Funding stalling biodiesel plant plan
By Turner Walston
Published in News on June 14, 2006 1:51 PM
MOUNT OLIVE -- Financial delays have reset the calendar for the North Carolina Grain Growers Cooperative in developing Atlantic Bio-Energy, the biodiesel plant planned for Mount Olive.
The cooperative had intended to raise about $18 million in farmer equity by March 31 but is short of the goal.
"We are having to raise about another $5 million," Sam Brake, president of the cooperative, said this week. "By not having everything in place by March 31, we had to give people a chance to reconsider and kind of regroup."
Brake said the Grain Growers Cooperative hopes to have the money in place by July 31.
Although the project was awarded in December 2004, the lot designated for the plant, behind the water tower on Northeast Church Road, sits awaiting construction.
"We are in the process of re-writing the private placement memorandum and having the financial analysis reworked," Brake said.
Costs for the project could total $45 million.
Brake said the Grain Growers Cooperative now hopes to have received commitments by the end of July. The next focus for soliciting investments will be on agribusiness, he said.
The Grain Growers Cooperative has an agreement with West Central Cooperative of Ralston, Iowa, to operate the plant. The agreement includes purchasing raw materials, managing the plant, quality control and selling the end-products. The company will be paid based on the number of gallons sold.
Investors for the project have come from a variety of places.
"It's pretty well scattered," Brake said. "We've got at least one in South Carolina, Tennessee and Virginia, but basically the Coastal Plain and Piedmont of North Carolina."
The plant has received some financial support from the Golden Leaf Foundation, which is handling half of the money from the state's settlement with tobacco companies. Golden Leaf and the Grain Growers Cooperative have both invested $5 million.
"Golden Leaf has been very supportive both monetarily and advisory," Brake said.
The idea for a biodiesel plant came about when the North Carolina Soybean Producers Association sought a way to add value to the product.
"Research began several years ago on biodiesel, how can we add value to the soybean oil, which is really a commodity one step past what the farm grows," Brake said.
Typically, about 1.5 million acres of soybeans are grown in the state, Brake said. On average, farmers in North Carolina harvest about 30 bushels per acre.
"Here recently, the market is a little stronger. At $5 a bushel, it's hard for the farmer to make any money," he said.
"People on our board made contact with the people at West Central Co-op, developed a relationship there, and found out profits on producing biodiesel several years ago and still today, are very lucrative. So that's really what we needed to add value."
Research funds for the project have come from a one-half percent tax on the crop, assessed by the soybean association.
Financial delays pushed the start of the project back but work is still proceeding, Brake said, noting that some soil stabilization work is expected to be done this year.
Brake said East Carolina Farm Credit would likely be the senior debt lender for the project.
"They have been very supportive and want to be part of this project," Brake said. "Then we will assign a building contract and see when our slot comes up for construction."