$65 Million Ethanol/Feedlot Complex Hits Financing Snag, Developers Exhausted but Re-Grouping

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). You wouldn't think life on the farm would be effected by the financial meltdowns of companies like Enron and WorldCom; however, Dakota Value Capture Cooperative (Pierre, South Dakota) has found that buying the farm and getting a new agricultural concept financed is not a sure thing either.

The company managed to raise $26 million in equity for a new $65 million ethanol production and cattle feedlot project, but the primary lender, Co-Bank of Omaha, would not agree with funding configurations set by the U.S. Department of Agriculture, who also gave a $10 million loan guarantee for the project.

Co-Bank agreed to loan Dakota Value Capture $36 million for the project but only if the USDA agreed to exceptions they established. The lender wanted the USDA funds to be used first, rather than last, which is standard for government loans. They also wanted a 90 percent loan guarantee versus the standard 70 percent and the ten percent un-guaranteed portion to be paid first.

One other factor was state amendment E that required the company to form a cooperative and the cooperative, unlike many others building ethanol plants in the state, would have the liability of 28,000 head of cattle.

The parties involved could not reach an agreement and some $18 million that was invested by about 1,040 cooperative members will be returned.

Prime Technologies LLC (Pierre, South Dakota), the management team working with Dakota Value Capture, is exhausted by the setback, but will regroup to construct the 20 million gallon per year ethanol plant. Construction of project could be delayed perhaps by a year.

The first of its kind ethanol plant and cattle feedlot complex was originally scheduled to be under construction by now, and operational by the 2003 corn harvest.

For further project details see the June 27th article Dakota Value Capture Moving Forward with $60 Million Ethanol Feedlot Complex.