Glacial Lakes Energy sells shares of ethanol plant; terminates management agreement

By Erin Voegele | August 10, 2009
Report posted Aug. 26, 2009 at 5:40 p.m. CST

Glacial Lakes Energy LLC recently announced the company has completed the sale of 2,000 units of its ownership share in the Minnesota-based ethanol plant Granite Falls Energy LLC to Fagen Inc. Glacial Lakes Energy is a subsidiary of Glacial Lakes Corn Processors and part owner of the Granite Falls Energy ethanol plant.

According to information released by Glacial Lakes Energy, the company originally entered into a Membership Unit Purchase Agreement with Fagen in Dec. 2008. Under that agreement, Glacial Lakes Energy agreed to sell the 2,000 units to Fagen subject to customary closing conditions and was initially slated to close on the sale anytime during a seven month period concluding on July 4. Until that time, Glacial Lakes Energy reserved the right to sell its entire ownership interest (6,500 units) in Granite Falls Energy and terminate the agreement with Fagen. The July 2009 deadline was extended to allow for a later sale date.

"We explored all of our options to sell the GFE units as one block," said Glacial Lakes Energy CEO Jim Seurer. "However, due to the downturn of the ethanol market, acceptable offers from interested buyers were in short supply. There are many other opportunities for those interested in investing in ethanol facilities to own an entire plant. In the end, it became difficult to compete with these opportunities at what our board would consider a fair price. After exhausting all of our leads, our board agreed to release the shares to Fagen Inc. as there is no reason to prolong the sale."

Prior to the sale, Glacial Lakes Energy owned 21 percent of the Granite Falls Energy ethanol plant. Now that the sale is complete, the company retains approximately 15 percent ownership in the facility.

According to Marcy Kohl, Glacial Lakes Energy's executive assistant, Glacial Lakes Energy currently intends to maintain ownership of its remaining interest in the ethanol plant. However, she also said that if a potential buyer made an offer that the board considered a fair and acceptable price, the company would consider liquidating its remaining ownership in the Granite Falls Energy facility.

Glacial Lakes Energy, in conjunction with Redfield Energy LLC, also recently announced that the two companies have mutually agreed to terminate their management agreement effective Aug. 31. Glacial Lakes Energy currently owns 8 percent of Redfield Energy.

The five-year management agreement originated when the Redfield facility was constructed in 2005. With less than one year remaining on that agreement, the board of directors of each company agreed that it was in the best interest of both entities to move from the existing management agreement to a more independent operation for Redfield Energy. According to information released by Glacial Lakes Energy, both companies have indicated a desire to continue cooperating in many areas. Redfield Energy will determine what level of support services, if any, are needed while Glacial Lakes Energy is willing to provide certain non-competitive services as needed.

"We want to continue to explore the advantages of our working together and, at the same time, recognize that the Redfield employees are a very capable and dedicated group," Seurer said. "We have many common shareholders and believe this is a win-win for both companies. As we discussed and worked through the final transition year, both boards wanted to find an arrangement that fit the needs of both companies and we believe this accomplishes that objective."