ETHANOL PLANTS PROVIDE BENEFITS TO A REGION

by Mike Bryan, BB1 International

Across North America, ethanol production has been growing dramatically. Production has enjoyed double digit increases for over a decade. While much of the growth has occurred in the U.S. mid-west, increasingly, interest in ethanol has been spreading outwards. In Ontario, there are a number of groups looking to build new or expanded production facilities.

A combination of improved ethanol production economics and increased government support for the industry has spawned considerable interest in renewable fuel production. At least four different groups are actively developing ethanol projects in the province. One of the newest entrants to the field is the producer based group Integrated Grain Processors Cooperative Inc. (IGPC).

Formed just two years ago, IGPC began when a group of southern Ontario farmers and agri-business people decided to take a serious look at the viability of building an ethanol plant in South-Western Ontario. Incorporated in April of 2002, the nine directors of the founding board of IGPC were chosen to ensure a diverse agricultural and business background. They include professional engineers, commercial grain elevator operators and dairy and cash crop farmers.

"For primary agriculture producers, we see the building of an ethanol plant in the region as providing a number of key benefits," says Tom Cox, chair of IGPC. "For the corn producers, the plant will add a substantial outlet for corn in a region that doesn't have a large buyer of corn. This will help to lower transportation costs and strengthen the local basis." Additionally, because the largest input cost to the plant is the corn itself, ownership in an ethanol plant will provide a sustaining hedge against corn prices. "For livestock producers, the distillers grain produced from a modern ethanol plant is improved over earlier products and per pound of protein represents a real value over other competitive protein options currently available."

In the summer and fall of 2002, BBI International, an ethanol-consulting firm based in Colorado, conducted a feasibility study on the project. Funding for the study came from a combination of seed money from the founding members and a CanAdapt grant. Based on the positive findings of the study, the group moved ahead with project development.

To fund this further development, IGPC hired co-operative consultant George Alkalay to assist in obtaining an offering statement that would allow them to conduct an equity drive. In February of 2003, with interest in the area running high, the full 1.2 million dollars was raised in a few weeks.

A comprehensive business plan for the project was completed by BBI during the summer and fall of 2003 and letters of intent were sought and obtained for all the plant's production of ethanol and co-products. The project has received a letter of intent from the ethanol marketing company Eco Energy to buy all of the ethanol produced by the plant. They have also received a letter of intent from EC. Stone to provide the comprehensive risk management services dealing with ethanol, corn, distillers grain and natural gas pricing.

The proposed plant site is a 47 acre parcel bordered by the mainline of the CN railroad and less than a kilometer from the exit to the 403 highway. Its location, near the Brant/Oxford border, offers a close proximity to markets for its production of ethanol, distillers grain and CO2.

IGPC has chosen the team of Lurgi PSI and ICM to design and construct its plant. The plant will produce 125 million litres of ethanol, 96,000 tonnes of dried distillers grain and 60,000 tonnes of CO2 per year while consuming 11.8 million bushels of corn. The total projected cost of the project is $86 million, which IGPC plans to raise in equal proportions of debt and equity.

"The project has recently received a receipted offering statement from the Financial Services Commission of Ontario to proceed with the next round of equity raising," explains Steven Smith, chair of the Equity Committee. "The project is looking to raise a minimum of $25 million up to a maximum of $43 million in various forms of shares and debentures." Minimum investment levels vary for the different securities but there are opportunities for all investment levels. An escrow account has been set up with the Canada Trust Company for funds raised under this offering.

On January 20, 2004 the project kicked off its equity drive with a meeting attended by over 250 people in Brantford. Additional large public meetings are being held in the 9 county area surrounding the plant with numerous follow-up meetings occurring throughout the region.

Those interested in learning more about the project are encouraged to call the IGPC office at 1-866-211-0435 or visit the web site at www.igpc.ca.