Tuesday, April 22, 2008

A Missed Investment Opportunity

“We wanted to give this signed offering memorandum to you, as a remembrance of what you missed,” Clarence Schutte told me as he and Randall Matheny gave me a 2002 offering for 15 million shares of stock in Lincolnland Agri-Energy, a 40 million gallon ethanol plant that was started that year in Palestine, IL. More later in the blog on what my non-investment cost me!
I was there for a tour of the plant and town and to do a talk sponsored by the Palestine Public Library. Sue Lockhart, head librarian, has developed a program called “Looking Within”, to encourage the community to look within themselves to build upon the skills and talents of those within the community to help encourage more economic growth in the town. Part of the program is aimed at former residents who are starting to move back home to retire close to their roots.

I took a tour of Lincolnland Agri-Energy with board member Robin Guyer, who also runs Bunker Hill Supply, a fertilizer, chemical and seed retailer in the area. He talked about getting the plant started, “We started up the plant in 2004 with 453 investors. It was a tough sell at the time but we had one local person who stepped forward and put us over the top. We made a 100+% return on investment in the first 18 months, but are now down to about a 15 to 20% return which still isn’t bad but doesn’t look as good when you compare it to that first year and a half. We used those early returns to pay off all of our debts and returned the entire investment to those 453 investors.”

Robin went on, “What makes me proudest is how the entire community worked together to make this project happen. Even those who didn’t invest in it have been supportive and our builder told us that it was the easiest plant to get started that they’ve been involved with.”
Lincolnland has continued to plow money back into the plant, growing from an initial storage capacity of 400,000 bushels to 2.8 million bushels. Consuming 50,000 bushel/day means that they can now store 58 days
of their needs compared to only 8 days when they started. They’ve also been able to increase production from 40 million gallons rated capacity to over 50 million gallons.

Robin explained the current economics of ethanol to me, “$6 (per bushel) corn isn’t causing us any problems. At 40% of that, or $2.40/gallon for ethanol, we are able to make about 15 to 30 cents per gallon.”

From my untrained eye, it looked like the plant is selling everything they are producing. There were tanker trucks lined up waiting for the next batch of ethanol to be sent to the storage tanks which were dry and the DDG pile (the feed by-product) was tiny. The plant is going to be one of the first in the country to begin separating out corn oil, which will be used for biodiesel. The plant is also going to begin using 10% of its energy needs from local methane production being drilled with horizontal drilling technology.

The plant has had a very positive economic impact upon the local and regional economy. Thirty seven high paid people work at the plant, local farmers are selling their corn at a premium and local gas producers are going to begin to sell what used to be a by-product. How did I ever miss this investment? Don’t you want to kick yourself sometimes?

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