Company optimistic equity goal will be reached; ethanol plant planning continues
By Mikkel Pates - Agweek Staff Writer
FARGO, N.D. - Red Trail Energy L.L.C. officials are so sure they’ll reach their $25 million equity goal for breaking escrow on a
$78 million ethanol plant in Richardton, N.D. that they’re going ahead on their deal and preliminary site preparation.
The board made a go-ahead decision Nov. 17 when it met to study the results of its ongoing equity drive, says Frank Kirscheneiter, project coordinator.
At the meeting, the board learned that it was only $3 million to $4 million from the equity goal.
It decided to go ahead and use some of its “risk capital” to exercise the land deal with two landowners and to take advantage of an exceptionally mild fall a “window of opportunity” for dirt work to start a construction phase, which is scheduled to take 12 to 14 months.
Construction under way
The construction site, a half-mile east of town, started buzzing Nov. 23 with four scrapers, a grader and several packers. The past three weeks of the equity drive have been “phenomenal,” Kirscheneiter says.
In early October, the group reported it was $7 million away from the goal. Now that amount has been cut roughly in half.
“It sounds like a lot of money to some people, but to me it’s starting to sound like a relatively small amount,” Kirscheneiter says of the goal. “One should never say ‘only,’ but we know where we’ve been. The board’s confidence level in this happening is 100 percent. The job is not done, but we’re going to move forward.”
Some people who invested previously are investing additional sums, Kirscheneiter says. The minimum individual investment is $10,000.
“We have enough prospectuses out there now to complete it, but you can’t stop,” he says.
The board all along has stressed the importance of allowing as many North Dakotans as possible to invest. Kirscheneiter notes that 8,000 South Dakota families have invested in projects in that state, while North Dakota hasn’t built a new ethanol plant in 20 years.
Red Trail’s board may allow a modest overrun of the $25 million goal because at any given time there might be $1 million to $2 million in the “pipeline.”
“We may go as high as $33 million,” he says.
Red Trail’s financial projections currently are based on the $33.6 million equity. Return-on-investment projections are for 32 percent in the second year of operation, with returns above 23 percent in subsequent years.
The board will have to decide how to end the drive. The company has no certain date for the end of the drive.
Among other things, the board has emphasized that projects such as the ICM Fagen Design have been extremely successful.
“Not one of the plants like this one has failed, and they have a proven track record of high returns,” Kirscheneiter says.
A unique feature the plant is that it will use lignite coal as a source of energy, to save the company $8 million a year compared with plants fired with natural gas, and the lignite prices have been contracted for 10 years.
The board is contemplating a series of meetings for potential investors in the Fargo and Grand Forks, N.D., areas. Information: http://www.redtrailenergyllc.com or (701) 974-4733.
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