Ethanol plant may squeeze farmers again

Brenda Rothert

Farmer shareholders who lost thousands of dollars in a bankrupt ethanol plant outside Canton are getting letters this week telling them they'll have to pay more.

HWS Energy Partners, the Champaign company that built a water treatment plant at the ethanol plant site, wants members of the defunct Central Illinois Energy Cooperative to make good on a lease agreement - to the tune of hundreds of thousands of dollars.

"It's like a slap in the face," Fulton County Farm Bureau Director Elaine Stone said Thursday. "It's not realistic to ask these stockholders to put up any more money after they've lost everything."

Central Illinois Energy LLC was first proposed in 2001. It took several years to get financing, and ground was broken in October 2006. There were 400 shareholders then, and 365 were farmers, who committed both money and corn to the project by purchasing stocks for $5,000 per share and signing corn supply agreements.

In December 2007, construction on the nearly complete plant stopped when contractors left the job site because they weren't getting paid. Millions of dollars in mechanic's liens were filed, and the plant's board of directors declared bankruptcy within a few days.

Shareholders lost all their money with the bankruptcy filing. The plant's assets were bought earlier this year by a consortium of banks that originally financed the project, which was proposed at $94 million when construction started. At the time of the bankruptcy filing, $130 million had been spent.

HWS Energy Partners built a water treatment plant at the site, intending to lease it to the ethanol plant.

In letters sent to CIE Cooperative shareholders this week, HWS attorney Douglas Slayton said HWS was supposed to enter into an agreement with Central Illinois Energy LLC, the now-bankrupt entity. But one of the lenders for CIE LLC objected to the agreement, which called for a monthly payment of $24,166.67 to HWS from CIE LLC for at least 11 years. The payments would have repaid HWS for its costs of construction on the water treatment plant.

Instead, CIE Cooperative, the group of 365 farmer shareholders, agreed to assume responsibility for the payments, promising to pay up to $72,500 per quarter.

HWS filed a civil lawsuit Sept. 11 in Fulton County Circuit Court, seeking $435,000, the amount of payments now due.

Robert Vohland of Farmington, the former secretary of the CIE Cooperative board of directors, sent a response to the suit that said all the board members have resigned, and there is no money to pay the debt. The CIE Cooperative's bank accounts total $2,319, according to court records filed Tuesday.

On Oct. 21, Judge John Clerkin awarded a default judgment to HWS for $435,000. No one from CIE Cooperative came to the hearing.

Now HWS is asking each farmer shareholder to pay the company $1,500 per share purchased in Central Illinois Energy LLC by Dec. 1. After that, the company will seek $2,000 per share.

"I don't plan on paying it," said one farmer who asked that his name not be used. He said he didn't get any notice of the recent hearing but probably wouldn't have been able to attend even if he had.

"Not too many farmers are going to take the time to go to court in the middle of the harvest," he said.

In his letter to shareholders, attorney Slayton said the company may seek another $290,000 per year from the farmer shareholders for the next 9 1/2 years. Slayton pledged the company will "remain resolute" in efforts to make the farmers pay.

"If necessary, these efforts will continue for several years," he said.

Brenda Rothert can be reached at (309) 686-3041