A buyer has approached bankrupt VeraSun Energy about taking over the company’s ethanol plants, though details of the potential deal aren’t being released. VeraSun is Iowa’s largest ethanol producer with plants in Albert City, Charles City, Dyersville, Fort Dodge and Hartley. All five are operating today.
Timothy Fox, executive director of Charles City Area Development Corporation, says the number of employees has been scaled back, though, from last year’s levels. "There’s still steam coming out of the stack. They’re still producing. As far as I can tell, they have a minimal supply of corn," Fox says of the Charles City plant. "They’re not storing any corn. They’re buying corn and producing it as they get it."
In 2003, Fox and others in Floyd County started talking with VeraSun about building a plant in the area and in 2006 VeraSun bought land the county owned that’s near the Avenue of the Saints Super Highway. "They constructed (the ethanol plant near Charles City) in 2006. At that juncture, of course, we were very pleased," Fox says. "They were a good employer. They paid all their vendors and things were going well."
VeraSun buys corn from farmers in a roughly 30-mile radius of each plant, including the plant in Floyd County that Fox of the Charles City Area Development Corporation is watching. "Our task is to see that the plant stays open, the people stay employed, that all the agreements that VeraSun committed to are complied with by the new buyer and that we have an outlet for our producers to deliver corn," Fox says.
VeraSun found itself caught in a financial vice when corn prices spiked after this spring’s floods and the company recorded losses in the last quarter that were nearly half a billion dollars. "I think it’s always been kind of our assumption that the larger a company grows, the bigger mistakes it can make, but when you have one input and you make a very dramatic mistake hedging and buying corn, that’s disastrous," Fox says. "What we’re attempting to do here is to restore confidence from the producers that they’re going to have a reliable outlet for corn, that contracts are going to be honored and that they’re going to get paid."
VeraSun was founded in 2001. In June of 2006, it went public when corn was cheap and refiners were clamoring for more ethanol. When corn prices soared this summer, VeraSun and other ethanol producers tried to control costs by signing hedge contracts for corn purchases. But by October 31st of this year, the company had filed for bankruptcy.
John Kramer is president of the Development Corporation of Fort Dodge and Webster County, where VeraSun operates a plant. "Obviously, the hedging and the price of corn — what they were paying — is what got them into the situation that they’re in," Kramer says. "But we have seen in the past a very progressive VeraSun looking at developing alternate sources of profit other than just producing ethanol, using some of their byproducts."
Kramer sees that kind of diversification as key for the ethanol industry. "Extracting the corn oil, extracting the glycerins, taking out the fibers and other things to give the companies like VeraSun…multiple profit centers, not just ethanol," Kramer says.
VeraSun’s corporate headquarters is in South Dakota and the company operates 16 biorefineries, including the five ethanol plants in Iowa.