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Camilla, Georgia
Ethanol Feasibility Study

Table of Contents


Executive Summary			1
Project Description			3
Technology Review			4
Production Inputs Supply and Price			5
Corn			5
Supply and Demand			5
Price			8
Basis Impact			8
Natural Gas			9
Coal			9
Electricity			10
Denaturant			11
Other Input Costs			11
Overhead Expenses			12
Labor Costs			12
Production			12
Maintenance			13
Laboratory			13
Material Handlers			13
Administration			13
Maintenance			13
General and Administrative			13
Capital Requirements			14
Plant			14
Site Costs			15
Other Costs			15
Working Capital			15
Accumulated Interest			15
Markets for Outputs			16
Ethanol			16
DDGS			18
CO₂			18
Sales and Marketing Plan			19
Ethanol			19
DDGS			19
CO₂			19
Pro Forma Financials			20
Production Cost Summary			20
Initial Capital			20



HCSLLC	iv	PRX Geographic

Executive Summary

This study explores the possibility of constructing a dry mill ethanol plant near Camilla, Georgia. This feasibility considers the viability of 50 and 100 million gallon per year (mmgpy) natural gas powered dry mill ethanol plants. Additionally, a 50 mmgpy coal powered plant was reviewed. Input and output markets and prices are evaluated as well as personnel, operating and capital costs. Three pro forma financial scenarios were prepared using historical average input and output values.

Inputs Supply and Price

Adequate corn is not produced within the Camilla study area to supply the proposed plant. The 10 year average historical corn production in a 17 county study area is slightly less than 16 million bushels. A 50 mmgpy ethanol plant would consume approximately 2 million bushels more than the average production. Therefore, corn will need to be shipped to this plant from eastern cornbelt origins.

The estimated 10 year historical flat price for corn is $2.67/bushel, the 5 year average is $2.34/bushel and the 3 year average is $2.46/bushel. The estimated basis impact for this plant is $0.013/bushel for a 50 mmgpy plant and $0.025/bushel for a 100 mmgpy plant.

Natural gas, coal and electricity prices for this study are state averages as reported by the Energy Information Administration of the US Department of Energy. Denaturant price is the state average dealer tank wagon (DTW) price. All other input costs are industry averages. The historical averages are shown in the following table. For consistency, the 5 year average of 1999-2003 was used for all energy components.


	Average
	5 Year				3 Year		1 Year
	1999-2003		2000-2004		2002-2004		2004
Natural Gas ($/mcf)	$	5.08	$	5.85	$	6.30	$	7.66
Coal ($/mmbtu)	$	2.25
Electricity ($/kwh)	$	0.0409	$	0.0414	$	0.0411	$	0.0437
Denaturant ($/gal)	$	0.84	$	0.97	$	1.02	$	1.27

Operating Costs

Operating costs are industry averages, personnel costs have been estimated for this size plant based on 2003 Department of Labor statistics for the Albany, GA metropolitan area.

Capital Costs

Capital costs reflect a typical 50 mmgpy “greenfield” site. The overall plant, buildings and equipment cost is $60,000,000, site improvement costs are estimated to be $9,000,000, and other costs total $3,500,000 for a total project cost of nearly $81,000,000. The 100 mmgpy plant project cost is $131,000,000 and a coal powered 50 mmgpy plant cost is $105,000,000.



HCSLLC	1	PRX Geographic

Output Prices

Ethanol prices were estimated from nearby regional markets. The markets used in this analysis include New Orleans, LA; Memphis, TN; Nashville, TN; and Richmond, VA. These prices were averaged and $0.04/gallon was subtracted for freight. The 5 year (1999-2003) average ethanol price used in this study was $1.23/gallon net to the plant. Ethanol prices over the last year have been substantially higher than this average. The 5 years of 2000-2004 increases the average price $.14/gallon. The banking industry is not convinced that the high prices experienced over the last year are representative of the ethanol industry going forward. Therefore the 1999-2003 average is used in this study.

DDGS prices are not readily available as a historical data series. Therefore, the estimated DDGS value is based on reported values in selected markets and adjusted based on corn price differentials. A value of $105/ton was used for the base scenario.

CO2 is not considered in this analysis.

Pro Forma Results

The pro forma financial results based on the above information result in the 10 year average returns on investment shown in the following table.


	10 Year Average Return			Year 5 Return on
Name	on Investment			Investment
Base 50 NGas		14.1	%		14.8	%
Base 100 NGas		23.6	%		24.3	%
Base 50 Coal		16.8	%		17.4	%

The returns are very sensitive to corn and ethanol price. Current prices for ethanol are significantly higher than the values used in the pro forma. During the 52 weeks ending 6/2/2005, the average ethanol price for the regional markets used was $1.67/gallon. This is $0.40/gallon more than used in the study.

