Panda Ethanol announced that it has terminated Lurgi Inc. as the general contractor for the Hereford, Texas plant. Panda Ethanol terminated Lurgi’s general contractor contract to construct the Hereford, Texas ethanol plant because Lurgi did not meet the guaranteed substantial completion date. The termination action was approved by Panda’s Board of Directors and with the support of the projects lenders.

Lurgi Inc. is a well known supplier of gasification technology and equipment. The Lurgi technology is well known for gasifying many feedstocks, but especially coal and Lurgi has many installations in coal gasification service. For the Hereford Ethanol plant, the Lurgi technology was being used to gasify cow manure. Unlike other plants that rely on natural gas or coal to generate the steam used in the plant, the Panda Hereford plant will use cow manure a waste product from the local feedlots for producing steam. Hereford, Texas is a major cattle processing city and there are 3 million head of cattle within a 100 mile radius. So you can do the math and figure that there is a plentiful supply of feedstock.

Lurgi was the general contractor for the Panda Hereford plant. The contract included a guaranteed substantial completion date and also included language that the general contractor must achieve final acceptance within six months of the guaranteed substantial completion date. The project has experienced problems with the foundation work and is behind schedule. Panda exercised it’s right to terminate the contract due to construction delays and not achieving the schedule milestones. Panda plans to take over the duties of general contractor and manage the subcontractors to complete the project.

The project is financed with a non-recourse loan. Panda is negotiating with the senior lenders for additional draws to fund the completion.

When completed the Panda Hereford plant will process 38 million bushels of feedstock grade corn to a clean burning ethanol. Panda estimates that the ethanol produced could displace approximately 2.6 million barrels of foreign oil per year.