Friday, April 16, 2004
The developer of a proposed ethanol plant in Cape Girardeau couldn't convince corn farmers to invest in a similar venture in Marshall, Mo., and has had trouble securing financing for both projects.
Developer Phil Danforth, who lives in an upscale Kansas City suburb, has proposed building an ethanol plant in Marshall that would produce 30 million gallons of ethanol. Ethanol plants produce grain alcohol which is added to gasoline to make a cleaner-burning fuel.
So far, all Danforth has to show for his plans is a 28.8-acre tract of land he purchased from the north-central Missouri city in late December for $115,000.
Farmers, skeptical of Danforth's financing plan, have elected to build their own 40-million gallon ethanol plant now under construction at Malta Bend, Mo., about 10 miles north of Marshall. The plant, scheduled to be in operation by March 2005, will employ 35 to 40 people. It is being built by a Minnesota contractor who has constructed other ethanol plants.
Danforth is the retired chief of security for a jewelry company, according to Roy Hunter, director of economic development for the city of Marshall and Saline County. He has never built an ethanol plant but continues to push his projects.
He said he's ready to start constructing the Marshall plant "any time" but refuses to be pinned down to a specific date or month and bristled at questions about the financial viability of the Marshall and Cape Girardeau ethanol projects.
"I will not be chastised in the press," Danforth said Thursday before hanging up on a reporter who called his Leawood, Kan., home.
Three years ago
Danforth, who has set up a corporation called Renewable Power, proposed the ethanol venture in Marshall more than three years ago. Even while plans for that venture lagged last year, he managed to convince the Cape Girardeau County Industrial Development Authority last November to approve documents allowing for the issuance of up to $250 million in industrial bonds. The industrial development group's action gave Danforth legal permission to have a financial firm market $250 million in industrial bonds to investors to finance construction of a 40-million-gallon-a-year ethanol plant and a related 15-megawatt power plant on land in the Nash Road industrial park.
Clifford Rudesill, a member of the seven-member Industrial Development Authority, said the board met with Danforth and was convinced that the developer was ready to proceed with the project.
"Supposedly everything was lined up," Rudesill said. "Then we found out later that wasn't true."
Said Rudesill, "You hate to be misled on it."
In January, Danforth told local officials and civic leaders at a meeting in Jackson that it would cost an estimated $150 million to develop the two plants in Cape Girardeau and that construction could take up to 18 months.
Danforth has yet to buy the 32-acre site south of Nash Road for the ethanol plant project or the adjacent ground needed for the power plant.
Rudesill said the Industrial Development Authority by state law deals with bond financing for non-profit projects such as hospital expansions or for construction and expansion of manufacturing plants in the county.
The board is appointed by the county commission. Members serve six-year staggered terms.
Applicants pay a $1,250 fee to the Industrial Development Authority as part of the funding process. Danforth paid the fee, Rudesill said.
The Industrial Development Authority board doesn't investigate a developer's finances because there's no risk to the county, the IDA or taxpayers, Rudesill said.
It is up to the developer to find a company to buy, market and retire the bonds. The risk is to the investors, he said.
The Industrial Development Authority board assumes developers are telling the truth, Rudesill said. "We take them at their word."
Danforth insists he has the financing to proceed with the Marshall plant and has entered into a contract with a financial firm for the Cape Girardeau venture.
Cape Girardeau County industrial recruiter Mitch Robinson, who meets with the Industrial Development Authority board, said earlier this week that Danforth had yet to secure financing for the Cape Girardeau project.
"The financing is the critical point," Robinson said.
Unlike Danforth's project, Mid-Missouri Energy's ethanol plant under construction at Malta Bend is a 100 percent farmer-owned venture. Its owners are 729 corn producers from more than 40 counties in Missouri whose investment amounts to about 42 percent of the $62 million cost of the project.
Loans from banks and a major agriculture lending company are providing the other funding.
In addition, the Saline County Commission last year voted to give Mid-Missouri Energy property tax breaks for 30 years through the issuance of Chapter 100 bonds that will be retired by the company.
Patty Kinder, project coordinator for the Mid-Missouri cooperative, said Saline County farmers initially talked of entering into a partnership with Danforth to build an ethanol plant a few years ago, but they soon parted ways.
"He had the idea but didn't have the funding," Kinder said.
Corn farmer Ryland Utlaut grows about 1,500 acres of corn on the family farm about 5 miles from the developing plant. Utlaut is chairman of the board of Mid-Missouri Energy and one of the key organizers of the venture.
Utlaut and other farmers quickly tired of dealing with Danforth, he said. "He has told us one thing after another. I developed an uneasy sense of his credibility."
Danforth was all "big hat, no cattle," Utlaut said.
He was surprised Danforth found the financing even to buy the Marshall property. Danforth bought the land a few months after he held a groundbreaking ceremony on the site.
Since then, little has happened at the site. "There are some stakes out there, but no dirt work has been done," Utlaut said.
In contrast, construction is well underway on the 75-acre Mid-Missouri Energy site. Crews poured the first concrete in December. To date, about 80 percent of the concrete has been poured.
Kinder said the project is assured of a good supply of corn because its investor farmers agree to deliver a certain amount of their crop to the ethanol plant. Each $10,000 investment carries a commitment to deliver 5,000 bushels of corn to the plant annually.
"We will use about 15 million bushels of corn a year," Kinder said.
A bushel of corn will yield 2.8 gallons of ethanol, 18 pounds of dried distiller grains for livestock feed and about 17 pounds of carbon dioxide.
Hunter, the economic development official in Saline County, thinks Danforth's $50 million project in Marshall can succeed and that there is enough corn to fuel both ethanol plants.
He's not surprised by the delays. "Getting a general agreement is easy, but getting the fine points worked out takes forever," Hunter said.
Still, he said, he'll feel more confident about the project once construction starts.
As for the Cape Girardeau project, Utlaut offers a word of caution. "I wouldn't be expecting it to come real quick," he said.
335-6611, extension 123