GRANITE FALLS - Fagen Inc., the Granite Falls industrial contracting company that made a name for itself by building more than 60 percent of all ethanol plants in the United States, is set to continue its success in the industry by building its first plant abroad in Dunafldvr, Hungary.
During the ethanol boom Fagen Inc. was the leading manufacturer of Ethanol plants, but as the commodities market halted the demand for ethanol in recent years, Fagen Inc. was forced to diversify its renewable energy offerings.
"The ethanol industry came to a halt about a year ago," Ron Fagen said. "We had to recreate ourselves after the ethanol industry cratered."
With corn prices on the rise and oil prices falling, Fagen Inc. moved into constructing biomass power plants and wind farms. Currently, the company is constructing the country's largest single-boiler biomass power plant in Texas with another in the works in Florida.
One of the last ethanol plants constructed by Fagen was built in Mason City, Iowa. The plant received interest from international investors who contacted Fagen inquiring about the possibility of building an ethanol plant in Europe.
Initial plans called for the plant to be built in Croatia, but regulatory hurdles and a disorganized government caused the program to fall through. The Croatia plans were scrapped and a new plan developed to place a plant in Hungary.
"It was too difficult to pin their government officials down and it was tough to do any planning as rules and regulations in the country could not be pinned down." Fagen said of Croatia. "The Hungarian people are rock solid and want to have another market for their corn."
As the project progressed Fagen received requests from other European countries expressing interest in building ethanol plants. With interest expanding, Fagen Europe, a satellite company based in Budapest Hungary, was formed to provide a European presence of Fagen, Inc. Montevideo native Chad Core, a long-time employee of Fagen Inc., moved to Hungary to head up the new office.
Ron Fagen himself has stayed close to home to build his business. As a Minnesota native, Fagen said his goal is to keep as many jobs local as possible. Rather than export jobs overseas, Fagen plans to build 75 percent of the plant in the Granite Falls area and ship it piece by piece to Hungary.
"We're taking our expertise to Europe. We're not only exporting technology, we're exporting our manufacturing capabilities to Europe," Fagen said.
Fagen Inc. employs approximately 250 people in the Granite Falls area. The goal, Core said, is not to built a europeanized ethanol plant, but to build an efficient American plant in Europe.
"In every aspect we want it to be a carbon copy of a American plant," Core said. "We are not Europeanizing anything we don't have to."
Exporting an American built plant to Europe is not without challenges. The plant is being built in U.S. dimensions (feet and inches) instead of the metric system used in Hungary, so everything will have to be annotated with metric measurements. In addition, the operating system in the plant and employee training will use both English and Hungarian.
"We have lots of translating to do," Core said. "It will be not only annotated with the metric equivalent, but all of our design and drawings have to be checked off by Hungarian authorities for regulations."
Hungary was chosen as the site for the new plant based on its prominence in European corn production. The countryside of Hungary looks similar to southwest Minnesota, Core said: dotted with corn fields.
"Hungary is a leading producer of corn within the EU (European Union)," Core said. "They normally produce between 6 and 10 metric tons of corn per year."
The ethanol plant being built would use approximately half a million metric tons of corn when running at capacity. Currently, Hungary only uses 3 to 4 million metric tons of corn annually with the rest going to the export market. In past years, the country has produced more than the export market could hold.
"In the last nine or 10 years they received an EU intervention with a price guarantee to pull that corn off the market," Core said. "The EU has since said that '09 is the last year."
The market potential for ethanol plants in Europe has improved since the European Union signed a law earlier this year that mandated 5.7 percent of fuels must be composed of a biomass. Several ethanol plants exist in Europe, Fagen said, but the majority use barley and wheat - a more costly and less efficient alternative to corn ethanol.
"Corn ethanol plants are the most efficient thing there is to make ethanol," he said.
The plant is being constructed on the coast of the Danube river adjacent to a Cargill corn storage facility. Corn from the countryside is shipped by rail or truck to the facility to be loaded on boats and sold to the export market. The plant being built by Fagen Inc. will capitalize on that available corn.
"We're building one small silo and a milling tower with a conveyor that goes right into Cargill," Core said. "So we should not ever run out of corn."
The current timeline calls for the plant to be operational in 21 months, but Core said he hopes they can get it completed sooner.
"We don't know how quickly the work is going to be completed by Hungarian subs," he said. "We are functionally thinking that our startup procedures will start in the spring of 2012."
Once completed the plant is expected to provide 77 direct jobs and additional indirect jobs, such as trucking and sales positions, in the region.
"The benefit to the local community will be enormous for the small community and the area around it," Core said. "It's a feel-good project."