(20/03/07) Operations Update and Proposed Expansion of Rochelle Plant
Construction of the first 50 million gallon plant at Rochelle was completed on time and to budget in December 2006.
Plant acceptance tests were passed in January 2007 and the plant has been running ahead of planned rates during January and February. Peak daily rates have exceeded 54 million gallons pa equivalent and whilst it remains early days,
such rates augur well for future production.
The Company has worked with its corn procurers Cargill Inc. to put in place financial derivative transactions which limit the price which it pays for corn. As previously announced, such transactions are in place for 95% of the plants 2007 nameplate corn demand. During the first two months of operations this has resulted in the plant procuring corn
at more than 60 cents per bushel below the average Chicago Board of Trade front month corn futures price for that period.
The margin of ethanol revenue over corn costs achieved year to date is also above that targeted in the original project investment economics and has averaged 80 cents per gallon.
Both supply and marketing arrangements are operating smoothly with corn, Dried Distillers Grains (DDG) and ethanol stocks being managed comfortably within expected operating limits.
To date, the majority of the plant’s ethanol output has been sold to the local Chicago market and the Company has taken advantage of local container yards to export DDG at attractive prices to the Far East.
Proposed expansion of operations at Rochelle
GTL is pleased to announce that the proposed expansion of its ethanol plant at Rochelle, Illinois USA to 100 million gallons production per annum is expected to begin in the third quarter 2007.
Discussions with banks are well underway on the debt funding for the project. The Company believes that it will be able to raise the debt at an acceptable debt/equity ratio, in particular given that the existing plant is performing well.
The Company has agreed the terms of an engineering service agreement with its constructor Fagen Inc and is close to finalising the terms of the design and build contract. The application to the Environmental Protection Agency of Illinois for a permit to enlarge the plant is in its final stages and currently expects to receive approval in April 2007.
The expanded plant is expected to benefit from the same logistical advantages as the existing plant and will continue to benefit from the strong business relationships already established. Furthermore, fixed costs will not increase pro rata and the Company’s purchasing position will be improved.
A lower per-unit capital cost is expected for the proposed expansion, compared with certain greenfield projects that the Company has evaluated, driven primarily by the fact that the Company already owns the land and has constructed a rail spur.
The Company will be reverting to shareholders in due course with progress on the planned expansion and the proposed debt and equity arrangement for its financing.
Peter Middleton - Chairman, said, “We are pleased to report good progress on preparations for the second phase of the Rochelle plant. We look forward to executing this project as efficiently as we have delivered the first phase and we are encouraged by the operational performance of the existing plant achieved to date.
“Separately, we have been invited to study a number of new ethanol projects in recent months. However, the recent escalation of land prices and of labour and building materials costs makes the economic returns of these new projects unattractive currently. We believe that it is currently in the best interests of our shareholders to take advantage of the
available economies of scale and our existing assets and infrastructure and focus on expanding our existing plant.
We will continue to study the other opportunities available, but will do nothing to undermine the strong foundation we have now built for the company".