The results of these pro forma indicate that this site is a marginal location for a 50 mmgpy ethanol plant using the 10 year average corn price and the 1999-2003 average ethanol price. A 100 mmgpy natural gas or 50 mmgpy coal plant improves the return on investment 3% to 9% and makes the plant much more viable in a competitive capital market. The actual cost of coal is very important to this analysis as well. A $0.50/mmbtu change in the cost of coal results in a change of approximately 2.0% on the return on equity.



HCSLLC	2	PRX Geographic

Technology Review

The dry milling process for production of ethanol consists of 3 primary inputs, corn (or other grains or biomass), enzymes and chemicals. Of these, corn is the greatest proportion of the production costs amounting to 65-70% of the total. The corn is ground into flour and water is added to create a “mash”. Enzymes are added to the mash to convert the starch to sugar. The mash is then cooked at high temperatures to kill bacteria. After cooling, yeast is added to convert the sugar to ethanol and carbon dioxide (CO2). This process takes a couple days. Once the conversion is complete, the ethanol is then separated from the stillage. The ethanol is then dehydrated to 100% pure alcohol.

The pure ethanol is then blended with a denaturant (usually gasoline) to make it undrinkable and not subject to beverage alcohol taxes. The ethanol is then usually shipped to petroleum terminals where it is blended with gasoline for retail sale.

Another output from the process is distillers grains with solubles (DGS). This is a high-quality animal feed. This product can be marketed both wet and dry. Typically, there is not a large enough market within close proximity to the plant to sell all the DGS wet, so it is usually dried and sold as dried distillers grains with solubles (DDGS). DDGS can be a significant value to the plant. They can account for approximately 20% of the revenues generated. Also, the price relationship to corn and soybean meal as a feed allows for some opportunities to hedge risk associated with buying and selling these commodities.

Source: Renewable Fuels Association



HCSLLC	4	PRX Geographic

Production Inputs Supply and Price

Corn

Supply and Demand – Following is the ten year historical production for the 17 county Camilla study area. Corn production has ranged from 11 to 22 million bushels with an average of nearly 16 million bushels over the last 10 years. A 50 million gallon per year ethanol plant would consume approximately of 80% to 160% of this production.

Camilla, Georgia Study Area Corn Acreage, Yield and Production


County	ST	1995		1996		1997		1998		1999		2000		2001		2002		2003		2004

Planted Acres (000s)
Baker	GA		5		14		12		11		9		10		8		9		8		8
Brooks	GA		10		13		12		10		8		8		7		7		6		6
Calhoun	GA		5		8		8		8		6		6		5		5		6		5
Clay	GA		1		2		3		3		—		—		1		1		—		—
Colquitt	GA		4		6		6		6		3		3		3		3		3		3
Decatur	GA		6		10		10		12		7		6		6		8		13		12
Dougherty	GA		3		3		2		3		2		2		2		3		3		4
Early	GA		8		16		15		18		9		10		6		7		6		5
Grady	GA		20		22		21		24		15		17		14		16		16		14
Lee	GA		6		15		12		13		9		8		6		7		8		10
Miller	GA		6		18		16		19		13		14		10		12		11		9
Mitchell	GA		5		14		11		11		10		12		9		12		11		16
Randolph	GA		5		7		7		7		5		5		3		4		5		5
Seminole	GA		8		17		17		21		20		18		10		10		9		7
Terrell	GA		6		15		14		22		12		12		8		9		9		9
Thomas	GA		15		16		15		13		10		10		6		8		8		8
Worth	GA		4		8		5		9		4		6		3		4		4		4

Total			114		201		186		206		140		146		105		124		124		124
Yield (bu/acre)
Baker	GA		114.4		155.1		130.0		133.6		170.0		183.0		170.0		159.0		163.2		150.3
Brooks	GA		93.0		94.3		106.2		54.2		100.0		112.5		124.2		92.6		107.0		83.5
Calhoun	GA		136.8		134.6		140.0		125.3		155.0		147.1		157.9		141.9		177.7		180.4
Clay	GA		92.9		76.5		95.0		87.3		—		—		165.7		121.5		—		—
Colquitt	GA		89.2		78.6		100.0		96.5		100.0		97.5		139.1		92.0		115.3		128.6
Decatur	GA		115.0		114.9		125.0		109.2		130.0		127.1		160.0		129.6		143.4		140.7
Dougherty	GA		115.8		92.7		125.0		152.2		145.0		172.9		165.0		142.1		163.6		179.0
Early	GA		110.0		138.6		135.0		122.0		135.0		146.2		161.0		130.5		151.8		145.6
Grady	GA		105.8		103.7		120.0		56.9		90.0		67.0		132.9		100.4		135.0		123.4
Lee	GA		88.5		111.3		130.0		145.5		134.0		131.9		160.9		119.5		152.7		167.2
Miller	GA		139.2		149.6		140.0		125.0		134.0		147.1		158.9		137.6		149.6		153.3
Mitchell	GA		133.3		155.6		140.0		144.0		130.0		183.1		177.5		149.0		151.4		178.0
Randolph	GA		127.8		141.5		125.0		103.1		140.0		121.9		140.9		130.0		169.1		179.2
Seminole	GA		145.1		125.1		130.0		163.0		170.0		173.0		184.2		150.0		150.6		167.7
Terrell	GA		92.5		116.5		120.0		97.1		110.0		142.0		158.4		140.7		158.5		168.3
Thomas	GA		72.0		82.4		100.0		35.9		80.0		66.3		111.8		79.7		111.0		112.0
Worth	GA		89.1		98.6		105.0		42.2		100.0		98.1		140.0		124.0		154.0		136.3

