U.S. Will Back Arms Dealer’s Ethanol Plant

The Energy Department is planning to co-sign nearly $80 million in loans for an alcohol fuels plant being built in Louisiana by billionaire Saudi Arabian arms dealer Adnan Khashoggi, officials said Monday.

“We’re ironing out the last details and plan to close it within a matter of days,” Dan Beckman, deputy director of the department’s Office of Alcohol Fuels, said of the $79.9 million in federal loan guarantees for the project.

Seeking the loan guarantees for the plant, to be built at New Iberia, La., is Agrifuels Refining Corp., a company whose ownership traces back to Khashoggi, believed to be one of the wealthiest men in the world.

According to officials for the government and Triad America, the Khashoggi family’s company for its U.S. holdings, the plant will produce 35 million gallons of ethanol a year from sugar-derived molasses. Officials said the company plans to market the plant’s output to petroleum refineries for making gasohol, a blend of 90% gasoline and 10% alcohol.

The son of Saudi King Ibn Faud’s personal physician, Khashoggi, 50, earned much of his fortune as a middleman in arms deals between Western firms and Arab governments.

May Miss Deadline

Beckman said three other companies seeking loan guarantees from the government for similar alcohol fuels ventures are not expected to meet the Sept. 30 expiration of the program.

The alcohol fuels program was established by the 1980 Energy Security Act that also set up the government’s multibillion-dollar Synthetic Fuels Corp. to subsidize the development of energy alternatives for imported oil. It originally was to have expired last December but was extended nine months by Congress because of problems that Khashoggi’s company and the three other proposed projects were experiencing in lining up private capital for the ventures.

“We aren’t even close with the others,” Beckman said Monday. “Even if the sponsors, banks and us all had the financing assurances ironed out, I don’t see how we could do it physically in 14 days.”

The other three ventures are a 15-million-gallon plant in Mankate, Minn., proposed by Minnesota Alcohol Producers Corp.; a 15-million-gallon facility in Blair, Neb., proposed by Circle Energies Corp. of Wichita, Kan., and a 25-million-gallon plant in Auburn, Maine, proposed by New England Ethanol Producers Inc.

Under the contract with Khashoggi’s company, the Energy Department would guarantee 90% of the $88.8 million in debt financing for the $105-million Louisiana plant, Beckman said. He said that Agrifuels has lined up that private financing through a syndicate headed by Bank of New England.

Triad is putting up $16 million-plus in cash for construction of the plant and another $6.5 million in working capital as a condition for the government loan guarantee, Beckman said.