17 possible buyers: The longer GO Ethanol remains idle, the more costly the Lima plant will be to restart $150 million plant could sell for fraction of original cost

TOLEDO, Nov 25, 2008 (The Lima News - McClatchy-Tribune Information Services via COMTEX) -- GOHO | Quote | Chart | News | PowerRating -- When Greater Ohio Ethanol hits the auction block next month, the sale price could be just a portion of what the 5-month-old facility cost to build.

U.S. Bankruptcy Court Judge Mary Ann Whipple approved bid and sales procedures Monday, clearing the way for the sale of the Perry Township plant as early as Dec. 17. Nobody knows what the eventual price tag will be, but an attorney for the failed facility said it would undoubtedly be less than they owe.

"We don't know, and don't intend in this kind of setting, to say what [the selling price] will be, but it will be significantly south of $90 million, which is about the threshold of what the bank is owed, not counting its post-petition debt," said Tim Hurley, one of the attorneys representing Greater Ohio Ethanol.

Plant President Greg Kruger, speaking to the court via telephone Monday, said the value of the facility is diminished by a decline in the ethanol market and an increase in the number of plants on the auction block. In recent months, more than a dozen ethanol plants -- financed and built when corn costs were low and credit readily available -- have closed or filed for bankruptcy.

Add to that the fact that the Lima plant suffers from design flaws that have crippled production and inflated the cost of operating and the sale price for the plant could drop as low as $18 million. It cost $150 million to build.

"Right now, the economics of running an ethanol plant, even without design problems, they're ... making zero profit," Kruger said. "We have the compounded difficulty. The market itself is upside down and we also have mechanical problems."

Last year at this time, a fully operational ethanol plant would be worth about $2 for every gallon of ethanol it produced in a year's time. Had the Lima facility lived up to its 54 million capability, it would have been worth about $108 million.

A year later, the devaluation in ethanol has dropped that calculation to about $1.25 a gallon. Given the plant's mechanical problems which, resultantly, drops productions to about 35 million gallons a year, the Lima plant is probably worth less than half that.

"Our belief here is, considering all the capital that would have to be infused in it, we're looking at 50, 60, maybe 70 cents a gallon," Kruger said.

There are 17 potential buyers who have shown interest in purchasing the plant, Hurley said. They will accept bids through Dec. 15. If two or more bidders submit acceptable proposals, an auction will take place Dec. 17. The final approval of the sale will come from Whipple in a Dec. 19 hearing.

Hurley said the quick sale is an effort to increase the facility's value by selling it while it is still in what he called a "warm shutdown." The longer the plant remains idle, the more costly it is to restart. There is also a hope that a quick sale could get some of the plant's 60 employees back to work and a customer for some of the local businesses who now find themselves listed as creditors in a bankruptcy.

"Our hope is to create a situation ... where it can be operated as a business and they will have a customer to do business with and we can get people back to work," Hurley said.

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