Having failed to raise $1.5 million in interim financing, Ethanex Energy Inc. plans to seek bankruptcy court protection, according to a posting Monday with securities regulators. The Basehor, Kan., ethanol company, which at one point announced plans to build three plants, said it had ceased operations and ended an agreement to buy a small ethanol plant in Nebraska. It also dismissed three of its six officials, according to the filing with the Securities and Exchange Commission.
Helge: All new things are not immediate successes. Ethanol production capacity is growing but this will be the play ground for big companies with solid financial backing.
Ethanex had suggested bankruptcy as a possibility in a March 12 filing in which it outlined its financing problems. According to the filing, Ethanex dismissed its executive chairman, Robert Walther, and its co-chief operating officers, Randall Rahm and Bryan Sherbacow. Still employed are Chief Executive Officer Albert Knapp, Chief Financial Officer David McKittrick and Lisa Hallier, whose title was not known. "Knapp could not be reached," writes the Kansas City Star.
Helge: Should this be compared with the RG in Finland?
The company originally planned to build three ethanol plants, each able to produce 110 million gallons of the gasoline additive a year. Its organizers raised $20 million in a private stock offering in 2006 and then registered the shares for public trading. Shares dropped 9.1 cents in over-the-counter markets Monday to 17 cents a share. The company had held a reverse stock split in January in which shareholders were reduced to one share for every 10 they held. At their height in October 2006, shares traded above $48, when adjusted for the reverse split.
Helge: Quite a downturn. What is the reason?
Ethanex had shifted strategies in November, agreeing to buy and expand the Nebraska plant that produces 26 million gallons a year. It hoped the plant would showcase Ethanex’s corn fractionation processes that it said would make ethanol more efficiently. Officials said the shift followed fundamental changes in the ethanol business. Ethanol prices soared in mid-2006, making it cheaper to build than to buy a facility. That changed as ethanol prices dropped, and Ethanex shifted its strategy.Helge: Is the technology evolution so fast?
The Nebraska deal involved a $50 million purchase of the existing plant, followed by two additional transactions as the plant expanded. In total, Ethanex would pay $170 million in cash and enough Ethanex shares to bring the total to $220 million. But that, too, would depend on Ethanex raising $1.5 million in interim financing while it worked to fund and complete the deal, which it was unable to do. Ethanex also was identified in an SEC complaint as one of several corporate victims of an alleged scam in which an attorney representing the companies illegally sold their unregistered shares publicly.Helge: Need to take a closer look at this.
There was a comment in Kansas City. "I work for that small ethanol company in Nebraska, The Ethanex Group had great intentions and would have been very successful in the ethanol industry. It's unfortunate that financing could not be done..."