Midwest Agri-Products A U.S. Producer since 1957 Company Prospectus and Investor Information MidWest Agri-Products has traditionally been a large grain producer, having produced 75 million bushels in 2007. However, U.S. midwestern agriculture is in the midst of a rapid shift from being primarily a food producer to a major source of energy. High oil prices in the last three years have brought huge investments in ethanol plants throughout the Midwest. MidWest is a growing agribusiness therefore facing a big decision: should we pursue ethanol? If so, what are the best strategies? We believe we need to begin looking into ethanol production. The President has called for increased production and use in the coming years, and not only do we foresee a rush to investment by our competitors, but we also want to be a part of a venture that helps our nation to meet its energy needs and ease the dependence on foreign oil. We consider ourselves a green company in that we care about the natural environment, including the air and water. We view climate change issues as strategically important to U.S. industry and consider them an important element in our corporate strategy and business planning and development. Investors and other companies see us in this light as well. We recently made Fortune s list of America's Most Admired Companies, with green being one of the distinguishing qualities. We are also proud to say we have been named a Fortune Green Giant. Green Giants go beyond what the law requires to operate in an environmentally conscious manner. We value our corporate reputation and consider ourselves a socially responsible company. Many socially responsible investors continue to invest in our company.
Individual Pre-Assignment Assuming you were hired to assist MidWest Agri-Products in its decision, investigate the current issues, both business and social, surrounding ethanol, considering various stakeholders and raw material sources. Summarize your research on the current issues in a written document (suggestion: 1-3 pages).
Capacity * Start Date Plant Name City State Feedstock Abengoa Bioenergy Corporation York NE Corn 55 Dec-93 Abengoa Bioenergy Corporation Colwich KS Milo / Corn 25 Dec-02 Abengoa Bioenergy Corporation Portales NM Milo 30 Jul-05 Abengoa Bioenergy of Nebraska Ravenna NE corn 88 Jul-07 Absolute Energy LLC St. Ansgar IA corn 100 Feb-08 Ace Ethanol LLC Stanley WI Corn 42 Jun-02 Adkins Energy LLC Lena IL Corn 43 Aug-02 Advanced BioEnergy Fairmont NE corn 100 Oct-07 Ag Processing Inc. Hastings NE Corn 52 1992 Agri-Energy LLC Luverne MN Corn 21 Feb-99 Al-Corn Clean Fuel Claremont MN Corn 36 May-96 AltraBiofuels Coshocton Ethanol LLC Coshocton OH Corn 60 Oct-07 Amaizing Energy LLC Denison IA Corn 55 Sep-05 Andersons Albion Ethanol LLC, The Albion MI Corn 55 2006 Andersons Clymers Ethanol LLC, The Clymers IN Corn 110 May-07 Andersons Marathon Ethanol LLC, The Greenville OH Corn 110 Mar-08 Archer Daniels Midland Walhalla ND Corn 28 N/A Archer Daniels Midland Cedar Rapids IA Corn 420 N/A Archer Daniels Midland Columbus NE Corn 100 N/A Archer Daniels Midland Marshall MN Corn 40 N/A Archer