Financial struggles force layoffs at Beatrice Biodiesel
By Joelyn Hansen/Daily Sun staff writer
Thursday, Jun 05, 2008 - 09:46:04 am CDT
Financial struggles and delays in project completion forced Beatrice Biodiesel LLC to lay off 10 employees from the plant Wednesday.
Bud Cummins, U.S. Canadian Biofuels Inc. chief executive officer, said the layoffs were due to a several-month struggle to meet financial obligations, significant setbacks in the project last fall and problems with finding an investor or buyer.
Beatrice Biodiesel LLC is a wholly owned subsidiary of U.S. Canadian Biofuels. “The personnel at the plant are loyal, highly skilled, well trained and familiar with this particular plant and with the unique Axens technology we are using,” he said. “Together, we view these employees as a significant asset of the plant, and for that reason we made every effort to keep them together until the plant could be started up.”
Approximately nine employees will continue at the plant after Wednesday’s layoffs.
Beatrice Biodiesel was set to begin production this past winter, but the plant has faced several setbacks in construction and in the biofuel industry as well as failed attempts to gain working capital. All of this has contributed to delays to start-up, Cummins said.
“We’ve been up against a lot of things to get this plant in production,” Cummins said. “Hopefully, we can find a partner or buyer that can provide some capital. At this point it’s a struggle to keep our plant in operation.”
Construction problems have included the two reactor vessels that arrived on the job four months late, Cummins said. When they arrived, they were found to be defective and repairs proved to be costly and time consuming.
He said this compounded previous cost increases caused by certain errors and omissions by third party contractors.
At the same time, the renewable fuels industry began to suffer nationally as the cost of feed stocks skyrocketed, he said. This past year the cost of soybean oil, the main feedstock Beatrice Biodiesel is designed to use, more than doubled, making the purchase price of the commodity substantial.
Plant officials were attempting at one point to bring in new technology to the plant that would allow for use of other feedstock alternatives, Cummins said.
“We are working to develop new business plans that work better in this environment,” he said. “Right now we lack the capital to make those modifications.”
In the sub-prime mortgage crisis, credit markets tightened and Beatrice Biodiesel has encountered difficulty securing financing to absorb cost overruns, Cummins said.
In January, U.S. Canadian Biofuels’ Australian parent, Agri Energy Limited, reluctantly agreed to a sale. However, the sale failed to close, leaving the biodiesel company with bills to pay, little cash and few options, Cummins said.
In the past few months several outside groups have attempted to put together a purchase of the company, but none has been successful, he said. Negotiations surrounding at least one conditional offer are ongoing as market conditions become more favorable for the business.
“We’re still doing everything we can to find a suitable buyer,” Cummins said. “Not only find a right owner for the plant but to protect our creditors.”
The biodiesel’s project lender, Home Federal Savings, agreed to release certain collateral and additional funds through a Protective Advance loan to finish plant construction with the goal of increasing the value of the plant and also to increase the likelihood of a sale, Cummins said. With this agreement the lender has put off foreclosure until June 30.
“By June 30 we hope to have some committed transaction to put off foreclosure,” Cummins said.
Construction still continues at the plant, however. Plant officials are hoping that by July 31 all of the substantial construction will be completed and they will be able to start production by fall.
