Interview with Tom Hanson, Vice President of Operations (left), and Dean Reder, Chief Financial Officer (right).

Q. Please tell us a bit about the history of Guardian Energy since opening in 2009 and how it operates today?

Reder: The Janesville, MN, ICM/Fagen 100 million gallons per year facility was one of the final designed and constructed facilities by US BioEnergy before their merger with Verasun. It was nearly complete when Verasun’s bankruptcy liquidation occurred. The facility was purchased in September 2009 by six farmer-owned ethanol companies that had worked together to form and develop Renewable Products Marketing Group (“RPMG”) based in Shakopee Minnesota. The plant quickly filled positions and started operations in November 2009.

The Company enjoys leadership from its ownership group that have been pioneers and leaders for the ethanol industry:

KAAPA Ethanol, LLC - Minden, NE

Heartland Corn Products - Winthrop, MN

Al-Corn Clean Fuel Cooperative - Claremont, MN

Chippewa Valley Ethanol Company - Benson, MN

Golden Grain Energy, LLC - Mason City, IA

Q. Where specifically has Guardian Energy made the most significant improvements in production efficiencies since the facility opened?

Hanson: Guardian Energy has converted the process to a zero liquid (water) discharge.  One of the first production facilities to do so.  Occasionally, the plant will utilize excess run-off rain water in its production to further reduce well water usage.  The use of  strong conservation and environmentally focused processes, and the facility’s  state of the art water treatment  system, have enabled the plant to generate each gallon of ethanol with less than 2 gallons of water.

Q. What do you view as the three most important things you can do to ensure the continued success of Guardian Energy?

Reder: We must stay focused on:
1.    Maximizing efforts on the things we can control and hire good people to manage the areas that are out of our control
2.    Continuously improving yield & efficiency while not cutting corners on safety
3.    Enhancing shareholder value
These focal points align and interconnect in many areas. 
We don’t control or exercise significant influence over the corn or ethanol markets.  We can strive to develop good relationships with local farmers and elevators to make us the preferred place for them to sell their corn.  We have state of the art grain receiving equipment to minimize “waiting times” and added 1 million bushels of grain storage to reduce the days that “we’re full”. 

The empowered maintenance team and diligent preventative maintenance programs have enabled us to become a reliable source of ethanol for RPMG to market our products to customers that have come to rely on us as a source for them in tightening ethanol supply markets.  Beyond the normal planned shutdown days (5-10) for cleaning and inspection the facility has had relatively few unplanned shut-downs.  By doing these things we believe we receive fairly priced corn and receive the best price available on our ethanol.

Emphasizing yield improvement and energy usage reductions with a strong group of laboratory and production managers will continue to separate the leaders from the followers.  We may not see ethanol demand exceed production capacity in the next few years resulting in thin margins. When margins are thin the only way to make a profit is maximize yield and energy efficiencies.

Realizing that our ownership group and their group of farmer-owners took a risk to purchase and operate our facility, we understand that we need to operate in a manner that will maximize returns to those owners in the current, near term and long term. Shareholder value over the long term should be maximized by making good economic decisions and treating farmers, employees, vendors, railroads, policy makers and advocates fairly and with the respect expected in rural communities. Earning and maintaining that respect will result in  continued success at Guardian Energy.

Q. Consumers have been hearing about E15. How do you feel E15 impacts Minnesota and the fuel consumers in the state?

Reder: We believe E-15 will reduce the price at the pump for fuel consumers without impacting gas mileage.  Over the last few years the price of ethanol has been considerably less than gas and has provided an octane boost when blended with gasoline. By blending an additional 5% of less expensive, high quality fuel, retail competition should pass on some of that savings to the end users. Burning more ethanol and less petroleum should improve air quality especially in the Twin Cities and surrounding communities. As E-15 gains market share, the increased demand will be met by Minnesota ethanol producers. That spurred activity should maintain the value that local farmers receive for their corn which historically has been reinvested in local economies.

Q. What would you like consumers to know about your plant, your employees, and the products produced by the plant?

Hanson: Guardian Energy employees are very proud to be a positive influence for their community bringing value to rural Minnesota. We take pride in processing corn from local farmers to provide  a clean renewable fuel, corn oil used as an animal feed additive and biodiesel feedstock and a value added feed for livestock and poultry called Dried Distillers Grains.
The Guardian team is very involved in the community and  and the team understands the importance of the benefits they provide for their neighbors since the materials and services needed for the ethanol facility are sourced from their neighbors.
Guardian Energy is focused on continually improving and utilizing new methods and new technologies that result in more efficient and more environmental friendly ways to produce a renewable liquid fuel.

Q. Where are the biggest opportunities for ethanol in the next 10 years in your opinion?

Reder: We believe there is an opportunity for growth of higher ethanol fuel blends within the United States in the next 10 years. Once the oil industry supported 10% blend wall is penetrated (torn down), E-15 will become common place.  As US fuel economy standards increase, there is additional opportunity for higher octane fuels (E-20 or E-30) to run higher compression engines that auto manufacturers are indicating will be required to meet those standards.

We believe that new markets will develop for using the recently available in bulk scale commodities that are produced in the ethanol production process (distiller grains and corn oil).  Often referred to as co-products, the distiller grains are primarily sold to beef and dairy cattle, swine and poultry markets as feed and the corn oil is used in poultry diets as well as a feed stock for bio-diesel production.  We believe that additional “green products” will be developed from further refining these valuable co-products.

Q. What do you see as the biggest threats to the ethanol industry in Minnesota in the short term (next year) and in the long term?

Reder: The potential reversal of federal legislation originally designed to improve energy independence, clean the air and produce domestic jobs would threaten our industry. Ethanol is a less expensive, cleaner burning, higher octane fuel than petroleum based fuel. However, without certain protections, the oil industry has the resources to halt any further market penetration by renewable fuels and or exercising influence to regain 100% of the liquid fuel market in the United States.   Failure of any state to adopt or promote federal renewable programs, like the EPA’s 2011 approval of the use of E-15 blends, adds another threat level to producers in those regions.