The ethanol industry had a tough 2012, said Brian Kletscher, CEO and general manager of Highwater Ethanol, LLC in rural Lamberton.
When the VEETEC (known as the blender’s credit) was eliminated, the incentive for gas stations to sell ethanol came to an end.
That compounded by a drought that hit the corn belt and slow economic recovery meant significant challenges for those who are in the industry.
The good news, though, is things seem to be changing, and Kletscher is optimistic 2013 is going to be a much better year.
One of the signs of optimism is the continuation of the move toward a renewable fuel standard that would require all fuel to include a renewable source at the 15 percent level, with a requirement of 36 billion gallons of renewable fuel being blended by 2022.
“There is definitely light at the end of the tunnel,” said Kletsch-er, adding it is good to have a challenging year in the rear view mirror as the industry as a whole looks ahead.
Highwater Ethanol, LLC is permitted to produce 59.5 gallons of ethanol per year, and Kletscher said the production rate of the Redwood County ethanol facility is in the 57-58 million gallon range – the rolling average added Kletscher must be below 57, and in 2012 the average production was 56.452 million gallons.
Kletscher said what continues to stand out in terms of production at Highwater Ethanol is its capacity to gain nearly 2.9 gallons of denatured ethanol from every bushel of corn.
That rate makes it one of the most efficient facilities in the industry, he added.
In the 2012 annual report, Kletscher stated 19.473 million bushels of corn was ground at the facility last year.
Kletscher said the corn being processed comes from area farmers, adding in the annual report management believes the corn market has been pushed up to 12 cents per bushel, which has resulted in nearly $2 million in the region’s economy through in-creased prices.
The corn, said Kletscher is of high quality, and he said that not only means good ethanol but also high quality dried distiller’s grains (DDGs) which are sold to livestock producers throughout southern Minnesota and northern Iowa.
Those feeds, added Kletscher, also include what is known as a modified distiller’s grain (MDG), which is similar to DDGs but does not go through as much of the drying process. Kletscher said Highwater currently produces more than 115,000 tons of distiller’s grains, and 25 percent of that is made up of the MDGs.
There are currently 40 full-time and one part-time employee at Highwater Ethanol, and Kletscher praised the work they are doing to keep the area facility competitive in terms of many efficiencies.
In the annual report, Kletscher said there was a net loss of more than $4 million in 2012 for the facility, which was significantly less than the $2 million net profit that was anticipated, but he said in spite of that the company is still able to reduce the overall debt and member owners were able to receive their first dividend after 2012, although Klet-scher said it was small.
Page 2 of 2 - The current capital lease on the facility is just over $15 million, and Kletscher said the facility continues to remain current on those payments.
The industry continues to research how to extract more of the quality in each kernel of corn, said Kletscher, adding recent efforts have shown the ability to pull out more of the oil during the process, which Kletscher said could be used as an additive for the feed it sells or it could be used in biodiesel production.
“We continue to look at other opportunities as they come up,” said Kletscher, adding the company continues to be in discussion with Butamax™ as it strives to develop its biobutanol as a viable re-newable fuel. “We are seeing movement, but we know they want to make sure it is right before they move forward with research.”
In the annual report, Kletscher said the company anticipates moving forward with some form of agreement with Butamax™ within the next year.
The facility is currently fully permitted at both the state and federal level.
Kletscher, who serves as the president of the Minnesota Bio-fuels Association, said the industry continues to keep an eye on issues at the state and federal level, as debate regarding increases in the required biofuels blend, including a 20 percent blend, near.
Kletscher said he knows there are going to be peaks and valleys in the ethanol industry as the years progress.
The local facility is making progress, and he is confident that is going to continue far into the future.