Breach of contract sparks concern over ethanol plant

Breach of contract sparks concern over ethanol plant
The fact that there has yet to be any noticeable signs of construction of a proposed new ethanol plant near Meckling is, by itself, a source of concern.

Something new has been added to the seemingly uncertain future of the development of the facility that is supposed to one day transform corn from local fields into 50 million gallons of ethanol each year.

Glacial Lakes Energy, LLC of Watertown announced May 23 that it has commenced a $5 million breach of contract action against Granite Falls Energy, LLC, stemming from the termination of the management agreement between the two parties.

Missouri Valley Energy, LLC, a subsidiary of Glacial Lakes Energy, is the manufacturer of the Meckling plant.

Glacial Lakes Energy, LLC is also the largest single member owner of Granite Falls Energy, LLC, holding approximately 20.9 percent of the membership units issued and outstanding for Granite Falls Energy.

Tom Branhan, CEO of Glacial Lakes Energy, refused to answer questions when contacted by the Plain Talk Wednesday afternoon.

There has been talk that recent wet weather has played a role in the delay of the start-up of building at the Meckling site.

According to Missouri Valley Energy's Web page, a focus on construction activities in Aberdeen also has shifted attention away from the Meckling construction.

Last August, people interested in investing in the new local ethanol plant were told that dirt work was scheduled to begin in the fall of 2006.

The plant was expected to be built and up and running by early 2008.�

According to the May 23 press release, Glacial Lakes' breach of contract action was filed with the American Arbitration Association under the arbitration provisions of the management agreement between the parties.

Glacial Lakes Energy seeks approximately $5.3 million in damages for payments for past services rendered as well as future payments under the contract.

"We managed the construction of that project under budget and ahead of schedule, and brought that plant on-line during a period of unmatched profitability in the ethanol industry," Branhan said in the press release. "We simply do not believe Granite Falls Energy had a basis to terminate the management contract."

"We believe Granite Falls Energy should honor the agreement they made when they asked for our management assistance and $6.5 million equity investment, plain and simple," said Jon T. Anderson, chairman of the board of Glacial Lakes Energy.

Glacial Lakes Energy expects the arbitration action to generate a sharp response from Granite Falls Energy, "but we intend to follow through on this" Branhan stated in the press release, "because we believe we were wronged."

The arbitration will be conducted in front of arbitrators selected by the parties, and the action is expected to take up to 12 months.

Glacial Lakes Energy constructed the first 40 million gallon ethanol facility built by Fagen, Inc., in Watertown. It is now a wholly-owned subsidiary of Glacial Lakes Corn Processors, a 3,900+ member cooperative.

Glacial Lakes Corn Processors is currently expanding its Watertown facility to 100 million gallons of production capacity, and is also constructing a new 100 million gallon per year ethanol production facility in Mina near Aberdeen.

In addition to the Meckling site, Glacial Lakes Corn Processors (through Glacial Lakes Energy) is developing a plant near Madison, MN. Besides its ownership ofGranite Falls Energy, Glacial Lakes Energy owns approximately 8 percent of Redfield Energy, LLC, a recently-completed ethanol facility in Redfield.

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