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Posted on  

June 18, 2002

Ethanol venture: Little to lose, a lot to grain

Denver company can't 'wheat' to get started on construction of four ethanol plants in Canada

By John Rebchook, News Real Estate Editor

The Broe Cos. Inc., a private railroad, real estate and investment firm based in Denver, will build and operate four ethanol production plants in Saskatchewan, making it the largest ethanol producer in Canada.

Broe, through its OmniTrax railroad subsidiary, already is the largest owner of shortline railways in Canada. For example, it owns the rail line to Churchill, Manitoba, famed for its polar bears, as well as the port and grain elevators in Churchill.

"If we had the plants operating today and producing (about 80 million gallons of ethanol), we'd be the biggest in Canada," said Dwight Johnson, managing director of Broe Cos., which is headed by Pat Broe.

The plants will cost about $150 million to $175 million in U.S. dollars, he said.

Saskatchewan will be its partner, but the Broe Cos. will control the operation, he said.

"We were invited by the government of Saskatchewan to build the plants," Johnson said. "We have the capital and the credibility, and we're pretty active investors in Canada."

Conventional bank financing will be used to pay for the plants. Construction will begin this fall, and the plants will open in late 2003, Johnson said.

In the United States, ethanol, primarily made from corn, is viewed as a way to make the air cleaner and as a way to be less dependent on oil from the Middle East. At the Broe plants, the ethanol will be produced from wheat.

"Canada is energy self-sufficient," Johnson said. "For them, this is agriculture policy. It gives the wheat farmers another outlet for selling their grain."

Some of the ethanol produced by the plants may be exported to the United States, he said.

Johnson said the ethanol also will help Canada meet lower-emission standards set by the Kyoto Protocol designed to reduce man-made emissions of heat-trapping "greenhouse gases," such as carbon dioxide produced by burning coal and oil. President Bush has refused to abide by the accord, which calls for the United States to cut carbon-dioxide emissions by 2012 to a level 7 percent below 1990 levels.

Paul Martin, chairman of the Regina (Saskatchewan) Regional Economic Development Authority, recently praised Broe's participation.

"We welcome the fact that a major private-sector company -- one already heavily committed to our province -- has come together with our communities to jointly plan the single biggest ethanol expansion in Canadian history," Johnson was quoted in a recent article in the Leader-Post newspaper in Regina.

This will be the Broes first investment in ethanol, but it is looking for other opportunities in Canada as well as the United States.

"For us, this is really another step in our diversification," Johnson said. "We like Canada. And we like the ethanol business. This is a natural diversification process for us" because Broe already ships tons of Canadian grain on its 1,100 miles of rail lines in Saskatchewan and Manitoba.

"The fundamentals and dynamics are very compelling, and we are looking for more opportunities in the U.S., although it's not clear that there are many opportunities in Colorado."

He said most of the ethanol-plant opportunities in the United States would be found in big corn producing states such as Illinois, Iowa and Minnesota.

 

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