With reduction in staff and other cost-cutting measures in place at Great Plains Synfuels Plant near Beulah, financial projections show Dakota Gasification Co. hovering near breaking even by 2024.
“This plant is in a much better place financially today even than it was six months ago,” Basin Electric Power Cooperative CEO Paul Sukut told members at the organization’s annual meeting in Bismarck on Wednesday.
Basin CFO Steve Johnson said his staff began its financial projections in February, gathering data on the prices it could expect to receive for its products. By July, a real problem had been identified.
“It was dire,” Sukut said. “Think low gas prices, think low fertilizer prizes, think low tar oil prices.”
In response, Basin decided to reduce its staff. More than 300 Basin Electric Power Cooperative employees took buyouts in August, bringing the cooperative to less than 2,000 employees.
“It was a tough summer,” said Sukut, adding that without those adjustments, the plant was projected to continue with losses beyond 2028.
The move to cut more costs followed several years of losses at DGC amid low commodity prices. The plant suffered $212.4 million in net losses over the past three years — $87.2 million in 2017, $94.1 million in 2016 and $31.1 million in 2015, according to the cooperative’s annual reports. The plant also suffered $11 million in losses in 2013.
Net loss for the first six months of 2018 was $57.3 million, compared to a $30.3 million loss experienced in the first six months of 2017, according to the cooperative’s latest financial statement.
In that time, the utility cooperative’s power sector, following a rate increase for customers in 2016, has offset losses at DGC. Basin Electric's net margin and earnings were $31.2 million for the first six months of 2018, compared to $49.1 million in 2017.
Until 2024, losses are projected to continue at DGC from $30 to $50 million annually, according to Johnson’s financial report, but the difference over the next decade marks a $550 million improvement when compared to previous projections.
The company also highlights that, over the plant’s 30 year history, benefits have outweighed losses by $1 billion.
“While there are still projected losses at DGC, the benefits to the Basin family of having DGC continue to operate are once again greater than the projected losses,” Johnson said.
Sukut said DGC already has seen some marked improvement, with fertilizer prices having risen from this summer to fall.
“The questions is, ‘Are they going to hold?’ ” Sukut said.
If they do, Sukut said the company could see a bottom line improvement of $25 million to $30 million per year.
DGC COO Dave Sauer said, to cut costs, the plant reduced its managerial staff by 30 percent and nixed its onsite engineering team in favor of Basin Electric’s engineers. The plant also switched to running at 85 percent rather than 100 percent capacity, which allows it to meet demand for products, such as tar oil and ammonium sulfate, and fully run its fertilizer facilities year round.
After fixing issues experienced during startup, the urea plant is running at 115 percent capacity, he said.
“We have a fertilizer factory, we really do,” Sukut said. “We’re not dependent on natural gas for revenues. It’s more of a byproduct.”
Sukut said demand for the urea product is so high — covering 40 percent of total urea usage in the state — that the company is working with new marketing partners to find other urea storage facilities in the area.
The plant's new marketing partnership is also expected to bring in more revenues as it increases sales of the diesel exhaust fluid byproduct. Sauer said a mixing station was added to be able to sell varying levels of DEF. He said this brings revenue projections for the product from a straight $5 million up to a range of $5 million to $10 million.
“We have an asset here,” Sukut said of the plant.