Farmers Cooperative, Omaha-based Gavilon seek liquidation of Ravenna plant for debt repayment

Source: By Russell Hubbard, Omaha World-Herald • Posted: Wednesday, February 10, 2016

Drama in the global biofuel industry a continent away has reached its way over to Omaha and west to the small Nebraska town of Ravenna.

In Spain, a global ethanol producer called Abengoa SA is in financial trouble. Some think the company will soon file for bankruptcy, which would be the largest such filing in the history of Spain.

Among the company’s assets: an ethanol plant in Ravenna, a town of 1,400 people about 30 miles northwest of Grand Island.

What’s that all got to do with Omaha? Plenty.

The Ravenna plant bought corn to refine into ethanol from both the local Farmers Cooperative Association and Omaha-based grain-trading giant Gavilon.

Together last week, Gavilon and Farmers Cooperative threw the Ravenna plant into involuntary Chapter 7 bankruptcy. Chapter 7 of the bankruptcy code is the section that asks for a judge’s permission to liquidate a debtor’s assets to generate cash for repayment to creditors. The petition filed in U.S. Bankruptcy Court in Omaha says Gavilon is owed about $2.3 million and Farmers Cooperative $362,000 for grain sales.

Both Farmers Cooperative and Gavilon, a unit of Japanese conglomerate Marubeni, declined to comment on the filing.

But Abengoa SA, the court bankruptcy petition says, has filed pre-insolvency papers of its own with the Spanish authorities and ceased operations at its plants because it is “unable to pay for the grain needed to continue operations.”

Further, the Gavilon/Farmers Cooperative filing says, it is feared that “any remaining equity” in the Abengoa operations “will be dissipated” or sent to Spain to help the parent company with its problems, which include $9.7 billion of debt.

Abengoa so far hasn’t made a filing in response to the involuntary bankruptcy, a tool available to creditors when a company has been systematically avoiding its debts.

In a statement emailed to The World-Herald, Abengoa SA said it is working with creditors on a financial reorganization. It said it continues to own and operate 16 plants worldwide. They include an ethanol plant in York, Nebraska.

“We are aware that there has been an involuntary bankruptcy filing in the U.S. against the Ravenna, Nebraska plant, and we are evaluating many options in responding to that filing,” Abengoa said in the statement.

“At the same time we are working to manage and operate our U.S. facilities in the most efficient way possible during this time period.”

The company is a large concern, with 24,000 employees worldwide. In addition to producing biofuels such as ethanol, it makes equipment used in the energy and water utilities industries and designs and builds energy and industrial plants.

In 2014, the company’s American depositary receipts traded on the Nasdaq market approached $30 a share, seen as a promising investment in a company on the fore of green energy production.

But problems have ensued, including high debt and the construction of a costly new plant in Kansas designed to create ethanol from waste products such as stalks and leaves. The U.S. securities now trade for about 87 cents per share on Nasdaq as Abengoa is said to contemplate bankruptcy in Spain.

Todd Sneller, administrator of the Nebraska Ethanol Board, said the problems are indicative of financial troubles at one company, not within the ethanol patch itself.

Nebraska is the second-largest producer of ethanol, behind Iowa, with 25 plants, Abengoa’s included.

“I see considerable interest by other parties in acquiring the assets of Abengoa in Nebraska,” Sneller said. “This financial failing is not attributable to the biofuel sector, but rather the state of the economy in Spain and the ongoing downturn in the energy sectors in which Abengoa has invested on a worldwide basis.”