Total			106.5		120.6		123.9		109.0		129.0		134.6		153.8		126.9		146.6		149.9
Production (000s bu)
Baker	GA		469		2,016		1,430		935		1,530		1,281		1,020		1,304		1,224		1,202
Brooks	GA		874		1,132		1,115		271		660		596		745		602		578		334
Calhoun	GA		643		1,050		980		689		837		500		616		610		942		830
Clay	GA		65		130		190		131		—		—		116		158		—		—
Colquitt	GA		321		393		520		193		240		156		306		230		173		270
Decatur	GA		575		1,138		1,125		819		897		572		960		985		1,721		1,618
Dougherty	GA		359		241		250		274		261		242		264		341		360		555
Early	GA		781		2,079		1,890		1,281		1,161		950		966		848		865		699
Grady	GA		1,958		2,126		2,520		370		1,260		703		1,728		1,486		1,958		1,654
Lee	GA		487		1,336		1,300		582		871		686		853		502		687		1,087
Miller	GA		724		2,544		2,100		1,437		1,675		1,397		1,430		1,514		1,496		1,380
Mitchell	GA		480		2,023		1,400		792		832		1,556		1,367		1,565		1,590		2,403
Randolph	GA		588		948		725		464		672		390		310		520		727		663
Seminole	GA		1,088		1,876		2,080		2,038		3,349		2,249		1,658		1,425		1,205		1,174
Terrell	GA		472		1,654		1,560		1,020		1,155		1,278		1,109		1,154		1,347		1,498
Thomas	GA		1,008		1,236		1,400		269		752		464		671		606		810		896
Worth	GA		312		720		483		190		320		412		350		434		647		545

Total			11,204		22,642		21,068		11,755		16,472		13,432		14,469		14,284		16,330		16,808



HCSLLC	5	PRX Geographic

Georgia corn production is located within the 17 county study area and is representative of state data. Yields in Georgia have been increasing and may be increasing at a faster rate. Additionally, corn acreage is lower than historical levels. Increasing yields and potentially more corn acres can increase the supply of local corn and reduce the amount needed from outside the state. Abundant yields (greater than 15% above trend) occur 24 percent of the time. Disastrous yields (greater than 15% below trend) occur 24 percent of the time. This yield variation is shown in the previous chart and should be considered in future planning.

CAMILLA, GEORGIA: CORN SUPPLY-DEMAND
PRXfile: PRX Camilla. GA DetailSD. PRXrev. 07-Jun-05.


Item	Crop Year																										cntrl
	90-91		91-92		92-93		93-94		94-95		95-96		96-97		97-98		98-99		99-00		00-01		01-02		02-03		03-04
	milbu		milbu		milbu		milbu		milbu		mibu		milbu		mibu		mibu		milbu		milbu		milbu		milbu		milbu
Regional Supply- Demand Factors
Carry-in		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Production		18.3		21.0		27.7		17.6		21.0		11.2		22.6		21.1		11.8		16.5		13.4		14.5		14.3		16.3
Supply		18.3		21.0		27.7		17.6		21.0		11.2		22.6		21.1		11.8		16.5		13.4		14.5		14.3		16.3
Carry-out		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Disappearance		18.3		21.0		27.7		17.6		21.0		11.2		22.6		21.1		11.8		16.5		13.4		14.5		14.3		16.3
Residual Use		1.8		1.6		2.7		1.1		2.1		0.2		2.3		2.0		0.8		1.5		1.1		1.2		1.2		1.3
Feed Use (w/o new DDG)		16.0		18.1		18.3		18.1		17.9		17.8		17.1		17.1		17.0		16.8		17.1		17.4		17.4		17.3
Barge loadings
Industrial Use		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
New industrial use
Total Use		17.8		19.7		21.0		19.2		20.0		18.0		19.5		19.2		17.8		18.3		18.2		18.6		18.6		18.7
A1 Net Exports (w/o new DDG)”		0.4		1.3		6.7		-1.6		1.0		-6.8		3.2		1.9		-6.1		-1.8		-4.8		-4.1		-4.4		-2.3

Corn produced in this area is exclusively used for livestock feeding. Due to the fact that this is a corn deficit area, up to 7 million bushels of corn have been imported to supply feed needs.