Daniels Midland Decatur IL Corn 290 N/A Archer Daniels Midland Peoria IL Corn 100 N/A Archer Daniels Midland Clinton IA Corn 237 N/A Arkalon Energy LLC Liberal KS corn/milo 110 Dec-07 Aventine Renewable Energy Inc. Pekin IL Corn 160 1981 Badger State Ethanol LLC Monroe WI Corn 55 2002 Big River Resources LLC West Burlington IA Corn 52 Apr-04 Biofuel Energy Corp Wood River NE corn 110 Mar-07 Biofuel Energy Corp Fairmont MN corn 110 Jan-08 Blue Flint Ethanol LLC Underwood ND Corn 50 Feb-07 Bonanza BioEnergy LLC Garden City KS corn/milo 55 Oct-07 Bushmills Ethanol LLC Atwater MN Corn 49 Dec-05 Cargill Inc. Eddyville IA Corn 35 N/A Cargill Inc. Blair NE Corn 85 N/A Cascade Grain Products LLC Clatskanie OR Corn 108 Dec-07 Castle Rock Renewable Fuels LLC Necedah WI corn 50 fourth quarter 2007 Center Ethanol Company LLC Sauget IL corn 50 Feb-08 Central Indiana Ethanol LLC Marion IN corn 40 Mar-07 Central Minnesota Ethanol Co-op Little Falls MN Corn 20.5 Jan-99 Chief Ethanol Fuels Inc. Hastings NE Corn 62 1985 Chippewa Valley Ethanol Company LLL Benson MN Corn 45 1996 Commonwealth Agri-Energy LLC Hopkinsville KY Corn 33 Mar-04 Corn LP Goldfield IA Corn 50 Dec-05 Corn Plus LLLP Winnebago MN Corn 44 Nov-94 Cornhusker Energy Lexington LLC Lexington NE corn 40 Dec-05 Dakota Ethanol LLC Wentworth SD Corn 50 2001
Dean CEG LLC Burns Flat OK milo/molasses/corn 2 Aug-06 DENCO LLC Morris MN Corn 24 Sep-99 Didion Ethanol LLC Courtland WI corn 50 N/A E Energy Adams LLC Adams NE corn 50 Nov-07 East Kansas Agri-Energy LLC Garnett KS Corn 35 Jun-05 Elkhorn Valley Ethanol LLC Norfolk NE Corn 40 Sep-07 ESE Alcohol Leoti KS Seed Corn 1.5 Jan-91 Front Range Energy LLC Windsor CO Corn 40 May-06 Glacial Lakes Energy LLC Watertown SD Corn 50 Dec-00 Golden Cheese Co. of California Corona CA Cheese Whey 5 Jan-85 Golden Grain Energy LLC Mason City IA Corn 80 Dec-04 Golden Triangle Energy Co-op Inc. Craig MO Corn 20 Feb-01 Grain Processing Corp. Washington IN Corn 20 N/A Grain Processing Corp. Muscatine IA Corn 10 N/A Granite Falls Energy LLC Granite Falls MN Corn 50 Nov-05 Greater Ohio Ethanol LLC Lima OH corn 54 Nov-07 Green Plains Renewable Energy Inc. Shenandoah IA Corn 50 Jun-07 Hawkeye Renewables Iowa Falls IA Corn 100 Nov-04 Hawkeye Renewables Fairbank IA Corn 115 Jun-06 Heartland Corn Products Winthrop MN Corn 95 N/A Heartland Grain Fuels LP Huron SD Corn 30 Nov-99 Heartland Grain Fuels LP # Aberdeen SD Corn 8 N/A Heron Lake BioEnergy LLC Heron Lake MN Corn 50 N/A Husker Ag LLC # Plainview NE Corn 27 Mar-03 Idaho Ethanol Processing LLC Caldwell ID Potato Waste/Corn 5 Mar-07 Illinois River Energy LLC Rochelle IL Corn 50 Nov-06 Iroquois Bio-Energy Company LLC Rensselaer IN Corn 40 Jan-07 KAAPA Ethanol LLC Minden NE Corn 40 Nov-03 Kansas Ethanol LLC Lyons KS milo/corn 55 N/A Levelland/Hockley County Ethanol LL Levelland TX corn/milo 40 N/A LifeLine Foods, LLC St. Joseph MO Corn 40 N/A Lincolnland Agri-Energy LLC Robinson IL Corn 45 Jul-04 Lincolnway Energy LLC Nevada IA Corn 50 May-06 Little Sioux Corn Processors LP Marcus IA Corn 52 Apr-03 Marquis Energy LLC Hennepin IL corn 100 N/A Marysville Ethanol LLC Marysville