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Farmers likely to lose their money in Canton ethanol plant

Posted December 12, 2007 10:00 pm

Brenda Rothert

Farmers who staked money in the embattled Central Illinois Energy ethanol plant likely will lose their investments, an attorney for the company said Wednesday.

"I think they're out of the money," said Barry Barash, the Galesburg attorney hired to help guide the board of directors for the unfinished plant outside of Canton. "I don't see any way to (finish the plant) outside of Chapter 11."

Initially billed in 2001 as a $40 million project, the cost of the plant south of Canton has since skyrocketed. After additions and delays securing financing, the cost when ground was broken in October 2006 was $94 million.

So far, according to Barash, close to $130 million has been spent on the incomplete plant. He estimates another $25 million will need to be borrowed to finish it, which he said is a top priority.

If the plant's board of directors files for Chapter 11, everyone involved in the project, including contractors who have filed more than $30 million in liens against the plant, will come to the table and negotiate, Barash said.

Around 50 plant employees are uncertain about their future after being told Monday to stop reporting to work. State Rep. Mike Smith, D-Canton, said employees have called him and said they've been terminated.

"Now they're out of work two weeks before Christmas," he said. Smith said he is arranging informational training for the employees and helping them apply for unemployment benefits.

Smith has also been working with the Illinois Department of Agriculture to protect the grain that farmers have delivered to the plant and not been paid for. The farmers will be paid under state law, he said.

"Unfortunately there's no protection like that for the financial investment," he said.

Some farmer investors in the project, who invested a minimum of $5,000, said Wednesday they are in the dark about what's going on with the project.

"That's what we figured," one farmer said when told investors stand to lose their money. Earlier reports indicate there are nearly 400 farmer investors in the project.

Wednesday morning, the Central Illinois Energy Web site listed eight members of the board of directors. Only one of those - Jay Sutor, is still on the board, Barash said. Many have resigned recently. Sutor and two other people, Suzanne Ginger and Jarrod Smith, make up the entire board now.

Ginger declined to comment Wednesday. Sutor and Smith did not return calls for comment. The Web site had been taken down by afternoon.

Last weekend the board asked for and received the resignation of general manager Mike Smith, who had been leading the plant since its formative stage. The board hired Moglia Advisors, a Schaumburg company, and Barash, who has experience with bankruptcy and reorganization. Brent King, a Moglia employee, has been named reorganizational officer of the plant.

"Hopefully Moglia and Brent King will be able to put some discipline and structure in it, which is what it needs," Barash said.

The project's main contractor, Lurgi PSI, had problems with licensing technology that increased costs and caused delays, Barash said.

The plant, which is on a 280-acre site 3½ miles south of Canton, has no rail transportation right now, Barash said, due to a dispute between the owner and the lessee of the rail spur adjacent to the plant about whose responsibility it is to repair it.

"If we started producing product, we wouldn't be able to get it out," Barash said.

It's likely too late for the investors in the project, but Barash said finishing the plant can still yield positive results.

"I think it helps the community eventually," he said, conceding that right now, "It's a mess."

Reach Journal Star reporter Brenda Rothert at (309) 686-3041 or state@pjstar.com.

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