HCSLLC	7	PRX Geographic

Price – Local corn values are evaluated using data from the surrounding market area. Due to the lack of reported local data, the state farm price is used. Based on these values farm price over the 10 year historical period is estimated to be $2.67/bushel. The 5 year value is $2.34/bushel and 3 year historical value is $2.46/bushel/.

Basis Impact - New corn demand within a market can have varying impacts on the corn price. Compared to the control year, 03-04, a new ethanol plant of 50 mmgpy (18 mil bu) will raise basis by $0.012 to $0.013 per bushel depending on the local feeding of DDGS. These results are shown in the following table and chart. The complete Basis Impact analysis is attached as Appendix B.

RESULTS
CAMILLA, GEORGIA: CORN BASIS MODEL FOR ETHANOL PLANT IMPACT
PRXfile: PRX_Camilla. GA_DetailSD. PRXrev. 07-Jun-05.

Million Gallons New Ethanol

100

150

200

100

150

200

Control Year

Future Year

03-04

PCP Basis, Cents per Bushel

Basis Impact, Cents per Bushel

PCP Basis model, past years

4.0

PCP Basis model with additional ethanol, DDG fed

5.2

6.4

7.7

9.0

1.2

2.5

3.7

5.0

PCP Basis model with additional ethanol, no DDG fed

5.2

6.5

7.8

9.0

1.3

2.5

3.8

5.0

Using the historical 10 year flat price from the surrounding area and the estimated basis impact from the model, the estimated corn cost for a 50 mmgpy plant would be $2.68 per bushel ($2.666 + $0.013) and $2.69/bushel ($2.666 + $0.025) for a 100 mmgpy plant.



HCSLLC	8	PRX Geographic

Natural Gas

Natural gas prices have increased over the last few years and therefore have had a much greater impact on the cost of producing ethanol. Natural gas accounts for approximately 10% to 15% of the total production cost of ethanol. On average, natural gas prices have risen from approximately $3.00/mcf to over $6.00/mcf. Overall, this change in price has added about $0.08/gallon to the production costs of ethanol.

Comparing industrial prices for natural gas, Georgia was at or below the comparative states over the last decade with recent prices lower than the other states.

Source: Energy Information Administration, DOE


	Average
	5 Year				3 Year		1 Year
	1999-2003		2000-2004		2002-2004		2004
Georgia	$	5.08	$	5.85	$	6.30	$	7.66
Illinois	$	5.76	$	6.50	$	6.82	$	7.81
Indiana	$	6.46	$	7.18	$	7.65	$	8.58
Michigan	$	4.84	$	5.85	$	6.64	$	8.97
Ohio	$	6.51	$	7.12	$	7.71	$	8.19
United Sta	$	4.46	$	5.17	$	5.45	$	6.57

Coal

Historic coal values as reported by the DOE are shown below. These prices are average delivered values to electric utilities in Georgia.



HCSLLC	9	PRX Geographic


											Average
	1999		2000		2001		2002		2003		5 Year		3 Year

Coal $/ton	$	40.00	$	35.65	$	39.04	$	39.17	$	40.22	$	38.82	$	39.48
Supplier Margin $/ton	$	3.00	$	3.00	$	3.00	$	3.00	$	3.00
Transportation $/ton	$	4.00	$	4.00	$	4.00	$	4.00	$	4.00

Delivered Cost $/ton	$	47.00	$	42.65	$	46.04	$	46.17	$	47.22	$	45.82	$	46.48

Coal $/mmbtu	$	1.96	$	1.78	$	1.92	$	1.92	$	1.97	$	1.91	$	1.94
Limestone & Ash Removal $/mmbtu	$	0.25	$	0.25	$	0.25	$	0.25	$	0.25

Total Cost $/mmbtu	$	2.21	$	2.03	$	2.17	$	2.17	$	2.22	$	2.16	$	2.19

As the majority of coal used in Georgia comes from eastern coal mines, 12,000 btu/lb has been used to convert to a mmbtu basis. A value of $2.25/mmbtu was used in the coal scenario. This value may be low based current conditions. A $0.50/mmbtu increase in coal costs reduces the return on equity by approximately 2.0%.

Electricity

Electricity prices in Georgia are similar or below other eastern cornbelt states. Average price over the last 5 years (1999-2003) has been $0.0409/kwh. Over the last 3 years the average price has been $0.0411/kwh. The Department of Energy forecast for U.S. electricity calls for prices to remain relatively flat.