MI corn 50 N/A Merrick/Coors Golden CO Beverage Waste 3 N/A MGP Ingredients Inc. Atchison KS Corn / Wheat Starch 4 N/A MGP Ingredients Inc. Pekin IL Corn / Wheat Starch 78 Feb-80 Mid-Missouri Energy Malta Bend MO Corn 40 Jan-05 Midwest Grain Processors LLC Riga MI Corn 57 Feb-07 Midwest Grain Processors LLC Lakota IA Corn 100 Nov-02 Midwest Renewable Energy LLC Sutherland NE Corn 25 N/A Minnesota Energy Buffalo Lake MN Corn 18 N/A Nebraska Energy LLC Aurora NE Corn 50 1995 Nesika Energy Scandia KS corn 10 N/A New Energy Corp. South Bend IN Corn 102 N/A
North Country Ethanol LLC Rosholt SD Corn 20 Mar-05 Otter Tail Ag Enterprises LLC Fergus Falls MN corn 57.5 N/A Pacific Ethanol Inc. Madera CA Corn 35 Oct-06 Pacific Ethanol-Columbia LLC Boardman OR corn 35 Jun-07 Panda Hereford Ethanol LP Hereford TX corn 100 fourth quarter 2007 Parallel Products Louisville KY Beverage Waste 4 N/A Parallel Products Rancho Cucamonga CA Beverage Waste 4 N/A Penford Corporation Cedar Rapids IA corn 40 end of 2007 Permeate Refining Inc. Hopkinton IA Sugars & Starches 1.5 N/A Phoenix Bio Industries Goshen CA corn 25 Sep-05 Pinal Energy LLC Maricopa AZ Corn 55 N/A Pine Lake Corn Processors LP Steamboat Rock IA Corn 20 Mar-05 Poet Biorefining-Alexandria Alexandria IN corn 65 N/A Poet Biorefining-Ashton Ashton IA Corn 55 Mar-04 Poet Biorefining-Big Stone Big Stone City SD Corn 75 2002 Poet Biorefining-Bingham Lake Bingham Lake MN Corn 30 1997 Poet Biorefining-Caro Caro MI Corn 50 2002 Poet Biorefining-Chancellor Chancellor SD Corn 100 Mar-03 Poet Biorefining-Coon Rapids Coon Rapids IA Corn 54 2002 Poet Biorefining-Corning Corning IA corn 60 May-06 Poet Biorefining-Emmetsburg Emmetsburg IA Corn 50 Apr-05 Poet Biorefining-Glenville East Albert Lea MN Corn 45 1999 Poet Biorefining-Gowrie Gowrie IA corn 60 summer 2006 Poet Biorefining-Groton Groton SD Corn 50 May-03 Poet Biorefining-Hanlontown Hanlontown IA Corn 55 Feb-04 Poet Biorefining-Hudson Hudson SD Corn 55 May-04 Poet Biorefining-Jewell Jewell IA Corn 60 Mar-06 Poet Biorefining-Laddonia Laddonia MO Corn 45 N/A Poet Biorefining-Lake Crystal Lake Crystal MN Corn 56 May-05 Poet Biorefining-Leipsic Leipsic OH corn 60 fall 2007 Poet Biorefining-Macon Macon MO Corn 36 2000 Poet Biorefining-Mitchell Loomis SD Corn 60 Dec-06 Poet Biorefining-Portland Portland IN corn 60 N/A Poet Biorefining-Preston Preston MN Corn 46 1998 Poet Research Center Scotland SD Corn 9 1988 Prairie Horizon Agri-Energy LLC Phillipsburg KS milo/corn 40 Jul-06 Quad County Corn Processors Galva IA Corn 30 Feb-02 Red Trail Energy LLC Richardton ND Corn 50 Dec-06 Redfield Energy LLC Redfield SD corn 50 Dec-06 Reeve Agri Energy Garden City KS Corn / Milo 12 N/A Renew Energy LLC Jefferson WI corn 130 Jul-07 Siouxland Energy & Livestock Co-op Sioux Center IA Corn 25 N/A Siouxland Ethanol LLC Jackson NE Corn 50 May-07 Standard Ethanol Cambridge LLC Cambridge NE corn 44 N/A Standard Ethanol Madrid LLC Madrid NE Corn 44 N/A
