Moses Lake ethanol plant seeks partners

Liquafaction hopes to be producing in 2008

MOSES LAKE - A still-in-the-works expansion of an existing Moses Lake facility into an ethanol production plant is looking for a new partner.

Carl Brannen, Vice President of Engineering at Liquafaction Corp., based in Redmond, Wash., said the money required to build out the Moses Lake plant, located at 720 Road N N.E., is about $5 or $6 million.

"We don't have that," he said.

The company has about $16 million in equipment, which was obtained by buying and selling used equipment.

"We could go ahead and get the other $5 million by doing the same thing," Brannen explained. "But it would take us another year to get it set up. By then, the ethanol price could have dropped some, and we would have missed out on such a good phase for ethanol."

Eventually corn and ethanol are going to be balanced in price, and it's going to be harder to make good money at distillation, he said.

"This is a golden time for distillers," he said.

An ideal partner would be someone who wants to have a hand in the operation of the plant, Brannen said.

"At Liquafaction Corp., we're engineers," he explained. "We'd love to, when we're done with this plant, go to work on building another and not have to worry about the day-to-day management."

The plant is offered for sale at a price of $21 million plus 50 percent of the debt funding on eBay, but Brannen said that site is just to get attention.

"Really, for something like this, you'd have to go into detailed negotiations," he said. "How much debt we would have depends on what amount we borrow from a bank and how much equity we've sold. If we've sold enough equity, there's no reason to take on any debt. However, we are applying for a bank loan, and it's possible we'll get one of those loans before we sell any equity. It's also possible we will get enough borrowed that we don't need to sell any equity and we will keep sole possession."

But in getting the plant fully funded by borrowing, if something went wrong, Brannen notes, the bank could take the company owner's property and homes away.

A Liquafaction-owned plant in New Mexico was originally supposed to produce 6 million gallons of ethanol per year, Brannen said.

The company purchased the parts to bring the Moses Lake plant up to where it produces 12 million gallons a year, including equipment not included in the original plant.

"Moses Lake is a perfect spot for an ethanol plant for several reasons," Brannen said. "It has cheap electricity, it has a good market for distiller's grain and it's close to a place where ethanol is used, that is to say, Washington state."

Ethanol is a hazardous material and expensive to transport over large distances, Brannen explained.

"For that reason, ethanol is more expensive in Washington than it is in the Midwest, where most ethanol is produced," he said. "For several years, there will be an inadequate number of railroad tankers for moving ethanol. Ethanol just cannot be put into a pipeline gasoline is put into, ethanol is difficult to move."

The company has about 30 acres, which includes three sites -the distillation plant, a warehouse and a site to receive grain from the Midwest an entire train at a time.

"Our plan is to upgrade that so that it can unload the train faster, so we can use unit trains, which are 110 cars long, in 10 hours," Brannen said. "It reduces the cost of corn if we have to import from the Midwest instead of local growers."

But the first step is to get the main plant capable of producing 12 million gallons of ethanol per year.

The company has a purchase contract for the water right to industrial water.

Brannen said the facility, which is not currently in production, although there are about 12 people working on the site, should have about 30 employees.

"We hope to be producing a great deal of ethanol in 2008," Brannen said. "The plant also has air and water permits to run with barley, as well as corn, so if the corn market goes high enough, we will shift to barley, which can be grown without irrigation water over the land which is not being used in Eastern Washington right now."

There is a great deal of misinformation about the economics of ethanol, Brannen said.

"Large companies are losing money in ethanol because of their high corporate overhead," he said. "We want to be a small company that is efficient. Ethanol plants in the Midwest have trouble because of the high cost of transporting ethanol and their distiller's grain markets are saturated. In addition, our plant will be more economic because it is built from cheaper equipment. Liquafaction Corp. installs equipment as well as buys and sells equipment, we have no doubt we can reassemble that."

The company has ethanol experts from around the United States consulting and acting as partial owners of the plant, Brannen added.

"Ethanol is important to the future of the country, for the farmers in Moses Lake who produce, I believe, the largest amount of corn per acre in the U.S.," Brannen said.

For more information, access the Liquafaction Web site at www.liquacorp.com.