Source: Energy Information Administration, DOE



HCSLLC	10	PRX Geographic


	Average
	5 Year					3 Year		1 Year
	1999-2003		2000-2004			2002-2004		2004
Georgia	$	0.0409		$	0.0414	$	0.0411	$	0.0437
Illinois	$	0.0403		$	0.0412	$	0.0419	$	0.0436
Indiana	$	0.0394		$	0.0398	$	0.0401	$	0.0411
Michigan	$	0.0498		$	0.0495	$	0.0486	$	0.0486
Ohio	$	0.0447		$	0.0454	$	0.0467	$	0.0472
United States	$	0.0474		$	0.0487	$	0.0497	$	0.0508

Denaturant

Wholesale gasoline would be purchased to be used as a denaturant in the ethanol process. Historic Georgia dealer tankwagon (DTW) and rack gasoline prices are shown in the following chart. The 5 year (1999-2003) average price of $0.84 per gallon was used in the feasibility at a 5% gasoline blend.

Source: Energy Information Administration, DOE

Other Input Costs

Other inputs to the production process include chemicals, yeast, enzymes and water. In total these costs account for about 4% of the input costs. Of these, chemicals and enzymes are the largest components.



HCSLLC	11	PRX Geographic

Overhead Expenses

Labor Costs

For the purposes of this feasibility study, it is assumed that a 50 mmgpy natural gas plant will employ 32 people, a 50 mmgpy coal plant will employ 36 people, and a 100 mmgpy plant will employ 45 people. The breakdown of positions is listed in the following table.


	Number of Positions
	50 MMGPY	50 MMGPY	100 MMGPY
Position	Natural Gas	Coal	Natural Gas

Production	12	12	16
Maintenance	7	7	11
Laboratory	2	2	3
Material Handlers	6	10	10
Administration	5	5	5

Total	32	36	45

The estimated wages and salaries for these positions were determined from reported salaries by the US Department of Labor. Reported averages for similar positions are shown in the following table for reference.

2003 Albany, GA Area Salary and Wages


		Average Salary
Production
	First-Line Supervisors/Managers of Production and
	Operating Workers	$	48,620
Maintenance
	Compliance Officers, Except Agriculture, Construction,
	Health and Safety, and Transportation	$	40,380
	Maintenance and Repair Workers, General	$	28,230
	Welders, Cutters, Solderers, and Brazers	$	26,990
	Electrical and Electronic Engineering Technicians	$	56,230
	Electrical and Electronic Engineering Technicians	$	56,230
Laboratory
	Chemists	$	48,420
Material Handlers
	Laborers and Freight, Stock, and Material Movers, Hand	$	17,400
Administration
	General and Operations Managers	$	100,000
	Industrial Production Managers	$	81,580
	Bookkeeping, Accounting, and Auditing Clerks	$	26,180
	Office Clerks, General	$	19,910

Source: U.S. Department of Labor, Bureau of Labor Statistics

Production – Production positions consist of 4 shifts for a total of 12 to 16 employees. As shown above, the 2003 average salary for first line production supervisors is $48,620 per year. The other positions are estimated to be 15% less than the supervisor. The total labor expense for the production positions including taxes and benefits is approximately $735,000 to $967,000.



HCSLLC	12	PRX Geographic

Maintenance – The 7 to 11 maintenance positions include a manager, boiler operator, welder, electrician, electronic technician and general workers. The average 2003 salaries for these positions are shown in the previous table. The total labor expense for maintenance positions is estimated to be $352,000 to $520,000.

Laboratory – The lab staff consists of a manager and assistants. The manager’s comparable position is shown in the previous table. The assistant salary is approximately 33% less than the manager. The total expense for lab personnel is approximately $113,000 to $158,000.

Material Handlers – The personnel required for material handling includes rail attendants, truck attendants, a grain sampler and entry level floaters. The average salary for material movers in this market is approximately $17,400. The other positions are estimated from this salary for a total expense of approximately $134,000 to $233,000.

Administration – The administrative positions include a general manager, plant manager, commodity specialist, bookkeeper, and secretary/general clerk. Again, 2003 average salaries for comparable positions are shown in the previous table. Based on these values, the total administrative labor expense is estimated to be about $382,000.

Maintenance

Maintenance costs are estimated at $500,000 annually for a 50 mmgpy plant and $650,000 for a 100 mmgpy plant. A 50 mmgpy coal powered plant maintenance cost is $700,000. As with any production facility these costs can vary widely from year to year. However, we believe this to be a reasonable value for modeling purposes.

General and Administrative

General and administrative costs include property taxes, insurance, fees for professionals (i.e., risk management services, accountants, attorneys) and other costs of operating an office. In the feasibility model these costs are estimated at $0.0348 per gallon of nameplate capacity. These are costs that will need to be better defined in a business plan.

All overhead expenses reflect an inflation rate of 3.0% per year. These are costs that generally will increase. The other costs of production and the value of outputs will not necessarily reflect a nominal increase in value due to being commodities.



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Capital Requirements

To achieve a 45% equity to asset ratio, a 50 mmgpy project will require an equity investment of $36,450,000. A 100 mmgpy plant would require $58,950,000 of equity and a 50 mmgpy coal plant would require $47,250,000 at this ratio. Equity capital will be spent first. Debt capital will then be accumulated until plant startup. The following table shows the usage of capital for a 50 mmgpy plant. Capital usage for the 100 mmgpy and 50 mmgpy coal plants are included in the pro forma financials in the appendices.

