Soy Energy's vision of owning and operating a biodiesel plant is one step closer to reality. It has been a long time coming, but it may well be the best bargain found anywhere. The board of directors has entered into an Asset Purchase Agreement to purchase the Freedom Fuel biodiesel plant at Mason City.
Freedom Fuels is currently in Chapter 11 bankruptcy reorganization. It is the intent of Soy Energy to purchase substantially all assets of Freedom Fuels for approximately $9 million. The bank holding the secured portion of the loan has agreed to this. In addition, a portion of the Freedom Fuel's members are contributing $3 million to the Freedom fuel's reorganization. These members have formed a new business called New Equity, LLC. Soy Energy has entered into a unit purchase agreement with New Equity, LLC . Soy Energy anticipates issuing units to New Equity, LLC that will represent 20 percent ownership interest in Soy Energy.
The plant will have a capacity of 30 million gallons of biodiesel per year. The plant is designed to run on soybean oil. Soy Energy anticipates attaching a module on the front end to enable the plant to run on corn oil and other various feedstocks. The plant was built to operate on soybean oil and had produced 20 million gallons of biodiesel.
The original plant design for Marcus was a 30 million gallon plant multi-feedstock plant at a cost of $2 a gallon or about $60 million in total for the project. The $9 million Soy Energy will pay for the Freedom Fuel plant equates to a cost of 30 cents/gallon on the plant or 15 cents on the dollar. This purchase price doesn't take into account any units that will be issued to New Equity, LLC or the cost of installing a corn oil module on Freedom Fuels plant.
The Asset Purchase Agreement provides that the assets Soy Energy purchases from Freedom Fuels will be free and clear of liens. The remaining $10-$12 million of Soy Energy's capital will likely be used primarily for working capital. The Board members of Soy Energy firmly believe this an adequate amount to begin operations.
The Soy Energy board wants to install a corn oil module on the front end of the plant and is expected to cost approximately $5-$8 million. They anticipate to obtain debt free financing for this project and are in a process of applying for a USDA loan guarantee in connection with obtaining such debt financing for the front end equipment. Estimates to install the corn oil module is from 6-8 months and to complete the purchase of the plant. Soy Energy board believes firmly that the addition of the corn oil module, will greatly assist the plant in achieving positive margins from the operations.
The Soy Energy board hired advisors to provide an opinion to the fairness of the proposed transaction to the members of Soy Energy based on the consideration to be paid to acquire the Freedom Fuels plant. The recommendation was a positive one. The board has set a timetable for completing this transaction. An open house at the Mason City Freedom Fuel plant will be held on Friday and Saturday, Aug. 21 and 22, from 9 a.m. to 2:30 p.m.. The board encourages those who would like to tour the facility prior to the investor's vote, to contact Becky at 712-376-2081.
A date for the annual investors meeting will be held on Monday, Aug. 24, at the Marcus-Meriden-Cleghorn high school gym in Marcus at 7:30 p.m.
The purchase of this facility is being recommended by the Soy Energy Board of Directors but the final decision rests with Soy Energy investors. Investors may call Rick Davis at the Soy Energy office or speak to any of the directors to answer any questions you might have.
Rick Davis commented, "The board looked at large number of plants. It has paid off to thoroughly research plants. Even though jobs will not be added directly locally, it will most certainly bring money into our local economy. The Mason City plant investors have lost $25 million yet some of them are willing and want to put $3 million additional dollars into this newly proposed plant. It simply shows they have faith in biodiesel as well as into our plans for the Mason City plant."
The following are members of the board of directors: Chuck Sand or Carol Reuter at 712-376-4135; Darrell Downs at 712-376-5230; Ron Wetherell at 712-436-2266; Bob Engel at 712-540-5959; Dave Langel at 712-546-9203; Chuck Getting at 712-348-5070; Daryl Haack at 712-261-5625; Steve Leavitt at 319-371-4628; Dallas Thompson at 712-548-8619; Doug Lansink 712-369-1435.