Ethanol startup soliciting investors

July 15, 2006

Project in eastern Indiana needs to raise at least $45 million

WINCHESTER, Ind. (AP) – Developers of a $150 million Randolph County ethanol plant will solicit potential investors during meetings in dozens of Indiana and Ohio locations beginning next week.

Cardinal Ethanol’s goal is to raise 45 percent of the project’s cost, $67.7 million, from investors. The project needs to raise at least $45 million from investors to proceed. The rest will be funded by debt financing, grants, bond financing and other incentives.

Cardinal president Troy Prescott, who owns and operates a 2,500-acre row-crop farm in Randolph County, said potential investors will be invited to meetings in four dozen Indiana and Ohio communities from July 24 through Aug. 18.

“We’re going to sell this to the local community, to local owners. The big difference is the profits will come back to the community. All the others are owned by big companies,” Prescott told The Star Press of Muncie for a story Friday.

The company will offer membership units in Cardinal Ethanol for $5,000 apiece. The minimum purchase requirement is four units, or $20,000.

Cardinal could have met its equity requirements by making a few telephone calls to outside, large investors, Prescott said.

“But we set out from the start to do a grass-roots ethanol project,” he said. “We wanted local ownership.”

Cardinal plans to begin construction in February.

The directors of the company include farmers, a banker, a lawyer, a physician, accountants, a pharmacist and businessmen whose interests include construction, apartment buildings, animal feed, race cars and trucking.

Nearly half of the approximately 100 ethanol plants now operating across the country are locally owned, said Kristin Brekke, a spokeswoman for the American Coalition for Ethanol.

Chris Hurt, an agricultural economist at Purdue University, said farmers are reaping few of the profits from the industry.

“A project like Cardinal Ethanol gives farmers and other local people the opportunity to be part of this relatively new industry,” Hurt said. “Some investors believe this is a chance to get in on the ground floor, or the second floor in a 20-story building. If that huge profit goes to local owners — wow, that’s pretty significant to the local economy.”

On the other hand, there’s also the possibility of huge losses, Hurt added.

“There is always a boom-bust cycle,” he said. “Is this going to be an industry that will boom for one year or 15 years?”

The risks include the possibility that world tensions will decrease and more oil starts flowing; the possibility that corn prices will skyrocket; public policy and political pressure; technological advances; and imports of cheap ethanol made from sugar cane throughout the tropics of the world, Hurt said.

Source: Northwest Indiana Times

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