IEDC to fund Wells County ethanol plant up-front

By DERRICK GINGERY, Greater Fort Wayne Business Weekly
derrickg@fwbusiness.com

Indiana Bio-Energy LLC has negotiated an unusual deal with the state that could lead to upfront funding for its proposed ethanol plant in Wells County - something state officials had avoided.

State officials have shied away from issuing bonds or giving up-front funding to ethanol plants, preferring to offer tax credits and training grants once the operations are up and running. Tax credits and training grants have been offered to other proposed ethanol operations.

But the Indiana Economic Development Corp. has agreed to a deal that could include some up-front funding for Indiana Bio-Energy, assuming the company can raise enough money in its equity drive.

IEDC spokesman Weston Sedgwick said the deal is not a new policy. He said the IEDC decided to change Indiana Bio-Energy's incentive package because local residents are driving and helping finance the project, rather than large agriculture corporations.

Sedgwick also said the company indicated up-front funding would be more useful to them than tax credits.

“The amount they are foregoing in those tax credits is probably $5 million more than we ended up putting in the offer letter,” Sedgwick said.

The IEDC has agreed to match dollar-for-dollar all equity investment raised over $34 million, up to $1.5 million.

One-third of the amount would be paid upon the close of financing and beginning of construction. One-third would come after the first year of operations and the last $500,000 would kick in after the second year of operations.

The final two payments would be contingent on the company meeting certain production, wage and employment levels.

Sedgwick said the IEDC would require the funding be paid back if the company does not meet goals or fails after a certain amount of time, just as it would with any other incentive package.

Indiana Bio-Energy also would forego all other incentives offered, except training grants that combined could equal as much as $98,500.

The proposal was outlined in an April 20 letter from IEDC president Mickey Maurer that was released by Indiana Bio-Energy President David Dale.

The Indiana Bio-Energy plant plans to produce 100 million gallons of ethanol a year and create a net of 61 new full-time jobs with an average wage of $14.87 an hour.

Construction of the $155 million plant could begin this fall after crops are harvested and last 18 months.

Indiana Bio-Energy met with IEDC officials in May last year to talk about raising $20 million to $25 million in bonds for the project. At that time the IEDC said the state was not interested.

In November, Indiana agriculture director Andy Miller said the state did not want to guarantee the bonds because it preferred to wait and see if the plant was viable on its own. He also said the state had tried to connect Indiana Bio-Energy to some private investors.

Dale said the change of heart came because IEDC recognized the Wells County project was different from ethanol plants planned for other parts of the state.

“We believe that the up-front money is due to IEDC's recognition that our grass-roots project differs significantly, in terms of economic benefits to the community, from the projects being built by the likes of Cargill and The Andersons,” Dale said in an e-mail.

The Andersons Inc. is building ethanol plants in Albion and Clymers and Cargill is part owner of a plant under construction near Linden.

The equity drive for investors for the plant is ongoing, and Indiana Bio-Energy officials are restricted now by Securities Exchange Commission “quiet period” rules. Company officials temporarily are forbidden to promote the company or the sale of its securities.

Dale said in an e-mail that the quiet period is expected to end in June.

The Wells County Council and Bluffton City Council have agreed to cover $800,000 of annual bond payments for the project if Indiana Bio-Energy cannot pay them. County Economic Development Income Tax (CEDIT) revenue would be used in that case.