BY DOUG LEDUC, Greater Fort Wayne Business Weekly
dougl@fwbusiness.com
An ethanol plant planned for Bluffton is among the first renewable fuels projects backed by a joint venture formed last year by NTR PLC and British billionaire Sir Richard Branson's Virgin Group.
NTR and Virgin Group recently announced the formation of VBV LLC to exploit opportunities in the biofuels sector, with particular focus on U.S.-based ethanol. VBV will do business as Virgin Bioverda, and one of the first ethanol plants it backs will be Indiana Bio-Energy in Bluffton.
It also will back Ethanol Grain Processors in Tennessee. A prepared statement about the joint venture said the total capital investment in these projects will be close to $336 million. The cost of the Indiana Bio-Energy project in Bluffton has been estimated at $177 million.
"Those organizations are fairly large and come with a reasonable toolbox of expertise," said Edgar Seward, general manager for Indiana Bio-Energy. "It's a fantastic partnership for U.S. entry into the ethanol market."
NTR, a Dublin, Ireland-based, closely held waste-management company, and Virgin will provide the largest equity portion of the financing, with the remainder made up of debt and investment by companies in Indiana and Tennessee, said Michael Walsh, NTR finance director.
Pekin, Ill.-based Aventine Renewable Energy Inc., has said it is investing $5 million in Indiana Bio-Energy. Aventine will market ethanol made at the plant.
The timing of the investment announcement coincides with a major Bush administration push to move the United States toward renewable fuels.
The U.S. Department of Agriculture will seek $1.6 billion in funding for ethanol and other forms of renewable energy as part of the 2007 farm bill. President George W. Bush set a goal in his State of the Union address of reducing U.S. gasoline consumption by 20 percent within a decade.
Bush said he wants production of renewable fuels stepped up so that the country can produce 35 billion gallons annually by 2017, about seven times current ethanol production.
That would replace about 15 percent of projected gasoline use, according to the administration. Another 5-percent reduction would come from higher fuel-efficiency standards for cars and light trucks.
"The Virgin announcement is evidence of the scale of opportunity that's out there for us," Walsh said. "By its nature, that scale means we are going to have to access capital."
That capital may be raised by a public sale of shares in NTR or an initial public offering of wind energy company Airtricity, in which NTR has a 51-percent stake, according to Walsh. A decision "will need to be made within 18 months," he said.
"We're certainly excited to have VBV as our lead equity provider, and along with local investors and others, we're looking forward to having the ethanol plant in the fall of 2008 operating," Seward said.
The site Indiana Bio-Energy has selected is served by Norfolk Southern and Wabash Central rail lines and can connect easily with all of the water and natural gas it will need. Best of all, it will be able to get all of the corn it needs from within a 50-mile radius.
Beyond its 60-employee payroll and the amount it adds to the county's property-tax base, the plant will benefit the area's economy by increasing area farm incomes, Seward said.
The Indiana Bio-Energy plant will need enough corn to produce 100 million gallons of ethanol annually. During 2005, farmers within 50 miles of Bluffton produced 215 million bushels of corn, and at that production level, Indiana Bio-Energy would need about 18 percent, Seward said.
Average corn yields have been trending upwards over the years, and "the region has the ability to grow a lot more corn," he said.
Purchasing for ethanol production is expected to increase the per-bushel price of corn between 5 cents and 10 cents. For a farmer growing 1,000 acres of corn with an average yield of 150 bushels per acre, the boost would mean $7,500 extra per year.
With the public comment period for the Indiana Bio-Energy plant's air permit concluding in mid-January, the Indiana Department of Environmental Management "is reviewing those comments and we expect a response here shortly," Seward said.