenue the city’s wastewater treatment facility received from industrial users, and 7 percent of the city’s total wastewater revenue.