Beet Ireland Ltd, chaired by Michael Hoey of Country Crest, is seeking a €6m investment. This is earmarked to fund the pre-development stage of a proposed new €400m sugar and bioethanol facility in Ireland.
The investment, offered by Cantor Fitzgerald in the form of loan notes in Beet Ireland, will be raised in two separate tranches – €3m now and €3m before year end. The monies raised will be used to fund pre-construction costs, including securing a site (deposit), planning costs and professional fees.
What is being built?
The proposed facility is estimated to have a capacity to produce 250,000 tonnes of refined sugar and 11m litres of fuel-grade bioethanol. The €400m is anticipated to be raised by investors, sugar beet growers and senior bank finance.
What is the business case?
The business case for the project is hinged around Ireland spending €326m on 377,000 tonnes of imported sugar in 2012. Part of Beet Ireland’s mission is to provide the Irish sugar market with security of supply and build a strong complementary export business.
The proposed capacity of the plant is such that it would be sufficient to supply all of Ireland’s needs. Beet Ireland has set a target of 75% market share in its business plan. Beet Ireland has also estimated that 70% of sugar is used by Irish food producers (wholesale), 25% in retail consumption and 5% in industrial applications. The business plan assumes a sale price per tonne of €600 for sugar, with an input cost for sugar beet of €47, including transport allowance. Another source of revenue will be from the bioethanol plant, which could produce 11m litres at peak. The capacity is there to expand to 56m litres should market conditions favour bioethanol relative to sugar.
Ireland imported 180,000 tonnes of beet pulp and bagasse in 2012 and this plant would meet a large proportion of this demand.
Proposed funding
structure:
Senior bank debt – to be secured from a bank or a number of banks; Grower investment;Loan note investment – this round €3m plus €3m;Promoters’ investment to date via a founder loan – circa €195k;Construction finance;Founder Equity.What is this investment round?
Investors are being offered Beet Ireland loan notes. There is a minimum subscription amount of €25,000. The expected term is eight years. The return is based around a rolled-up coupon of up to a maximum of 20%, compounded annually and payable at maturity (see tables). It is important to note that this coupon will be performance-based and is therefore not guaranteed.
It is also important to note that this will not entitle the investor to a supply contract for sugar beet – that will be a separate funding round.
From a security point of view, the loan note will rank junior to senior debt (banks) and the grower investment. Investors may also have the option to convert their loan note investment into equity in Beet Ireland at maturity or in the event of an early redemption at a 10% discount to the value of the ordinary share capital at that point.
Grower investment
As was outlined at the grower meetings held by Beet Ireland, it is proposed that beet growers will participate as stakeholders. This may be up to approximately 30% of the overall capital budget – or about €120m.
The grower will invest in exchange for a contract to supply sugar beet to the facility. Beet Ireland estimates 1,000 farmers will potentially supply the 1.8m tonnes of sugar beet.
Working this through, on average this would mean an investment of €130,000 per grower for an average annual contract of 1,800 tonnes of sugar beet on approximately 65 acres, based on average yields.
The sugar beet price in the business plan is €47/tonne including transport allowance. Beet Ireland said at grower meetings that grower investment of €25,000 per 400 tonnes of quota would be required. However, the exact terms and amount of this funding are still to be confirmed.
Founder equity
This represents the nominal investment in the company to date as well as the value ascribed to the intellectual property developed by the founders, which the company has valued at €1m.
The terms outline that founder equity will retain at least 10% shareholding in the fully scaled business.
The founders may also be included in an employee share option plan. The founders will control the board from the outset of operations and, for as long as the founders represent more than 20% of the shares, they will be entitled to appoint four directors to the board. The maximum number of directors is seven.
Who is behind the company?
Michael and Gabriel Hoey – Country Crest owners and
tillage farmers;Jim O Regan & Pat Cleary
– tillage farmers; Simon Cross – Cross
Agricultural Engineering;Chris Harmon –
Hoey Agri employee;Brian Arnold –
management consultant, has worked extensively in horticulture.
Loan note
default: the risks
Failure by Beet Ireland to raise tranche two of the loan note investment to fund pre-development stage; Failure by Beet Ireland to secure a suitable site for the facility by 30 June 2014; Project cost exceeding budget of €400m by 5% or more; Failure by Beet Ireland to raise follow-on finance for construction of the facility. Exit strategy
The promoters envisage the following exit mechanisms as being the most likely for investors in Beet Ireland: IPO, trade sale or refinancing.
If the factory is built, this will be a very good investment. If the factory is not built, the money is gone. This is a high-risk investment and potential investors in the loan notes should seek independent financial advice before making an investment.