CAMILLA, GEORGIA
50 MMGPY NATURAL GAS

CAPITALIZED COST SUMMARY


Capital costs

Plant, Buildings & Equipment
	Plant Cost	$	58,884,000.00
	Buildings	$	300,000.00
	Equipment	$	575,000.00

	Total			$	59,759,000.00

Site Costs
	Improvements	$	3,890,000.00
	Ulitities	$	1,880,000.00
	Rail	$	2,500,000.00
	Land	$	750,000.00

	Total			$	9,020,000.00

Other Costs
	Fees & Interest	$	720,000.00
	Pre Production Costs	$	0.00
	Organizational & Startup	$	1,850,000.00
	Misc & Contingencies	$	1,000,000.00

	Total			$	3,570,000.00

Working Capital (Inventory)				$	7,450,000.00


Total				$	79,799,000.00

Accumulated Interest				$	852,560.00


Total Debt and Equity Investment				$	80,651,560.00

Plant

The plant cost is a guaranteed amount by the construction firm chosen. This figure includes buildings and equipment directly related to the ethanol production facility. This cost does not include site improvement, utility construction and hook-up, rail improvements, etc. The plant, buildings and equipment cost for a 100 mmgpy plant would be $103,000,000. For a coal powered 50 mmgpy plant, the cost would be $84,000,000.



HCSLLC	14	PRX Geographic

Site Costs

Site improvements include dirt work, entry and exit access and other costs related to getting the site prepared for plant construction. Any additional buildings unrelated to the plant would be included in these costs. Road access costs would also be included here.

Utilities are readily available. Natural gas connection would be the greatest share of these costs. Costs associated with utilities would include site infrastructure and connecting to providers.

Rail costs are typically estimated at $2,500,000. These costs include ladder tracks and switches. For a 100 mmgpy plant, an additional $1,000,000 is added to these costs.

Land is estimated at $750,000.

Other Costs

Fees and interest are estimated to be $720,000 to $1,000,000 depending on plant size and energy source.

Organizational and start-up costs are estimated to be $1,850,000 to $1,950,000. This includes funds for equity fundraising and associated filing and legal costs as well as expenses prior to plant start-up.

A contingency of $1,000,000 to $2,000,000 is included to cover any unexpected costs incurred during the planning and construction phases.

Working Capital

Plant start-up costs, including purchasing of supplies and grain will need available working capital. Additionally, banks will require a certain amount of working capital in their loan covenants. This $7,450,000 will cover the first month’s expenses including inventories. For a 100 mmgpy plant, the working capital is estimated at $11,000,000.

Accumulated Interest

As equity investment is used up through the construction process, the entity will begin acquiring debt. This debt and interest is accumulated and rolled into the loan package. The accumulated interest is reflected in the principle loan amounts and repaid over the life of the loan.



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Markets for Outputs

Ethanol

Production and consumption of ethanol continues to grow in the United States. Specifically, the markets in large population centers will see growth over the next few years. Crude oil prices have increased dramatically over the last year and the outlook is for continued high levels. This is an impact from increasing Chinese demand and the “terror” premium.

Ethanol production and consumption has been steadily increasing over the last 6 years. Within the last 12 months the increase has leveled off however, new ethanol plants will come online over the next year increasing production again.

Ethanol price histories for the nearby regional markets are presented in the following chart and table.



HCSLLC	16	PRX Geographic


Ethanol Average Prices
										Recent
		5 Year		5 Year		3 Year		1 Year		52 Weeks
State	City	1999-2003		2000-2004		2002-2004		2004		06/02/05

LA	New Orleans	$	1.26	$	1.41	$	1.41	$	1.73	$	1.66
TN	Memphis	$	1.27	$	1.42	$	1.42	$	1.74	$	1.67
TN	Nashville	$	1.27	$	1.42	$	1.42	$	1.75	$	1.67
VA	Richmond	$	1.27	$	1.41	$	1.42	$	1.74	$	1.67

	Average	$	1.27	$	1.41	$	1.42	$	1.74	$	1.67

Source: Hart’s Renewable-Fuel News

Ethanol markets continue to develop. Production and consumption have tracked closely and are increasing. Transportation logistics are being addressed by the railroads creating a more efficient flow of product to the coastal markets. A renewable fuels standard, oxygenate requirements and high crude oil prices are all factors which can continue to encourage ethanol consumption and production. The five year (1999-2003) average price is $1.27/gallon for the markets of New Orleans, LA; Memphis, TN; Nashville, TN; and Richmond, VA; assuming $0.04 freight, a price of $1.23/gallon is used for this study. Over the last year, ethanol price has been significantly higher than this 5 year average. The banking industry is not comfortable that these high levels will be sustained. Therefore the five year period from 1999-2003 is used in this study.



