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Tyson’s Fats To Fuel Plant On Schedule
Last updated Monday, October 6, 2008 9:43 PM CDT in Business
By Kim Souza The Morning News
GEISMAR, La. – On a day when Wall Street sang the blues, two local companies – Springdale-based Tyson Foods Inc. and Tulsa-based Syntroleum Corp. – found themselves humming Zydeco tunes and eating jambalaya in southern Louisiana.
The venture partners were lauded by Louisiana Gov. Bobby Jindal and numerous other state officials at the groundbreaking of the Dynamic Fuels LLC. renewable diesel plant in Geismar, La., about 30 miles south of Baton Rouge on Monday.
Dynamic Fuels is an equal partnership between Tyson and Syntroleum with plans to refine waste chicken fat and nonedible grease products into 75 million gallons of clean-burning renewable diesel and jet fuel annually.
“We believe this venture will add value to our business and give animal agriculture another opportunity to participate in the production of renewable fuels,” said Tyson Foods CEO Dick Bond.
The Dynamic Fuels venture is expected to generate approximately $84.75 million in annual revenue when fully operational in 2010, the company said in a July conference call.
Retired board chairman Don Tyson said Monday the partnership is all about moving waste products up the food chain. Whether selling chicken feet to China or converting chicken fat to fuel, he said it’s a mission that Tyson Foods takes very seriously.
Construction on the refinery facility is slated to begin within the next 60 days with a projected construction cost of $138 million. L-Con Constructors of Houston was awarded the bid. Long-lead equipment has been ordered and all state and federal permits have been secured, said Lynn Tomlinson, the project director.
Geismar won the site selection on the basis of its existing infrastructure – namely three local sources for hydrogen, which is a key catalyst in the refinery process, said Jeff Webster, director of Tyson Foods’ renewable fuels division.
Dynamic Fuels is leasing the industrial-chemical site from Lion Copolymar. Webster said the logistics surrounding the industrial park includes immediate rail access and two shipping channels along the Mississippi River, just two blocks away, if the company chooses to export its product.
Jindal applauded both Tyson Foods and Syntroleum for their investment in Louisiana, creating 45 high-paying permanent jobs with an annual payroll of $4 million. An additional 200 or so temporary construction jobs will be created over the next year, at a time when jobs are being cut in many business sectors.
“It’s an exciting time to see the construction begin for the first facility of its kind in the country. This process that takes the lowest quality waste products and creates cleaner renewable fuel is a win-win – better for ecology and good for economy while also reducing U.S. dependence on foreign oil,” Jindal told a crowd of about 100 at the site location.
The possibilities for the technology used by Dynamic Fuels are huge, Webster said.
The plant will be capable of producing renewable diesel fuel as well as jet fuel. He said the exact market for the product has yet to be determined as there is still more than a year to go before the plant is fired up for production.
Both Syntroleum and Tyson Foods were fortunate to get financing for $100 million of the $138 million price tag through tax-exempt Go Zone Opportunity Bonds created in 2005 following hurricanes Katrina and Rita. The bonds provide the lowest funding source for the project at a cost of roughly 3 percent to 3.5 percent, Tyson Foods said.
While the approved bonds have yet to be issued, Tyson chief financial officer Dennis Leatherby said the bonds should be issued this month. He, along with a spokesman for the underwriting team, said the present financial turmoil in the credit markets should have little impact on the issue. They are merely waiting for confidence to return or settle somewhat in the fixed income markets, Leatherby said.
Concern has swirled around Syntroleum’s ability raise its half of the investment capital, given the company’s cash struggles in recent quarters.
Scott Alaniz, portfolio manager with Boston Mountain Money Management in Fayetteville, said recent meltdowns in the financial markets have made it more difficult for all companies to raise capital. The $700 billion rescue bailout recently signed into law should ease the liquidity crunch, but not overnight, he said.
Jeff Biggers of Syntroleum said Monday the next capital outlay of $6 million has been set aside in cash and the company will have no trouble making that contribution in December.
That leaves an additional $15 million that Syntroleum will need to raise over the next few quarters. The company remains confident it will get the necessary funds, and Tyson Foods has provided an emergency backstop if necessary to ensure the plant comes online as scheduled in early 2010.
“The groundbreaking is a significant, must-proceed step for Syntroleum, who has put everything on hold to make this project a reality. It is a ‘do or die’ proposition for them,” said Catharina Milostan of Morningstar.com. “It’s good to see them reach this milestone.”
Despite Dynamic Fuels’ “good news” day, it looks as if Tyson Foods’ other fuel initiative with ConocoPhillips is in serious jeopardy.
Tyson’s successful venture with ConocoPhillips has been cut short and is under review as an important $1 per gallon government tax credit was recently reduced by Congress to 50 cents. Webster said without the full $1 per gallon blending credit, the venture would likely not continue. However, he said Tyson is working on two other alternative fuel projects using pond algae and Tyson’s other renewable byproduct resources.