|By DOUG SCHMITZ
CEDAR RAPIDS, Iowa — In a move that company officials said would position Cedar Rapids as the world’s leading corn-processing capital, Penford Corp. started construction last week on a $42 million ethanol plant, slated for production by the end of 2007.
“We believe this investment will transform our company for our shareholders and for all our stakeholders,” said Tom Malkoski, Penford Products Co. president and CEO, at a groundbreaking ceremony last week at the plant, which has been an industrial fixture on the city’s southwest side for more than 111 years.
Established in 1851, Penford Products, a division of Penford Corp., said the new ethanol facility would be a part of the company’s overall plan to make better use of its corn-grinding capacity as it enters the growing biofuels industry.
The Centennial, Colo.-based parent company develops, manufactures and markets specialty natural-based ingredient systems for various applications, including papermaking, textiles and food products, with nine locations in the U.S., Australia and New Zealand. The Cedar Rapids plant makes corn starch for the paper industry.
Formerly named Penick & Ford, Penford will construct the 40-million-gallon-capacity facility within its existing plant at a total construction cost of $145 million.
Currently, Iowa remains the nation’s leading ethanol producer, generating over 1 billon gallons a year, according to the Iowa Renewable Fuels Assoc.
With new projects like Penford’s new ethanol plant slated for the city, Penford joins Archer Daniels Midland Co. (ADM), Cargill, Inc. and Genencor, Inc. as the four corn-processing juggernauts in Cedar Rapids that will consume 1 million bushels of corn each day, city officials recently estimated.
In addition, Penford’s planned expansion coincides with ADM’s scheduled 275-million gallon addition of its $348 million ethanol manufacturing plant, slated to finish in 2008.
As a result, the addition of Penford’s new facility would make Cedar Rapids the largest corn-grinding city in the world, processing more corn on a daily basis than any other city, according to Priority One, the city’s top economic development group.
In just two years alone, the city of Cedar Rapids has racked up nearly $800 million in farm-related production investment projects, which could add about 325 new jobs.
Malkoski said Penford is already progressing and obtaining project milestones, with three industry-leading firms contracting for the new facility’s design, engineering and construction to help assure that the process and cost profile would be optimal for the site.
“We have received requisite permits for construction, and water and air emissions,” he said. “Full project funding was obtained on Oct. 5 through a $145 million credit facility with several leading commercial banks.
“The credit agreement expanded our available credit by $40 million to finance the construction of the ethanol facility, and to continue to support growth in our food businesses,” he added.
Penford President and General Manager Tim Kortemeyer said obtaining the air permit was a major milestone for the company.
“The permit allows the Cedar Rapids facility to increase grind capacity by 30 percent over historical levels,” he said. “The ethanol facility is being designed to efficiently produce between 25 and 45 million gallons of ethanol per year.
“The increase in grind rate, along with the range of ethanol production, should allow for flexibility in the product mix of industrial starch and ethanol based upon market conditions and customer needs,” he said.
Malkoski added that the fermentation platform would also extend the potential of the Cedar Rapids bio-processing asset by expanding our range of starch modification reactions and by opening up opportunities for high value added industrial chemicals over the next several years.
“Penford’s entry into ethanol will create value for our shareholders from more complete utilization of existing facilities and resources,” he said. “We will be able to process more corn by utilizing existing assets more intensively and plan to convert a portion of our current production to ethanol use.
“This initiative also provides an attractive entry into this growing market through a lower capital investment and shorter time to market compared with many ethanol projects,” he said.
Since Penford has most of the new facility’s infrastructure already in place within the factory, Steven Cordier, Penford senior vice president and CFO, said the plant’s central location near important rail and ground transport arteries would be important for sufficient grain handling, separation processes, utilities and logistics capabilities.
On the day of Penford’s groundbreaking for the new ethanol plant, officials announced that the company closed its fiscal year with higher profits and revenue, reaching $318.4 million from last year’s $296.8 million.
This farm news was published in the Dec. 6, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.