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DDGS

DDGS markets are both regional and national. With the advancement of research into the feeding rations of poultry and swine, these markets will continue to grow. Some local markets appear readily available for the use distiller’s grains. Based on historic animal numbers and corn feeding rates, there is potential demand for DDGS of approximately 74,000 tons within the study area. The potential demand is less than half the production of a 50 mmgpy plant. Therefore additional markets will need to be found. The following tables show the corn supply-demand for the last 14 years and potential DDGS consumption for this area.

CAMILLA, GEORGIA: CORN SUPPLY-DEMAND & DDG CONSUMPTION POTENTIAL
PRXfile:PRX_Camilla, GA_DetailSD. PRXrev. 07-Jun-05.


Crop Item	Crop Year (Sep-Aug)
	90-91		91-92		92-93		93-94		94-95		95-96		96- 97		97-98		98-99		99-00		00- 01		01-02		02-03		03-04

CORN Area planted (thou ac)		216		206		265		218		197		114		201		186		206		140		146		105		124		124
Area harvested (thou ac)		200		193		247		196		183		105		188		170		108		128		100		94		113		111
Yield (bu/ac)		91.5		109.1		112.1		89.8		115.1		106.5		120.6		123.9		109		129		134.6		153.8		126.9		146.6
	milbu		milbu		milbu		milbu		milbu		milbu		milbu		milbu		milbu		milbu		milbu		milbu		milbu		milbu

Carryin		0		0		0		0		0		0		0		0		0		0		0		0		0		0
Production		18		21		28		18		21		11		23		21		12		16		13		14		14		16
Supply		18		21		28		18		21		11		23		21		12		16		13		14		14		16
Carryout		0		0		0		0		0		0		0		0		0		0		0		0		0		0
Disappearance		18		21		28		18		21		11		23		21		12		16		13		14		14		16
of which
Residual Use		2		2		3		1		2		0		2		2		1		1		1		1		1		1
Feed Use		16		18		18		18		18		18		17		17		17		17		17		17		17		17
of which,
Dairy																		0.8		0.8		0.8		0.8		0.8		0.8
Beef cattle																		1		0.9		1		1		1		1
Hogs																		2.1		2.1		2.1		2.2		2.2		2.2
Poultry																		13.1		13		13.2		13.4		13.5		13.4
Other																		0		0		0		0		0		0
Exports (+) or Imports (-)
Net of Feed & Residual		0.4		1.3		6.7		-1.6		1		-6.8		3.2		1.9		-6.1		-1.8		-4.8		-4.1		-4.4		-2.3

DDG Consumption Potential
	000mt		000mt		000mt		000mt		000mt		000mt		000mt		000mt		000mt		000mt		000mt		000mt		000mt		000mt
Dairy																		12		12		12		12		12		12
Beef Cattle																		14		14		14		15		15		14
Hogs																		11		11		11		12		12		11
Poultry																		35		34		35		36		36		35
Other																		0		0		0		0		0		0
Total																		72		71		73		74		74		74

A good historical data series does not exist for distiller’s grain, therefore a estimation of price has been made based on corn price relationships in other markets. For this study a price of $105/ton was used for the base scenario.

CO₂

CO₂can be captured and sold as another by-product of the ethanol process^.Due to the Midwest market being well supplied, this analysis does not assume the capturing of CO₂. However, assuming a CO2 market paying $10/ton, the revenue would increase over $1,000,000 and the average return on equity over 3%.



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Sales and Marketing Plan

Ethanol

The ethanol from this plant is assumed to be marketed through an ethanol marketer. There is a cost associated with this service and is included in the pro forma financials. This cost is assumed to be a 1% fee on the sales price of the ethanol. Payment for the ethanol will be made within 15 days of shipment from the plant. The estimated fees are approximately $650,000 per year for a 50 mmgpy plant and $1,300,000 per year for a 100 mmgpy plant. This will vary by the price of ethanol.

DDGS

As with ethanol, the DDGS markets are both regional and national. In addition, there is the possibility of some local marketing. However, the cost of staffing a position to handle the marketing of the relatively small amount of local demand exceeds what would be paid to a marketing firm. For purposes of this study it is assumed that 100% of the DDGS produced will be sold through a marketer. If possible, an agreement should be reached that would allow local sales if the market is available. The fee paid to a marketer would be 2% FOB. These fees amount to approximately $350,000 to $700,000 per year, again depending on the price of DDGS and plant size.

CO₂

CO₂ in this analysis will not be sold.



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Pro Forma Financials

Production Cost Summary

The Production Cost Summary details the production process inputs and outputs. This feasibility has made several assumptions related to the cost of inputs and the value of outputs. The table below shows the assumed values of the key components. All values are net to the plant. For the 100 MMGPY scenario, the corn price used was $2.69/bushel.

