Archive for Wednesday, April 2, 2008

CEO: Market turmoil sealed fate for Ethanex

April 2, 2008

The hopes of becoming the low-cost ethanol producer and a billion-dollar company have fizzled for Basehor-based Ethanex Energy Inc.

The company decided to file for Chapter 7 bankruptcy last week, listing $1.85 million in assets and $848,661 in liabilities.

Equity to carry out the company's original plan to build three ethanol plants in the Midwest - one each in Cape Girardeau, Mo., Waltonville, Ill., and St. Marys - could not be obtained.

"I think the simple answer is that the financial markets are just upside down right now," former Ethanex president and chief executive officer Al Knapp said. "They are really in turmoil."

The publicly traded company began two years ago after a large increase in ethanol prices at the beginning of 2006.

"Corn was the cheapest it had ever been and ethanol was skyrocketing," Knapp said. "There was a land rush for people to build ethanol plants."

However, Knapp said Ethanex officials were aware the surge would not last, which was why the company planned to focus on improving the efficiency of ethanol production through the use of lower-priced fuels and a reduction in the amount of energy needed to make ethanol.

Even with the different approach, Knapp said it quickly became apparent Ethanex would not be able to come up with the estimated $300 million needed to build the three plants and decided to cut back its original plan to focus on just the Waltonville plant. When the $100 million needed for just one plant looked as though it wasn't going to pan out, company officials again re-evaluated their strategy.

"Our latest effort was to buy a plant rather than build," Knapp said. "It took us awhile to find one that was willing to sell for a reasonable price."

The company then decided to work toward purchasing an existing plant in Sutherland, Neb.

"We figured we needed $67 million, and that wasn't to be had either," he said. "We continually downscaled our plans to try to adjust what we could do in the marketplace, and the marketplace just wasn't supportive at all."

With the price of corn rising to more than $5 a bushel in the past two years and ethanol continuing to fall to under $2.50 a gallon, Knapp said Ethanex was "definitely held captive by the capital market."

The company made the decision to file for bankruptcy and Knapp resigned March 26. All 11 employees either resigned or were dismissed in the weeks leading up to the bankruptcy filing on March 27. A trustee was appointed to pay the assets and bills then distribute the rest to shareholders.

Knapp called the unsuccessful efforts disappointing, but with his passion for the ethanol industry, he said he would eventually like to continue the efforts elsewhere.

"I have been contacted by a number of companies that have an interest in talking to me about ethanol, but I've been more concerned about each of our people (former Ethanex employees)," he said. "I want to make sure everybody gets settled."

"What we proposed would have drastically changed the economics of corn-based ethanol," he said. "I would still very much like to see the technology that we developed at Ethanex implemented, and at this point it's up for grabs."

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