John Bryant tried to convince farmers in Northwest Indiana to invest in an ethanol plant for months during 2002 and 2003.
It wasn’t an easy sell.
“First of all, we don’t do that every day,” said Bryant, who is board secretary for Iroquois Bio-Energy Co. LLC. “If I had to write a book about it, I could tell you what not to do. But the problem we ran into with farmers is they’re cash-poor cause they’re out running the land. They can’t afford to dump $50,000 or $100,000.”
But last September, the company broke ground for a $65 million ethanol plant east of Rensselaer.
Now, the world has drastically changed since Bryant was courting farmers.
Just ask Ron Miller. As head of ethanol producer Aventine Renewable Energy Inc., he also raises money to build ethanol plants, but is courting a decidedly different crowd of investors.
In mid-February, Miller attended a meeting in New York with Aventine directors who work for Metalmark Capital LLC, a spinoff of Morgan Stanley Capital Partners. He hardly sounds stressed out when it comes to pitching ethanol on Wall Street.
“I think if we come up with reasonable deals, yeah, the money will be available,” he said.
In the past year, federal energy regulations and the rising price of oil have spurred an investment boom in ethanol plants, bringing unprecedented levels of private equity into an industry once characterized by farmer-owned co-ops.
Of 42 new ethanol plants under construction nationwide, only six are farmer-owned, according to the Renewable Fuels Association trade group. That’s a stark contrast to the ethanol boom of the 1990s, when farmer-owned co-ops built more than half of all new plants, according to the Federal Reserve Bank of Kansas City.
The investment shift could have far-reaching affect on who owns the ethanol production industry, an issue of particular interest to farmers. The network of plants and refineries is seen as a beacon of economic hope in rural America, where the traditional pillars of agriculture and manufacturing have lagged.
Bryant says he wishes more local farmers could have invested in the project, but the timing was off.
They were able to raise $25 million for the estimated $65 million to $70 million project, but couldn’t have started construction without a financial partner.
The company snagged financial help from New Energy Capital, an East Coast corporation that specializes in renewable energy projects and ethanol is one of them. The company owns majority control in this project.
“Our timing was just off,’’ Bryant said. “Hindsight is 20-20. I’d love to be in right now. You could have a monkey running the ethanol plant and you’d make money.”
The plant will produce ethanol, an octane booster alternative to MtBE, Bryant said, as well as carbon dioxide and corn mash. The corn mash will be available as a high-protein, high-fat livestock feed for area dairies.
Bryant says if the local farmers could have begun building the ethanol plant in 2003 or even 2004, it would have already paid for the construction.
He describes the project as “about three years too late.”
Right now, construction is going well and the plant is slated for startup in February.
Bryant says that without New Energy Capital’s financing, construction wouldn’t have begun. But others view the financial industry’s role in ethanol plants as a “double edged sword.”
“We obviously want to see the industry succeed, and it is going to take lots of effort and lots of different groups and different resources,” said Geoff Cooper with the National Corn Growers Association. “At the same time, we’d like the money that’s invested in these plants to stay in these rural communities.”
Institutional investors stayed out of the business because they had seen ethanol production grow and collapse in the 1980s.
That changed in the late 1990s when ethanol demand increased, driven in part by federal laws requiring gasoline to contain cleansing additives. The true investor sea change came in August, with the passage of the 2005 Energy Policy Act, experts say. The bill set a new standard requiring the U.S. to use 7.5 billion gallons of renewable fuels by 2012, including ethanol and other fuels like biodiesel.
The Associated Press contributed to this article.