Natural Gas 50 MMGPY
Pro Forma Financials
Assumed Values


Inputs				Outputs
	Corn ($/bu)	$	2.68		Ethanol ($/gal)	$	1.23
	Natural Gas ($/mcf)	$	5.08		DDGS ($/ton)	$	105.00
	Electricity ($/kwh)	$	0.0409

Initial Capital

As discussed previously, the initial capital to construct and begin operations of this plant is approximately $81,000,000 for a 50 mmgpy natural gas plant, $131,000,000 for a 100 mmgpy natural gas plant, and $105,000,000 for a 50 mmgpy coal plant. Of this, approximately $35,000,000 to $60,000,000 would be equity capital resulting in an equity to asset ratio of 45%.

Income Statement

During the approximately 15 months prior to plant startup, expenses would be incurred for personnel, travel and meetings. These expenses have been estimated to be $1,850,000 annually.

Balance Sheet

The Balance Sheet does not consider distributions to owners. Therefore, owner’s equity grows over time, as does cash. The distribution of earnings to the owner’s needs to be managed in light of actual earnings generation and cash needs.

Return on Investment

Average return on investment is low for a 50 mmgpy plant at 14.1% achieving only 14.8% by year 5. The returns for a 100 mmgpy plant as well as a coal powered 50 mmgpy plant are better at 23.6% and 16.8% respectively with year 5 returns of 24.3% and 17.4%.



HCSLLC	20	PRX Geographic

Comparative Plant and Sensitivity Analysis

Comparative State Returns

Plant returns in other states were compared with the proposed plant. All input costs are 5 year state averages, except for corn which is a 10 year average. Georgia values were taken from this feasibility study. Ethanol price is based on a New York value of $1.40/gallon less estimated transportation costs to arrive at a plant gate price relative to an east coast market. DDGS values are estimates based on reported regional values.

State Ethanol Model Comparative Returns
New York Market


	GA		IA		IL		MI		PA
Inputs
Corn (per bu)	$	2.68	$	2.26	$	2.40	$	2.34	$	2.85
Natural Gas (per mcf)	$	5.08	$	5.53	$	6.18	$	5.29	$	7.18
Electricity (per kwh)	$	0.0409	$	0.0403	$	0.0493	$	0.0492	$	0.0591
Denaturant (per gallon	$	0.84	$	0.88	$	0.88	$	0.85	$	0.84
Outputs
Ethanol-NY ($/gallon)	$	1.40	$	1.40	$	1.40	$	1.40	$	1.40
Transportation ($/gallon)	$	0.11	$	0.13	$	0.10	$	0.10	$	0.05
Net to Plant ($/gallon)	$	1.29	$	1.27	$	1.30	$	1.30	$	1.35
DDGS ($/ston)	$	105.00	$	85.00	$	95.00	$	95.00	$	130.00



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From these returns, we see this plant is at a $0.04 to $0.08 per gallon disadvantage to cornbelt plants going to a New York market. As would be expected, this plant will need to focus on southeast ethanol markets to have a competitive advantage.

Sensitivity Analysis

The pro forma models were tested for sensitivity to corn, DDGS and ethanol price changes. In addition to the base assumptions, eight additional scenarios were tested. The results are shown in the tables below.

Natural Gas 50


			DDGS Price ($/ston)
			$95.00			$105.00			$115.00
			Corn Price ($/bu)
			$2.48			$2.68			$2.88
	$	1.13		5.4	%		-0.4	%		-6.3	%
Ethanol Price ( $ /gallon)	$	1.23		20.0	%		14.1	%		8.2	%
	$	1.33		34.5	%		28.7	%		22.8	%

Natural Gas 100


			DDGS Price ($/ston)
			$95.00			$105.00			$115.00
			Corn Price ($/bu)
			$2.49			$2.69			$2.89
	$	1.13		12.8	%		5.6	%		-1.7	%
Ethanol Price ( $ /gallon)	$	1.23		30.8	%		23.6	%		16.3	%
	$	1.33		48.8	%		41.6	%		34.3	%

Coal 50


			DDGS Price ($/ston)
			$95.00			$105.00			$115.00
			Corn Price ($/bu)
			$2.48			$2.68			$2.88
	$	1.13		10.1	%		5.6	%		1.0	%
Ethanol Price ( $ /gallon)	$	1.23		21.3	%		16.8	%		12.3	%
	$	1.33		32.6	%		28.0	%		23.5	%



HCSLLC	22	PRX Geographic


Tom Tucker		Doug Schultz
John Stewart & Associates		John Stewart & Associates
12810 Kings Forest		701 Kansas Ave. Suite C
San Antonio, TX 78230		Atchison, KS 66002
(800) 245-6408		(877) 367-1530
TT@jpsi.com		dschultz@jpsi.com


Income Statement			20
Balance Sheet			20
Return on Investment			20
Comparative Plant and Sensitivity Analysis			21
Comparative State Returns			21
Sensitivity Analysis			22

Appendices: