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Finance

The ethanol industry is at a crossroads. Long term success increasingly depends on being one of the low cost producers. Managing a plant’s second largest cost, energy, is critical to that goal. Energy cost management is the lowest cost and most efficient way to reduce ethanol cost/gallon. Achieving the needed level of energy cost containment requires controlling energy pricing.

TotalGEN’s financial approach controls energy pricing by generating power and steam at the plant independent of outside sources. In short, TotalGEN produces the plant’s energy on an outsourced basis, with minimum savings of 25% annually, by installing and operating a combined heat & power facility contiguous to the plant.

How does it work? By looking at capital project funding from an entirely different point of view.

The two points of view of capital project funding:

Traditional Lender

Projected return on investment (ROI)?
 - Costs?
 - Potential returns?
 - Effect of additional gallons on the local corn basis?

Downside risk to the stated interest rate?
 - No upside in the form of greater returns
 - Risk tolerence low

Finance

Capital project performance risk assumed by TotalGEN

100% Financing by TotalGEN
 - 100% financing through highly credible financial institutions
 - Can be structured off-balance sheet

Future energy costs protected by long term power and steam purchase agreements

Financing done on third party Balance Sheet

TotalGEN shares in a percentage of the upside

Risk tolerence is higher

In the TotalGEN model, our company engages the financing entities, structures the capital project loan, and funds a separate investor-owned entity. This entity owns the power and steam generating facility that’s managed and operated by TotalGEN Services and its partners.

The owning entity structures Power and Steam Purchase Agreements (P&SPA’s) that lock in the plant’s commitment to purchase energy at negotiated rates and time schedules. This transaction is not a balance sheet transaction – freeing the plant from the obligations inherent in a traditional capital project loan.