SOUTH BEND -- The New Energy Corp. ethanol plant cost more than $180 million to build in the early 1980s.
But when it was sold at auction last week as part of the company's Chapter 11 bankruptcy proceedings, the winning bid came in at just $2.5 million.
U.S. Bankruptcy Court Judge Harry C. Dees Jr. approved the sale Tuesday to a joint venture between Maynards Industries, based in the Detroit area, and Biditup Auctions Worldwide, which is in Los Angeles.
The sale could spell the official end of the ethanol plant's nearly 30-year run on South Bend's southwest side.
Maynards and Biditup are described on their websites as experts in auctions, liquidations and appraisals. That means the components in the ethanol plant could be taken apart and resold, though an attorney representing Maynards said after the court hearing Tuesday that the company will explore the possibility of finding a new operator for the facility.
"It was very disappointing," New Energy President Russ Abarr said of the winning bid.
Abarr said he had hoped the auction price would cover the company's $54 million in debt. According to bankruptcy documents, about $40 million of that debt is owed to LF Financial LLC and the U.S. Department of Energy, which guaranteed the original loans for the plant.
Abarr added that he also hoped to see the plant, which shut down in November when New Energy filed for bankruptcy, reopen and begin operating again.
New Energy employed 126 people before the company cut its staff to 90 workers in June 2011, according to bankruptcy documents. A small staff has remained on hand since the bankruptcy began to maintain and secure the property.
Timothy Hurley, a partner at Taft Stettinius & Hollister in Cincinnati and one of the attorneys representing New Energy, said the company will continue to work with South Bend officials to try to find a new operator for the plant.
The closure has caused side effects beyond the loss of employment and tax revenue.
New Energy pumped some 6 million gallons of water out of the ground each day, and nearby residents have been fighting flooding in their basements as a result of the shutdown.
The plant is also a major utility customer for the city.
Interim City Attorney Aladean DeRose wrote in a motion filed Tuesday that "the loss of revenue from this source will inevitably be shifted to existing customers which could result in a significant increase in the sewage bills for all city sewage customers."
Thomas Stanford, a managing director at RPA Advisors, a Chicago-based firm that helped facilitate the auction, said he and New Energy officials wanted to find a buyer that would continue operating the plant.
He testified Tuesday that they reached out to 100 interested parties, and 17 of those visited the 70-acre site.
Stanford said five bidders laid down the required $250,000 deposit and participated in the auction via phone Thursday. One of those bidders is an operator, and four are liquidators, he said.
The operator, which wasn't named in court Tuesday, submitted a bid of $3 million -- half in cash and half in the form of a note -- but Stanford said New Energy and the creditors didn't consider the note's terms to be acceptable.
Another company, Natural Chem Holdings, attempted to bid for the plant but was disqualified because it deposited only $25,000.
The Houston-based company filed an objection to the auction sale Monday on the basis that Maynards and Biditup entered the proceedings as separate bidders but then announced during the auction that they had formed a joint venture.
Dees overruled Natural Chem's objection.
Stanford echoed Abarr in saying he had hoped the New Energy property would fetch more than $2.5 million.
But, as several lawyers commented Tuesday in court, "The market has spoken."
Staff writer Kevin Allen: