Financing Biofuel Plants and Operations

1
Financing Biofuel Plants and Operations

• Reggie Holt
• Senior Vice President
• Farm Credit of Central Florida, ACA

2
Financing Terms

• Equity gt 40
• Loan Structure
• Term Loan (75 of term debt)
• Revolving Term Loan (25 of term debt)
• Working Capital Loan (1.50 per gallon)
• 10 year loan amortization with additional cash
  sweep requirement
• Collateral All Assets

3
Example

• 50 mmgy Fuel Ethanol Facility
• Total Cost 100,000,000
• Equity 40,000,000
• Term Loan 45,000,000
• Revolving Term Loan 15,000,000
• Working Capital Loan 7,500,000

4
Example

• Terms of Repayment
• Term Loan Quarterly installments of principal in
  the amount of 1,500,000 plus interest.
  Additional cash sweep.
• Revolving Term Loan Quarterly interest payments.
  Once the Term Loan is paid in full, the
  commitment amount will be reduced by 1,500,000
  each quarter.
• Working Capital Loan Quarterly interest
  payments. Availability is subject to a borrowing
  base of inventory and receivables.

5
Financial Covenants

• Working Capital
• 1.00 per gallon minimum
• Definition current assets / current liabilities
• Equity Ratio
• 40 minimum
• Definition total equity / total assets
• Debt Service Coverage
• 1.50x minimum
• Definition EBIDA minus shareholder
  distributions and capital expenditures divided by
  current portion of term debt

6
Other Conditions

• Limitations
• Shareholder Distributions
• Capital Expenditures
• Change of Management
• Financial Reporting
• Monthly - internal financial statements
• Quarterly - compliance certificate
• Annual - audited financial statements

7
Material Documents

• Detailed Business Plan
• Feasibility Study
• Engineering, Procurement and Construction
• Builders Risk Insurance
• Permits
• Utility Supply Agreements
• Risk Management Policy
• Supply Origination Contracts
• Marketing Contracts

8
USDA - RBS Renewable Energy Program

• Grants
• - up to 25 of eligible project costs
• - up to 500,000
• Loan Guarantee
• - up to 50 of eligible project costs
• - up to 10,000,000 loan
• Maximum Grant / Guarantee loan 10,000,000

9
Farm Credit

• The Farm Credit system is the leading lender to
  the bio-fuel industry with more than 3.3 billion
  in loans and commitments outstanding.

10
Farm Credit Eligibility

• Farmer bona-fide farmer, rancher, or producer
  of aquatic products
• Farm Related Service Businesses provides
  services directly related to agricultural
  production
• Rural Home Loans - residential loans for rural
  areas
• Marketing or Processing Businesses farmer or
• 50 ownership by farmers
• Some throughput produced by business or owners

11
The HORIZONS Proposal

• Provides a more competitive credit environment
  for farm-related businesses and rural home owners
  by allowing Farm credit to be a competitive
  choice.
• Provides modernization to Farm credits lending
  authority, and is supported by more than 550
  farm, commodity, rural and other organizations
  nationwide.