Sterling Ethanol LLC Sterling CO Corn 42 Nov-05 Sun Energy LLC Walsh CO corn 3 N/A Tate & Lyle Loudon TN Corn 60 N/A Trenton Agri Products LLC Trenton NE Corn / Milo 40 Mar-04 U.S. Energy Partners LLC Russell KS Milo / Wheat Starch 50 N/A United Ethanol LLC Milton WI corn 42 Jan-07 United Wisconsin Grain Producers LL Friesland WI Corn 52 Apr-05 Utica Energy LLC Utica WI Corn 52 Apr-03 VeraSun Albert City Albert City IA Corn 100 Nov-06 VeraSun Albion Albion NE corn 100 Oct-07 VeraSun Aurora Aurora SD Corn 120 Dec-03 VeraSun Bloomingburg Bloomingburg OH corn 100 Mar-08 VeraSun Central City Central City NE Corn 96 Apr-04 VeraSun Charles City Charles City IA corn 110 Apr-07 VeraSun Fort Dodge Fort Dodge IA Corn 110 Oct-05 VeraSun Linden Linden IN corn 100 Aug-07 VeraSun Marion Marion SD corn 110 Feb-08 VeraSun Ord Ord NE Corn 45 May-07 VeraSun Woodbury Lake Odessa MI corn 50 Sep-06 Verenium Biofuels Louisiana Jennings LA sugarcane bagasse/energy cane 1.4 N/A Western New York Energy LLC Shelby NY corn 50 Jan-08 Western Plains Energy LLC Oakley KS Corn / Milo 45 Jan-04 Western Wisconsin Energy LLC Boyceville WI Corn 45 late fall 2006 White Energy Hereford LLC Hereford TX corn/milo 100 Mar-08 Wyoming Ethanol LLC Torrington WY Corn 12 N/A Yuma Ethanol LLC Yuma CO corn 50 Oct-07 Total Plants: 164 Total Capacity: 9512 * Capacity noted in MMgy. # Plant under expansion. Source: Ethanol Producer Magazine (online). (accessed 5/15/08) Last Modified on May 6, 2008
To: Feasibility Team, EthicalDecisions Consultants From: Scott Richardson, President, Midwest Agri-Products Re: Ethanol production Based on recent articles in the news, ethanol production and its use as an alternative fuel seem to be surrounded by multiple issues, sometimes controversial. Based on the tradeoffs, we don t know if we should get involved and whether this would ultimately benefit our company. The federal government has greatly supported the ethanol industry. We know there is not one source, or raw material, for producing ethanol. However, each brings with it different issues, challenges, and current levels of feasibility. One such issue is the impact on water. In keeping with our expertise, we are interested in pursuing ethanol made from either food-based products or cellulosic agricultural biomass. We are interested in pursuing one or more of the following 5 areas: Massachusetts, Texas, Colorado, Louisiana, and Iowa for this ethanol venture. In a written memo, describe a procedure for determining whether we should get involved in the ethanol industry at this time and the best strategy for doing so (i.e. raw material source(s)). This would be in contrast to dedicating our pursuits to our traditional industry, i.e. grain production, in the midst of soaring crop prices. In addition, please also compare the 5 areas for possible development of an ethanol facility. Since we will reuse your procedure as our company grows, we will need this comparison procedure even if we decide not to get involved in ethanol at this time. This comprehensive, proactive approach will enable us to act quickly when and if we decide to proceed with ethanol. Thus, your procedure must be robust enough to answer this question for new areas at a later time. Attached is some data we uncovered that can be used to begin sorting out the issues.
Midwest Agri-Products A U.S. Producer since 1957 To: Feasibility Team, EthicalDecisions Consultants From: Scott Richardson, President, Midwest Agri-Products Re: Ethanol distribution centers Thank you for your research and procedure that have greatly supported our efforts in investigating the ethanol industry. Your work has heightened our awareness of the issues we need to be most cognizant of. Because of your groundwork, I feel we are in a position to move forward with establishing an ethanol production facility in Ames, Iowa. Based on our holdings, we anticipate being able to capture 1.5% of the market share nationally. We need your help with the next step of the process. Midwest Agri-Products will need one or more distribution points or centers for its ethanol, which we plan to market nationally. The big question is: should we pursue a centralized or a de-centralized distribution scheme? If centralized, what location is best? We have narrowed down the list of potential distribution center locations to the following four regions, based on a market analysis: Atlanta, Cheyenne, Erie, and Flagstaff. Also, based on this market analysis, we will need to achieve a service level of 90% to satisfy potential customers. We need for your team to develop a documented procedure that compares a centralized versus decentralized distribution scheme and makes a recommendation for how we should best proceed. In addition, I need your team to make me aware of logistical, ethical, cost, or other issues related to transporting ethanol that we will likely encounter in this venture. Does your recommendation change if the price of diesel fuel were to increase? Please account for this possibility as part of your procedure. I anticipate reusing your procedure to evaluate our options on an ongoing basis. Therefore, it should be robust and general enough to assess our distribution options in the future, possibly for new locations. Attached (in an Excel spreadsheet) are data related to the national demand for ethanol in 2006 and 2007. Also attached is a listing of the distribution center that will serve each state, along with the demand for ethanol by the state. Our accountants have estimated the cost to hold inventory at each DC at $.50 per gallon per year. Included at the bottom of this memo are the costs associated with shipping ethanol to and from the distribution centers by tank truck for both the de-centralized and centralized schemes. For the centralized scheme, the costs provided are those associated with shipping a gallon of ethanol from the DC to customers in the other regions, if this DC were to become the central DC. Our supply chain analysts have estimated that it will take about 2 weeks for a shipment order placed by any of the DC s to be sent between the production facility and the DC. In addition, it will cost $5,550 to process an order placed by a DC.
Table 1: Transportation Costs per Gallon of ethanol (De-centralized). Distribution Center Inbound Outbound Atlanta $0.34 $0.75 Cheyenne $0.26 $0.75 Erie $0.31 $0.75 Flagstaff $0.48 $0.75 Table 2: Transportation Costs per gallon of ethanol in Centralized system. Distribution Center Atlanta Cheyenne Erie Flagstaff Atlanta $0.75 $0.89 $0.82 $0.92 Cheyenne $0.89 $0.75 $0.89 $0.81 Erie $0.82 $0.89 $0.75 $0.94 Flagstaff $0.92 $0.81 $0.94 $0.75
State % of U.S. Demand DC Alabama 0.545 Atlanta Alaska 0.096 Cheyenne Arizona 0.474 Flagstaff Arkansas California 21.417 Flagstaff Colorado 3.018 Flagstaff Connecticut 0.745 Erie Delaware 0 Erie Dist. of Col. 0 Erie Florida Georgia Hawaii 0 Flagstaff Idaho 0 Cheyenne Illinois 14.007 Atlanta Indiana 4.771 Erie Iowa 3.798 Cheyenne Kansas 1.485 Atlanta Kentucky 2.091 Atlanta Louisiana 1.7 Atlanta Maine 0 Erie Maryland 0.008 Erie Massachusetts 0.031 Erie Michigan 5.508 Erie Minnesota 10.012 Cheyenne Mississippi Missouri 3.211 Atlanta Montana 0.045 Cheyenne Nebraska 1.352 Cheyenne Nevada 1.532 Flagstaff New Hampshire 0 Erie New Jersey 0.038 Erie New Mexico 0.219 Flagstaff New York 0.816 Erie North Carolina 3.126 Atlanta North Dakota 0.405 Cheyenne Ohio 6.683 Erie Oklahoma Oregon 0.944 Cheyenne Pennsylvania 0.243 Erie Rhode Island 5/ 0.017 Erie South Carolina South Dakota 0.87 Cheyenne Tennessee Texas 0.834 Atlanta Utah 0.114 Flagstaff Vermont 0 Erie Virginia 2.9 Erie Washington 2.411 Cheyenne
West Virginia 0.611 Erie Wisconsin 3.924 Cheyenne Wyoming 0 Cheyenne Total Sum 100.001