Beet Ireland Ltd, chaired by Michael Hoey of Country Crest, is seeking a €6m investment. This is earmarked to fund the pre-development stage of a proposed new €400m sugar and bioethanol facility in Ireland.
The investment, offered by Cantor Fitzgerald in the form of loan notes in Beet Ireland, will be raised in two separate tranches – €3m now and €3m before year end. The monies raised will be used to fund pre-construction costs, including securing a site (deposit), planning costs and professional fees.
What is being built?
The proposed facility is estimated to have a capacity to produce 250,000 tonnes of refined sugar and 11m litres of fuel-grade bioethanol. The €400m is anticipated to be raised by investors, sugar beet growers and senior bank finance.
What is the business case?
The business case for the project is hinged around Ireland spending €326m on 377,000 tonnes of imported sugar in 2012. Part of Beet Ireland’s mission is to provide the Irish sugar market with security of supply and build a strong complementary export business.
The proposed capacity of the plant is such that it would be sufficient to supply all of Ireland’s needs. Beet Ireland has set a target of 75% market share in its business plan. Beet Ireland has also estimated that 70% of sugar is used by Irish food producers (wholesale), 25% in retail consumption and 5% in industrial applications. The business plan assumes a sale price per tonne of €600 for sugar, with an input cost for sugar beet of €47, including transport allowance. Another source of revenue will be from the bioethanol plant, which could produce 11m litres at peak. The capacity is there to expand to 56m litres should market conditions favour bioethanol relative to sugar.
Ireland imported 180,000 tonnes of beet pulp and bagasse in 2012 and this plant would meet a large proportion of this demand.
Proposed funding
structure:
Senior bank debt – to be secured from a bank or a number of banks; Grower investment;Loan note investment – this round €3m plus €3m;Promoters’ investment to date via a founder loan – circa €195k;Construction finance;Founder Equity.What is this investment round?
Investors are being offered Beet Ireland loan notes. There is a minimum subscription amount of €25,000. The expected term is eight years. The return is based around a rolled-up coupon of up to a maximum of 20%, compounded annually and payable at maturity (see tables). It is important to note that this coupon will be performance-based and is therefore not guaranteed.
It is also important to note that this will not entitle the investor to a supply contract for sugar beet – that will be a separate funding round.
From a security point of view, the loan note will rank junior to senior debt (banks) and the grower investment. Investors may also have the option to convert their loan note investment into equity in Beet Ireland at maturity or in the event of an early redemption at a 10% discount to the value of the ordinary share capital at that point.
Grower investment
As was outlined at the grower meetings held by Beet Ireland, it is proposed that beet growers will participate as stakeholders. This may be up to approximately 30% of the overall capital budget – or about €120m.
The grower will invest in exchange for a contract to supply sugar beet to the facility. Beet Ireland estimates 1,000 farmers will potentially supply the 1.8m tonnes of sugar beet.
Working this through, on average this would mean an investment of €130,000 per grower for an average annual contract of 1,800 tonnes of sugar beet on approximately 65 acres, based on average yields.
The sugar beet price in the business plan is €47/tonne including transport allowance. Beet Ireland said at grower meetings that grower investment of €25,000 per 400 tonnes of quota would be required. However, the exact terms and amount of this funding are still to be confirmed.
Founder equity
This represents the nominal investment in the company to date as well as the value ascribed to the intellectual property developed by the founders, which the company has valued at €1m.
The terms outline that founder equity will retain at least 10% shareholding in the fully scaled business.
The founders may also be included in an employee share option plan. The founders will control the board from the outset of operations and, for as long as the founders represent more than 20% of the shares, they will be entitled to appoint four directors to the board. The maximum number of directors is seven.
Who is behind the company?
Michael and Gabriel Hoey – Country Crest owners and
tillage farmers;Jim O Regan & Pat Cleary
– tillage farmers; Simon Cross – Cross
Agricultural Engineering;Chris Harmon –
Hoey Agri employee;Brian Arnold –
management consultant, has worked extensively in horticulture.
Loan note
default: the risks
Failure by Beet Ireland to raise tranche two of the loan note investment to fund pre-development stage; Failure by Beet Ireland to secure a suitable site for the facility by 30 June 2014; Project cost exceeding budget of €400m by 5% or more; Failure by Beet Ireland to raise follow-on finance for construction of the facility. Exit strategy
The promoters envisage the following exit mechanisms as being the most likely for investors in Beet Ireland: IPO, trade sale or refinancing.
If the factory is built, this will be a very good investment. If the factory is not built, the money is gone. This is a high-risk investment and potential investors in the loan notes should seek independent financial advice before making an investment.
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