Virginia ethanol plant apparently headed to EnglandVirginia ethanol plant apparently headed to England
• What started as a bright and shining example of American entrepreneurship and an opportunity for Virginia grain farmers to market a fall-planted crop, is now about to be a part of alternative energy history and the beginning of a new dream for growers in Great Britain.
April 22, 2013
What started as a bright and shining example of American entrepreneurship and an opportunity for Virginia grain farmers to market a fall-planted crop, is now about to be a part of alternative energy history and the beginning of a new dream for growers in Great Britain.
The Appomattox Bio Energy Plant built by Osage Bio in Hopewell, Va., in 2010, with the intentions of buying millions of bushels of barley from Virginia grain growers, was purchased by a company from England, and may soon be disassembled and parts of the giant plant will be shipped to England for use in a British ethanol plant in northeastern England.
What started out as a grand plan for developing a market for millions of acres of cropland in the Upper Southeast, which lays barren over the fall and winter months, ended with the City of Hopewell and Osage Bio getting a fraction of what the plant cost to build.
Appomattox Bio Energy and their parent company Osage Bio Energy paid an estimated $178 million to build the plant. The new buyers, Future Capital Partners, paid less than 10 percent of the construction cost for the facility.
The revenue lost in construction cost is only a fraction of the expense of the project to be absorbed by Osage Bio.
The company fought for more than a year to find a location, often with long hours of legal support needed to make presentations, before finally settling on the Hopewell site. Only after a protracted battle with Hopewell officials, did the company secure rights to build the facility.
After the announcement was made in 2011 that the plant would be shut down and be sold to the highest bidder, more legal battles between the company and the City of Hopewell began, pushing the legal tab for the ending, some say, as high as the legal tab for establishing the project.
The City of Hopewell was finally paid$1,926,591 in back taxes from Osage. The city has also agreed to drop a lawsuit filed in 2012 against Osage after it failed to post a $5 million letter of credit to cover property taxes.
Best deal possible
Hopewell Mayor Michael Bujakowski says, “At this point in time it's probably the best deal we can get. If the plant's owners decide to take the plant apart and ship it overseas, hopefully, they will decide to sell to another company that will bring something good to Hopewell," he said.
To say the future of the giant Hopewell ethanol plant is uncertain is a big under-statement. Officials from Future Capital, a British-owned holding company, have been tight-lipped about the future of the plant.
While some Hopewell officials have said the company plans to dismantle the plant and ship most of the production equipment to England, that may or may not be the final fate of the facility, says Mayor Bujakowski.
"While the options are open as to what this company will do with the site, I have been led to believe that they, at this time, intend to dismantle the facility and ship as much of the equipment as is economically feasible to the UK to operate a plant there.
“Once this is completed, if it happens, they will look at all options for the remaining pieces of material and then re-market the site," Bujakowski says.
The City of Hopewell, banking on $2.2 million in annual tax revenues from the plant, made some difficult financial commitments that were a source of hot debate among members of the City Council, before final agreement between the city and Osage Bio was made.
In a report to the Hopewell City Council, the new buyers said, “"The LLP (Future Fuels) will acquire the plant and machinery for use in its UK property business.
“These comprise assets that will be brought to the UK and used in the LLP's construction and letting of the plant at Great Coates, a village in Northeast Lincolnshire, England.
The document, titled Project Update, revealed some insights as to the real cause for Osage Bio pulling the plug on production at Appomattox Bio Energy.
Clearly the big jump in price for barley — and other grain crops — played a significant role in the final decision to not continue with the project.
However, the British document hints that the real reason or major reason was more political than economic.
"The ABE (Appomattox Bio Energy) plant was designed to use barley as the feedstock in the expectation that this would obtain advanced bio fuels status and, therefore, offer significant financial incentives in the U.S.
Needs financial incentives
“Barley is not competitive with maize (corn, the main U.S. feedstock used to produce ethanol) without such financial incentives, and these were not granted," the document states.
The Virginia ethanol plant was scheduled to be opened in the first quarter of 2010. A fire and related production problems at the plant delayed opening.
Then, a second, more serious fire reportedly was the reason for a second delay in opening. Finally in May 2011, the announcement was made that the plant was being sold to the highest bidder.
The May 2011 announcement sent shockwaves through the Virginia farming community, because Osage Bio had already agreed, via their buyer Perdue, to purchase a large supply of grain from Virginia growers.
Many growers, recall similar bankruptcy cases in which Midwest ethanol plants were shut down, and farmers lost millions of dollars in corn delivered to the ethanol plants.
Fortunately, for Virginia farmers barley contracts were with Perdue Grains, a partner and grain buyer with Appomattox Bio Energy and parent company Osage Bio Energy.
Perdue never wavered and paid for every bushel of barley bought for use in the Hopewell Plant.
The plant was designed to produce up to 65 million gallons of ethanol per year, virtually all of it from barley.
Osage Bio became heavily involved with grain growers and with grain researchers at Virginia Tech to develop economically sound production practices and higher yielding, higher quality varieties of barley for use in ethanol production.
While a few growers invested some money in gearing up for increased barley production, most took a wait and see attitude — a conservative business approach that paid off in this case.
The end of the dream to produce ethanol from barley at the Virginia plant likely will end an aggressive research program geared up by Virginia Tech to help growers quickly boost barley production in the state.
If there is a bright side of the Appomattox Bio Energy plant for Virginia growers, it is the development by Virginia Tech researchers of several new varieties of barley.
For the most part, Virginia farmers will look at the ‘mess in Hopewell’, as some have dubbed it, as another lost opportunity for grain growers in the state to find a viable market for fall planted crops.
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