E3 BioFuels auction set for December

By Craig A. Johnson | November 11, 2009
Report posted Nov. 18, 2009, at 2:49 p.m. CST

The E3 Biofuels LLC ethanol production facility in Mead, Neb., will be auctioned off on an "as-is, where-is" basis according to court documents released November 9. The auction will be held Dec. 11, with bids due on Dec. 2.

E3 filed for Chapter 11 bankruptcy protection in late 2007 and began seeking investors for the 25 Mmgy facility. Unfortunately, E3 was forced to seek investors during 2008, when corn prices were at their peak and investors were scarce and the company was unable to secure the capital it needed to continue operating.

Rob Carringer of CRG Partners Group is the Chapter 11 Trustee in the case and CRG will be assisting in the sale. According to Mike Juniper, director of CRG Partners, "We expect to sell it to someone who wants to operate it as a plant. The bid is going to be for the plant as a whole."

According to the company's bankruptcy filing, E3 listed $10 million in assets and $73 million in unfunded liabilities. No one knows how the much the plant will fetch, but the design may be an asset for the sale. "There's been some market values established for ethanol plants from some recent sales with other entities that have gone bankrupt," Juniper said. "This is a novel application of an ethanol plant with the biogas component and we're just hoping for a good outcome."

Juniper anticipates receiving interest from a variety of potential buyers. "The majority of the interest has been from strategic buyers—people who own an ethanol plant or run one—but there has been some interest from financial buyers as well," Juniper said. "We have plenty of interested bidders, so I think we'll have a good auction."

E3 was plagued from the start by mechanical problems and inadequate startup capital, which exposed the company to substantial risk. The plant was designed as the first "closed-loop" facility powered by methane gas from an adjacent feedlot. While the design did prove the concept, difficulties with the plant's technology proved insurmountable and the plant only produced ethanol sporadically over the course of a six-month period.

"I think it'd be a shame that somebody would come along later and think about building a plant [with a similar closed-loop concept] and think ‘well, it never worked in Mead'," Juniper said. "There are still some bugs to work out, but the design does make a lot of sense."