Des Moines Register
03-18-07
Little-known Broin big in ethanol
It ranks No.2 in the industry, behind Archer Daniels Midland
By PHILIP BRASHER
REGISTER WASHINGTON BUREAU
Sioux Falls, S.D. - The word "Broin'' won't be found in the name of any of the
nation's ethanol plants, but the Broin Cos. is now a major player in the booming
biofuels industry.
Broin built and operates 19 investor-owned ethanol plants, including six in Iowa,
that together produce 950 million gallons of corn-based ethanol a year. That
makes Broin the No. 2 producer of ethanol in the country behind the longtime
industry giant, Archer Daniels Midland, which owns its plants and produces 1.07
billion gallons annually.
Four more plants that Broin is now building, including one at Corning, Ia., will
push the company's production capacity to 1.2 billion gallons. ADM is adding 275
million gallons in Illinois.
Broin soon plans to take a step to public prominence, starting in Emmetsburg, by
building what would be one of the first facilities in the world to commercialize the
production of ethanol from plant cellulose, the material that makes up leaves,
corn stalks and trees.
The company plans to start construction of the project at the company-operated
Voyager plant as soon as it can work out terms of a $80 million grant from the
U.S. Energy Department.
"Commercialization is the toughest part. It happens to be what we're good at,
making things work," said Jeff Broin, the youngest of the three brothers and now
the company's chief executive.
Unlike ADM, Broin owns a minority stake in its plants. But Broin's ascent is no
small achievement for a company started by three brothers who got into the
business after helping their dad cobble together a small distillery on their farm
from used parts.
The reason for Broin's anonymity is its business model: Broin designs and
manages ethanol distilleries while leaving most of the financial risk to banks,
farmers and other investors. Broin also markets both the ethanol and the
distillers' grains, the byproduct that the facilities produce.
Broin seeks farmer investment in plants
Broin's model allows farmers to invest in their local ethanol plant without having
to manage it themselves. Having farmer investment in the ethanol plants, in turn,
allows Broin to tap the quasi-governmental Farm Credit System, which can offer
better terms than commercial banks.
"Our partners have the best of both worlds," said Jeff Broin. In Broin parlance,
the ethanol plants are partners.
"They have the independence of being a small company in a rural community,
with a local workforce and small-company morale, yet they have the resources of
a world-class ethanol company behind them."
Roger Ginder, an economist at Iowa State University, said Broin's
involvement benefits communities by drawing private investors to a project, and
the company's management expertise helps the plants keep up with changes in
technology, a must when rising corn prices are squeezing profits.
As a private company, the company doesn't disclose how much of its own money
it invests in each plant. Altogether, the 19 Broin-run facilities have 9,000
investors who are farmers.
"It lets people share in the success of the ethanol industry," said Rick Brennan,
an agricultural lending specialist with Iowa Trust and Savings Bank in
Emmetsburg, where Broin opened a plant in 2005.
"Even after (Broin's management) fees, their return on investment is better.
They're just good at it," said Craig Brownlee, a local farmer who is on the board
of the Voyager plant and one of 270 investors who put down at least $50,000
apiece.
The $200 million Emmetsburg project would modify the Voyager facility to make
ethanol from the hulls of corn kernels and a small portion of cornfield residue,
known as corn stover. Broin said it plans to use technologies developed by two
other companies, chemical giant DuPont, which has developed bacteria to
ferment sugars from corn stover, and Novozymes Inc., a leading maker of the
enzymes necessary to break down the cellulose to sugars. Broin says it has
developed a proprietary process for separating the hull from the kernel.
The project would have another notable feature: the ability to make its own
energy - by burning the gas and solids left over from the fermentation process.
The Emmetsburg project will be watched closely because of the importance of
cellulosic ethanol to President Bush's plan for the nation to produce 35 billion
gallons of alternative motor fuels by 2017.
Broin seeks loan guarantee, subsidy
Cellulosic ethanol still has its doubters. There is no "industrial cellulosic ethanol
technology that is even remotely suitable for mass production," said Tad Patzek,
a petroleum engineer at the University of California at Berkeley.
In fact, the Emmetsburg project will be heavily dependent on taxpayers. In
addition to the $80 million grant, Broin is seeking a $137 million loan guarantee
and also is counting on getting federal subsidies for harvesting and storing the
stover. It costs about twice as much to build a cellulosic biorefinery as a
traditional corn ethanol plant of similar capacity, according to the company.
Broin, like the ethanol industry as a whole, is still a work in progress.
Construction underway on Broin's headquarters building will double its size, and
the company has doubled its staff in Sioux Falls to 200 people in the past year.
Their hires include a vice president for research and development, Mark Stowers,
who ran a biotechnology firm in Michigan and is experienced in working with
federal agencies.
Jeff Broin, 41, isn't quite comfortable yet giving interviews: "Is that too strong?"
he asks after making the statement that his plants have benefited local investors.
"I don't want to sound cocky. It's true."
His brother, Rob, is the company's chief technical officer. The third brother, Todd,
recently left the business for health reasons.
Jeff Broin said it is getting harder to find locations with adequate corn supplies for
a new ethanol project. Three of the four plants Broin has under construction are
in Indiana and Ohio, well east of where the industry developed.
"The Midwest is getting fairly saturated. It's getting difficult to find quality sites,"
he said.
The standard Broin plant produces 60 million gallons of ethanol. According to the
company, plant sites are picked so that the projects will use no more than 55
percent of the local corn.
Broin said their company has no plans to go public, as rivals VeraSun Energy
and US BioEnergy did last year, or to merge with another company.
"We have been able to raise enough capital to grow our company without
entering the public markets," he said. "We believe we'll continue to do that in the
future."