Georgia plant gains access to $20 million revolving credit

By Holly Jessen | May 31, 2012

Southwest Georgia Ethanol LLC, a 100 MMgy corn-ethanol plant in Camilla, Ga., has been approved for a $20 million secured revolving credit facility from AloStar Bank of Commerce. The money will serve as a strong working capital for the company, which emerged from bankruptcy in January.  “What that does is it allows us to basically look our farmers in the eye and say, ‘You are going to get paid for your corn,’” said Alicia Shirah, director of communications for the ethanol plant.

The secured credit facility will allow the plant to respond to variable pricing in the corn futures market, according to a news release from AloStar. The bank will also implement a hedge reserve to help the company minimize risk. “The AloStar team understands the industry and the model and has implemented a creative strategy that will help Southwest Georgia Ethanol operate at capacity while managing the price swings in corn supplies,” said Andy McGhee, president of AloStar Business Credit, the bank’s lending arm.

The money will also help the ethanol plant build up its physical supply of corn, Shirah added. The ethanol plant, which brings in 80 percent of its feedstock supply by rail, has an on-site storage capacity of 2.5 million bushels. However, the company hasn’t always had the funding necessary to keep a large supply of corn on hand—which can lead to production slowdowns or stoppages. “There have been several situations in our past where there was corn that we had already paid for sitting on a train somewhere and it couldn’t get to us,” Shirah told EPM.  

Southwest Georgia Ethanol filed for bankruptcy in February 2011 and in court documents it pointed to feedstock delivery delays, high corn prices and operational issues that have now been resolved. 

The facility continued to operate as a debtor in possession during the bankruptcy. The ethanol plant was previously the wholly owned subsidiary of First United Ethanol LLC, which began construction on the facility in 2007. FUEL did not file for bankruptcy and, as part of the restructuring, is now a shareholder in the plant.

Known as a destination plant, the Georgia facility is the only operating ethanol plant listed on the Ethanol Producer Magazine fuel ethanol plant map, which tracks facilities producing 1 MMgy and larger. Although Southwest Georgia Ethanol is not located in the Corn Belt, area farmers do grow and sell corn to the facility. “We like to buy as much local corn as we can, because that saves us money (on transportation costs,)” Shirah said.

The ethanol produced is sent out by truck and sold to blenders within a 100-mile radius. So, while ethanol plants in the Corn Belt generally have a local supply of feedstock and send out ethanol via rail, the Southwest Georgia Ethanol can take advantage of a local market for its product. “We don’t have as much corn but we do have a lot of neighbors to sell our product to,” she told EPM. “The scenario is we can rail the corn in cheaper than you could rail the ethanol out.”

The company has been running at about 106 to 107 percent of its nameplate capacity for the past year. “That seems to be the best rate for us,” Shirah said, adding that the company keeps its eye on market conditions to meet demand while also avoiding creating an oversupply.