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Highwater Ethanol applying for boosting production

LAMBERTON — Highwater Ethanol is applying to increase its ethanol production with the Environmental Protection Agency and the Minnesota Pollution Control.

Highwater Ethanol CEO Brian Kletscher said his company hopes to make the best use of equipment and resources to increase shareholder profits. He said the number one reason for increasing production is to produce more renewable fuel for consumers to use in their new flex fuel vehicles. Kletscher also said that will help decrease the country’s dependency on imported crude oil and finished gasoline.

He said the company will consume another 2 million bushels of corn which will be good for the local farmers. Kletscher said that the majority of the grain Highwater uses in its processes comes from a 25-mile radius including farmers and elevators.

“It’s not going to be a huge increase, but as long as margins are profitable, it will be an increase,” Kletscher said. “Anything we can do to increase ROI (return on investment), we owe it to our shareholders to do it.”

The CEO and his staff have calculated that with their current facility and production equipment, they could increase their production form 59.5 million gallons of ethanol per year to 70.2.

“We looked at how much our plant can handle by an engineering review and calculated how much our plant can produce with the current equipment,” Kletscher said Wednesday.

One of the reasons Highwater Ethanol would not have to add equipment or storage to make this leap in production is because the company had already added a 600,000-bushel grain bin which was completed in August of 2017. This brought their storage capacity up to 1.8 million bushels.

The company had also added new computerized systems for handling grain and distillers’ grains.

The increase in production would increase the volume of pollutants, which requires the involvement of the Minnesota Pollution Control and federal Environmental Protection Agency (EPA). The EPA requires Highwater Ethanol to monitor its air emissions and calculate how much more will be produced with the increase in production, he said.

“We’ve been working with them since mid-January on this permit and expect to hear back in late summer or early fall,” he said.

The application itself was started in May of 2017 and the EPA was able to start looking at it in January.

“We do a modeling of the project for them,” Kletscher said. “They may require us to measure the emissions. However, do those already. We anticipate very minimal increase in emissions.”

At the recent annual meeting, Board Chair David Moldan announced fiscal year 2017 (ending Oct. 31) was “another successful year.”

The company took in 20.3 bushes of corn and sold 59.4 million gallons of ethanol. Kletscher explained Wednesday the company also sells byproducts of its process. Dried distiller grains (DDGs) are sold for swine and poultry feed, while modified distillers grains (MDG) are sold to feed beef cattle.

“They serve as protein and energy sources for livestock,” he said.

Ethanol production for FY 2017 was 200,000 gallons more than the previous year while the corn used was 600,000 bushels less.

“That allows us improved efficiencies, and the potential for a more profitable year is definitely there,” the CEO said.

The net income was just over $3.5 million, an increase from the $522,668 margin in FY 2016, the company reported to its shareholders.

Total sales for last year were $100,225,143. The previous year was just under $99 million. This profit was due in part in the 10 cent per bushel decrease in the cost of corn, going from $3.30 in 2016 to $3.20 in 2017.

Distributions of $345 a unit were paid to shareholders in December for a total distribution of $1,660,657.

Going forward, Kletscher said tariffs on imports could create a problem, but he is optimistic.

“Tariffs could potentially hurt exports,” he said. “We’ve reviewed that any tariff can have an impact on ethanol exports. Currently China has a 30 percent tariff on our exports and has talked about adding an additional 15 percent on top of that. We’re hoping our other foreign markets will pick up and offset the drop to China.”

Kletscher is anticipating the permits to increase ethanol production at Highwater Ethanol to go through by fall and they will be able to meet an increasing demand for the renewable resource as the flex fuel vehicles that use it catch on in the metro areas as well as the rural areas.

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