Ethanol Firm Closes On Acquisition Of Plant In Spring Hope
Posted November 14, 2006 1:17 a.m. EST
RALEIGH, N.C. — Plans to turn a massive, closed fiberboard plant in Spring Hope into an ethanol fuel refinery took a major step toward reality on Tuesday.
, which is based in New York, said it had closed on the acquisition of the sprawling 212-acre site from Carolina Fiberboard Corporation. The facility, which was used to produce fiberboard, has 200,000 square feet of factory space.
Xethanol (AMEX: XNL) paid $4 million in cash plus 1,197,000 million shares of its stock for the plant. The sellers also received warrants to buy another 300,000 shares of Xethanol stock at $4 per share.
Carolina Fiberboard, whose chairman was Vic Kramer of Spring Hope, operated a subsidiary firm called Aganol. That firm was exploring use of the facility for ethanol production. Xethanol will operate the Spring Hope operation under the name Spring Hope Biofuels.
We get to go full steam ahead now, said Doug McCullagh, the general manager for the Spring Hope facility. We will continue with our permitting, hiring of employees, and building the pilot plant. We had to wait for the acquisition to be completed.
The operation plans to use wood products to produce ethanol. The former International Paper Plant has been vacant since 1998. The facility employed 191 people when it was closed.
Xethanol, which also has plants in Iowa and Georgia, announced plans to purchase Carolina Fiberboard in August. It said as much as $50 million would be invested in the Spring Hope plant.
Since then, Xethanol has gone through two changes in management. Its stock price also plunged after a series of negative reports by a web publication operated by Mark Cuban, owner of the Dallas Mavericks National Basketball Association franchise.
Asked if the changes in management helped Spring Hope Biofuels, McCullagh said: Only to our benefit. We have leaders with impeccable records and who understand the business. We have a great management team to move forward.
The changes in management were part of the reasons for the delay in closing from August to November, McCullagh added. David Ames, a board member of Xethanol, recently also took on the role as chief executive officer of the company.
We are very excited by the closing of this transaction as it represents a further milestone in our planned expansion on the east coast, Ames said. We are encouraged by the support we have received from both state and local governments and we look forward to working with the Spring Hope community and the State of North Carolina.
Nash County awarded a special use permit for the Spring Hope plant before Xethanol purchased Carolina Fiberboard, McCullagh. Other permits are needed. Once those are secured, Spring Hope Biofuels will hire as many as 45 people, he added.
Since the technique of using wood chips for the raw materials needed to produce ethanol is largely unproven, Xethanols CEO said a prototype plant would be built first to demonstrate the technical feasibility and economic viability of the process.
One of the reasons why Carolina Fiberboard and Xethanol chose the Spring Hope facility as a refinery location is the existence of digesters for the process of wood materials.
Ames was named CEO and William Behrens was picked as chairman of the board earlier this month. They were first named to the board on Oct. 3. Behrens is vice chairman of Northeast Securities, a securities firm that has acted as a financial advisor to Xethanol when the firm raised more than $34 million in capital last spring.
Ames, a founder of a cable modem company called Convergence.com, has invested in the past in alternative fuel companies. He also is a member of the National Ethanol Vehicle Coalition.
Ames took over as CEO when Marc Oppenheimer, a board member, was not elected as CEO. Louis Bernstein, the interim CEO, also resigned. The two cited philosophical differences with other board members as the reason for leaving.
Bernstein had taken over as CEO when Christopher dArnaud-Taylor left the company in August. He had served as both chairman and CEO. His departure followed negative reports about Xethanol in Sharesleuth.com.
In a Department of Energy analysis published in 2002, cellulosic technology was cited as a key to reducing the production costs of ethanol.
The ability to produce ethanol from low-cost biomass will be key to making it competitive as a gasoline additive, the analysis said. If Department of Energy goals are met, the cost of producing ethanol could be reduced by as much as 60 cents per gallon by 2015 with cellulosic conversion technology.