PICO Holdings, Inc. Announces Definitive Agreements To Build And Operate A Canola Processing Plant
LA JOLLA, Calif., Sept. 22, 2010 (GLOBE NEWSWIRE) -- PICO Holdings, Inc. (Nasdaq:PICO) has entered into definitive agreements to build and operate a canola processing plant with an integrated refinery near Hallock, Minnesota. The plant will process up to 365,000 tons of canola seed annually, and produce over 280 million pounds of high value, food grade "RBD" canola oil (refined, bleached and deodorized) and 195,000 tons of canola meal annually. The plant is expected to be operational by the fourth quarter of 2012.
Pending the completion of additional environmental permitting, it is anticipated that processing capacity will ultimately reach 570,000 tons of canola seed annually. Driven by a strong management team, the operations are expected to have competitive advantages (in both seed supply cost and oil and meal sales) due to the plant's strategic location, state of the art design and modern equipment, leading to operating and cost efficiencies.
Demand for canola oil is outstripping processing capacity in North America. Growing demand for canola oil in the U.S. and worldwide is driven by human health related initiatives including municipal bans on the use of trans fats, reductions in saturated fats in diets, population growth, increased consumption per capita, and renewable fuel uses.The total cost of the facility, including the expansion, is estimated at $168 million. PICO Holdings will contribute approximately $60 million of equity for an 88% ownership interest. Guaranteed Maximum Price construction, engineering, and technology contracts have been executed with leading firms in the industry that have significant prior experience. Closing of the transaction is subject to completion of an approximately $100 million non-recourse, senior secured construction loan facility. In addition, we will apply for a New Market Tax Credit for the project that could provide $0.25 of tax credits for each $1.00 invested up to a maximum of $40 million.
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