Energy Company Plans to File Bankruptcy

Basehor, KSEthanex Energy is seeking bankruptcy protection after failing to raise interim financing in the amount of $1.5 million, according to a March 24, 2008 posting with security regulators.

The ethanol company out of Basehor, Kansas had at one time announced their plans to build three plants, but had ceased such actions and also put an end to an agreement in which they were to buy a small plant located in Nebraska. The company also let go three of their six officials, according to a filing made with the Securities and Exchange Commission (SEC). The officials that are still with the company are CEO Albert Knapp, Lisa Hallier, and CFO David McKittrick. The officials that were dismissed are co-chief operating officers Bryan Sherbacow and Randall Rahm and executive chairman Robert Walther.

Ethanex outlined its financial problems and discussed bankruptcy as a possibility on March 12, 2008. The company had made plans that involved building three plants. Each new plant would have been able to produce 110 million gallons of ethanol annually. Organizers had raised $20 million in a 2006 private stock offering and then made the shares available for public trading.

In January 2008, the company held a reverse stock split in which shareholders were reduced to 1 share for every 10 shares that they owned. In October, shares were trading as high as $48 per share, but as of March 24, 2008 shares had dropped 9.1 cents in OTC markets to 17 cents per share.

In November, Ethanex had changed their strategy regarding the building of three plants and decided it would be more feasible to buy a Nebraska plant that already produced 26 million gallons of ethanol a year. Their hopes were that the Nebraska plant would showcase the corn fractionation process that Ethanex said was a way to make ethanol more efficiently. The shift in the decision is said by officials to be due to changes that have been made in the ethanol market. In the middle of 2006, it was cheaper to build a facility than buy one, but when ethanol prices dropped, it became cheaper to buy than build.

The acquisition of the Nebraska plant involved a $50 million purchase, which would then be followed by two more transactions as Ethanex would expand the plant. The total amount for the acquisition and the expansion would total $170 million in cash and enough in shares to make the transaction amount total $220 million. Unfortunately, that deal would also involve Ethanex having to raise $1.5 million in interim financing while it worked to find the monies for the deal, which it failed to do.

In addition to this bankruptcy news, Ethanex is also on the complaining end of an SEC complaint that says they are the victim of an alleged scam in which one of their attorneys illegally sold unregistered shares to the public.

By Ginger Gillenwater