CE+P announces marketing partner for its ethanol
BRAWLEY – California Ethanol and Power announced Thursday it has found a likely partner to handle marketing and distribution of the ethanol produced at its planned Sugar Valley Energy facility.
CE+P said it has agreed to terms on a letter of intent for global agricultural cooperative CHS Inc. to be the exclusive marketer and distributor of ethanol produced at Sugar Valley Energy, the new 160acre energy campus planned within the 5,000-acre Keystone Industrial Complex near Brawley.
“This letter of intent represents substantial agreements on the terms and conditions of the relationship between CE+P and CHS,” said CE+P spokeswoman Barbara Caruso. “The final agreement is with the lawyers on both sides, and we expect it to be completed soon.”
The Sugar Valley plant is projected to produce up to 68 million gallons of fuel-grade ethanol from sugarcane yearly. Sugar Valley would use the molasses created as a byproduct from the process to produce up to 740 million cubic feet of bio-methane gas per year and use the juiced sugarcane feedstock to generate up to 49 megawatts of electricity.
The site will also have a wastewater treatment plant capable of processing all wastewater from the property’s facilities, as well as 1 million gallons more from nearby businesses and homes.
CE+P President and CEO Dave Rubenstein has said he hopes to break ground on project before year’s end and begin production by 2023.
“The potential for an arrangement with global leader CHS is a significant step forward for Sugar Valley Energy, confirming the market potential for sugarcane ethanol,” Rubenstein said in release. “Highly respected,
CHS has the expertise to bring our low-carbon ethanol to the markets where it will have the most positive impact.”
The county Board of Supervisors originally approved Rubenstein’s biofuel plant in September 2013. A year ago, the board, by a 3-2 vote, granted Rubenstein an extension on a $625,000 loan it awarded him from public benefit funding in 2015. At that time, he estimated it would take $900 million to complete the project.
That estimate has since been revised to $950 million.
“Our goal is to reach financial close this coming October,” Caruso said. “All necessary permits have already been granted for this project, so financing represents the final step prior to groundbreaking.”
In May, CE+P announced it had reached a target price agreement with developer MasTec Power Corp. for $610 million to build the energy campus. A target price contract, as the name suggests, involves parties agreeing upon an expected price. If the project comes in under budget, the parties typically split the savings. If it comes in over budget, they share the additional costs.
Caruso said once the plant is complete, it will take about six months for it to ramp up to full capacity. The ethanol would be processed from up to 50,000 acres of sugarcane secured through long-term agreements with local farmers. CE+P said sugarcane is well suited for growth in the Imperial Valley’s climate. It has a water demand similar to alfalfa, one of the region’s dominant crops.
“We currently have enough growers needed to finance the project and move it into construction,” Caruso said. “We have now begun recruiting the second wave of growers who would begin growing sugarcane in the later stages of the construction.”
Based on current market conditions, the 15-year agreement between CE+P and CHS would represent about $170 million in annual revenue for Sugar Valley Energy, Caruso said.
CHS, owned by farmers, ranchers and cooperatives, produces 260 million gallons of fuel-grade ethanol and markets 900 million gallons of ethanol each year, making it one of the nation’s largest suppliers of ethanol-enhanced gasoline and the largest U.S. retailer of E85 ethanol.
“As an energy provider for rural America, CHS continues to identify new technologies and new partners to help enhance reliable energy supply for our owners from diverse sources, while minimizing environmental impact,” said Brian Schouvieller, senior vice president, CHS Global Grain Marketing. “We look forward to collaborating with California Ethanol and Power and Imperial Valley sugarcane growers on this initiative.”
“This deal with CHS is more than a win for California Ethanol + Power, it’s a longterm win for the community, environment and the future of low-carbon fuels,” said Ian Parker, managing director, Royal Bank of Canada, which is leading the project financing for California Ethanol and Power’s Sugar Valley Energy. “CE+P is continuing to make positive strides in moving this valuable project forward,”
California currently imports more than 1.2 billion gallons of ethanol each year, CE+P said.