New uses for the co-operative model

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New uses for the co-operative model

• Workshop E
• 11.15 am 12.30 pm
• June 10, 2006

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Raising Equity in a Community Owned Ethanol
Co-operative

• Presentation to CCAs National Congress
• Tom Cox, Chair
• Integrated Grain Processors Co-Operative Inc.
• June 2006

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Who Is IGPC?

• Over 600 members
• Regionally-based
• 150 million litres per year of ethanol
• Utilizing 15 million bushels of corn annually
• 120 thousand tonnes of distillers grain
• 90 thousand tonnes of marketable carbon dioxide

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What is Ethanol ?

• 200 proof (100) ethyl alcohol C2H5OH
• - produced by the fermentation of sugar
• - clear, colourless liquid
• - used as solvent, beverage and fuel
  additive
• - blended at 10 in gasoline
• - contains 35 oxygen
• - 116 octane rating

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Site Features 48 Acres zoned M2 Industrial -
Ethanol plant is permitted use 30 additional
acres available Across the road from Imperial
Tobacco Municipally owned Municipal Services
available at lot line -Water sourced from Lake
Erie Trillium Rail runs along south border
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IGPC History

• Winter 2002 Preliminary Meetings
• 40-50 interested people
• Value-added opportunities
• Seed money from initial group
• Raised a small amount to get started
• 100 each later to 5000
• 105,000 Can Adapt Grant

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IGPC History

• Investigated Business Structures
• Ontario Business Corporation
• Co-operative
• Incorporated April 2002
• Raised 200,000 in member equity
• Feasibility Study

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IGPC History

• Embarked on feasibility study completed in
  September of 2002
• Internal and external feasibility
• 1st Offering statement for 1.2 million
• Sold out quickly to 198 members
• Seed capital to move from feasibility to business
  plan
• All at risk dollars

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IGPC History

• Building the business plan
• Understanding your business
• Identifying markets
• Identifying risks
• Capital Structure
• 50 debt and 50 equity
• Subordinated Debt
• Government assistance

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2nd and 3rd Offering Statements

• December 2003
• 25 million to 43 million
• Investment opportunities from 500 to 4 million
• 3 equity Classes plus debentures
• Protective conditions
• Escrow 6 at risk
• Promissory Notes -20 deposit
• Drop Dead Date

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2nd and 3rd Offering Statements

• Core group of individuals and directors
• Public meetings in 9 counties
• Over 50 smaller meetings
• Countless group meetings
• Farm groups, Service Clubs, etc.
• Individual meetings

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Challenges

• Individual perceptions
• Co-operatives fail more than Business
  Corporations
• Previous Experience
• Investment Dealers
• No experience with Co-Operatives
• Many other opportunities to invest
• Media General Information
• Education about Ethanol
• Lack of successes in Canada
• Old data about the industry

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What Worked.What did not

• What Worked
• Member participation
• Kitchen table sales
• Honest assessment of Risk
• Sincerity and Enthusiasm
• Word of mouth sales
• Angel investors
• Great timing
• 50 plus a barrel oil
• Ethanol Mandate
• Government Support
• What did not
• Indirect sales- print advertising, mass mailings
  etc.
• Venture/Fund Capital

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Lessons Learned

• Choose the right board of directors/ consultants
• Be realistic about timelines
• Expect to be criticized
• Be wary of short cuts
• Dont Panic
• Enjoy the challenge..