An embattled Buffalo Lake, Minnesota ethanol plant has now been turned over to its lender under a court order, which has left most of the creditors unpaid.
Judge Katherine Constantine, a U.S. Bankruptcy judge, awarded the Purified Renewable Energy assets to West Ventures. This is the company that financed the rebirth of the plant in 2012 after the plant had been shut down for four years. However, the revival of the plant was not a triumphant one as it experienced fires, various losses, and other issues. This halted production in March 2013.
It is not clear when the plant will resume production, but the Chapter 11 bankruptcy case was filed in March. In the meantime, the plant has remained in the condition that it could reopen.
Under the sale, West Ventures purchased the plant for $5 million, but they do not have to pay that in cash. The amount was subtracted from the over $18 million that Purified Renewable owed West Ventures. Because of this, West Ventures has taken steps to acquire the plant and condition it for reopening. Some of the bills that are owed by West Ventures also have to be addressed.
The plant, established in 1997, is one of the smallest in Minnesota, but it faltered when it was trying to restart in 2012. Part of this is due to drought inflating the price of corn. Two fires also occurred in the plant and there was an ongoing issue with wastewater compliance.
Purified Renewal wasn’t the only ethanol plant seeing problems, though.
The plant’s shutdown came as many ethanol plants throughout the United States struggled to stay in the black or open. There is one other plant in Minnesota that is still closed, but recent quarters have shown the plants turning out small profits as corn prices have leveled out.
In the bankruptcy case of Purified Renewal, West Ventures was the only company to make a bid on the plant. Another company was interested, but they didn’t submit an official bid.
However, most of the creditors are not getting anything out of the deal. Minnesota Energy is one of the big creditors. The company is a farmers cooperative that ones owned and operated Purified Renewal. It is owed over $5 million. There are also other creditors owed approximately $5 million.
Before the company filed bankruptcy, Minnesota Energy’s former managers filed a lawsuit against West Ventures, accusing the company of making threats and other wrongdoings. Those lawsuits were dismissed early in 2013. West Ventures stated that management didn’t do what it was supposed to do.
While the lawsuits were dropped, the battle in bankruptcy court is still pending.
One of the cases brought by a creditor is set for a December trial and it alleges that West Ventures breached its fiduciary duty when it declared the operation in default and seized control of Purified Renewal’s board in March. West ventures denies that it did anything wrong in its seizure of the company.