Community investments helped launch plant
By Steve Thompson, Assistant Editor
lacial Lakes Corn
Processors Cooperative
shows just how successful
a farmer-owned ethanol
operation can be when
conditions are right. Located in
Waterton, S.D., Glacial Lakes was
begun for much the same reasons as
many others: with only
one elevator in town,
corn producers didn’t
have a good market for
their crop.
Adding value by turning
their crop into
ethanol seemed to be
the best answer to
chronic low prices. So
11 local farmers decided
to take on the risk, and
founded the cooperative
in September 2000 to
start an ethanol operation.
After hiring a general
manager and a manager
to oversee construction
of the plant, Glacial Lakes signed up
two firms with proven track records in
building ethanol facilities. ICM of
Colwich, Kan., was chosen to design
the plant, using its own proprietary
technology, in cooperation with Fagen
Inc., of Great Falls, Minn., which
would build it.
Fagen and ICM had worked together
on a number of previous successful
projects-- starting out building power
plants and later getting into ethanol
production-- and they had excellent
reputations among ethanol producers.
ICM also has a successful grain merchandizing
operation, through which it
markets the byproducts of ethanol distillation:
distillers grains and liquid
stillage for livestock feed.
Struggle for funding
As usual for new business ventures,
the stumbling block was financing. The
plant was projected to cost $54 million,
and to obtain financing from lenders,
the co-op needed to raise at least $20
million. Even the smaller amount was
far more than local farmers could come
up with. The co-op looked into partnerships
with corporations and other
entities, but soon ran into issues over
who would control the operation.
Says Tom Branhan, the current general
manager, The problem was, they
wanted management of the plant as
part of the deal. The co-op members
weren’t ready to accept being, as they
saw it, passive spectators in their own
operation.
The alternative was raising the
funds from individuals, not necessarily
farmers-- but this meant moving
away from a strict farmers’ co-op
model. The co-op began an equity
drive in March 2001, making available
shares of common stock in a new entity:
Glacial Lakes Capital, LLC.
To keep the venture from becoming
a South Dakota firm in name only,
ownership of shares was limited to residents
of the state, and the equity drive
concentrated on members of the local
community. While the success of the
plant promised a boost to the area,
raising funds among local residents was
much more difficult than more conventional
ways of financing.
It meant making sales pitches to
hundreds of people, many of them on
an individual basis, and
many of whom could not
afford to risk very much of
their capital.
But the community
came through. In the end,
Glacial Lakes raised the necessary
nest egg through sales
of stock to more than 825
residents of the surrounding
area. In June 2001, the co-op
and the LLC agreed to
merge and formed Glacial
Lakes Ethanol, LLC.
Construction began the following
month. The plant
began operations in August
2002, and has operated consistently
above its rated
capacity of 40 million gallons per year,
providing a welcome head start on
retiring the operation’s debt.
Lessons learned
Are there things they would do differently
if they had to do it over? Yes,
says Branhan. Most of them have to do
with changes in the layout of the plant
to improve traffic patterns and loading
of trucks. There are things that could
have been done differently to make the
plant more user friendly, make it easier
to keep clean, he says. But he wouldn’t
change the mechanical design. We’ve
got no complaints about that. Ron
Fagen still questions me about the
operation of the plant so they can
improve their future designs.
With the plant in operation, the
original goal of the co-op seems to
have been fulfilled: the comparative
local price for corn has risen significantly.
And while some ethanol operations
may be experiencing difficulties
because of the general rise in grain
prices over the past year, Glacial Lakes
Ethanol has benefited from futures
positions it took earlier.
In any case, member farmers sell
their corn to the plant even when they
can get a couple of cents more per
bushel elsewhere. I didn’t think it
would happen, says Branhan, but
people around here feel like they have
real ownership of this operation.
It’s that local ownership that has
made the difference for Glacial Lakes.
