South Bend to invest in ethanol plant
SOUTH BEND — The city is about to enter the corn oil business.
Under the terms of a proposed development agreement, the Department of Community Investment plans to buy a corn oil extraction unit and then lease it back to Noble Americas for no less than $100,000 per year over five years.
The cost of the unit is about $2 million, and the money would come out of the Airport Tax Increment Finance Area, which includes South Bend Regional Airport and the Studebaker corridor.
The agreement, which is under negotiation, would include clawbacks in the case Noble Americas does not create the expected number of jobs, Assistant Executive Director of Community Investment Chris Fielding said.
Ownership of the unit would pass to Noble Americas at the end of the lease period, Fielding said.
Noble Americas is the new owner of the ethanol plant, which has been idle since late 2012, when the previous owner, New Energy, declared bankruptcy.
"This was part of the method that we used to really attract Noble Americas to the plant," Fielding said. "So it's not something where we came in retroactively and said, 'Now that you've purchased it, we'll participate.' Our participation was promised upfront."
From a business standpoint, producing corn oil makes sense at the plant in that it makes the plant more sustainable and better able to withstand fluctuations in the ethanol market, Bernie Punt, a representative for Noble Americas, said.
"Corn oil (is) very high value, and it can be sold for lots of different purposes," Punt said, including as cooking oil, as a key ingredient in some margarines and as a feedstock for biofuels.
Punt said he expects corn oil production to generate additional revenue of between $4 million and $6 million per year at the plant.
Based in Connecticut, Noble Americas bought the shuttered ethanol plant back in July. The company paid about $8 million for the plant and is in the process of spending another $28 to upgrade it and get it ready for production.
That's about $16 million more than the company had planned to spend, Punt said. But he said the age of the plant warranted a larger upfront investment.
"There has been a tremendous amount of progress in the technology that's used to make ethanol ... over the last 10 to 15 years, so we say there's a lot of low-hanging fruit out at the ethanol plant," Punt said. "So that's some of the reason we've decided to invest more now before the start-up of the plant."
Punt said Noble Americas expects to restart the plant sometime in July. He said the company plans to hire between 50 and 65 people to work there at an average wage of about $27 per hour.
Looking ahead, the company plans to invest another $12 million in the operation within the next four years, Punt said, for a total investment approaching $50 million.
The Department of Community Investment is expected to present a final version of the development agreement to the Redevelopment Commission for approval in the coming weeks.
EBlasko@SBTinfo.com
574-235-6187
Twitter: @ErinBlasko
