Terra Grain Fuels Holdings Inc., the company building an ethanol plant at Belle Plaine, Sask., is now part of a larger, more diverse company with the resources to invest more in ethanol if it chooses.
Terra Grain was bought by Universal Energy Group Ltd.
The acquisition was part of an initial public offering of Universal Energy Group common shares, which closed Feb. 2. The company offered 11.4 million shares at $11 each and raised $125 million.
Under the IPO, it also acquired all shares of Terra Grain Fuels and Universal Energy Corp., an Ontario-based energy retailer.
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Terra Grain Fuels is building a 150-million-litre ethanol plant that is scheduled to start producing by the end of 2007. It will be the largest wheat-based plant in North America.
Universal Energy Corp. sells electricity and natural gas in Ontario to residential, small and mid-size commercial and small industrial customers. It also sells natural gas in Michigan to small and mid-size commercial and small industrial customers. It intends to enter the British Columbia natural gas market this year and is evaluating opportunities in New York.
Tim LaFrance, president of Terra Grain Fuels, said the deal doesn’t alter the Belle Plaine project.
The IPO gives the company access to a pool of equity financing should it decide to build a second ethanol plant, he said.
“It’s positioning for opportunities beyond that.”
It also creates a vehicle to raise money fairly quickly should the need arise, he said.
“On a combined basis, management believes that Universal and (Terra Grain Fuels) represent a more diverse and stable source of long-term cash flow than either company on its own,” said the company’s preliminary prospectus.
Management believes there are significant growth opportunities in both ethanol and energy retailing, it said.
The principals involved in Universal Energy Group include LaFrance and Terra Grain chair Gary Drummond. The president of the acquisition company is Mark Silver, a former business partner of Drummond’s.
“We’ve all crossed paths or worked together,” explained LaFrance.
An over-allotment option, resulting in an additional 1.7 million shares and proceeds of about $18.75 million, was exercised in full. Senior management and original shareholders still own 68 percent of the new company, LaFrance added.
Universal Energy Group shares are listed on the Toronto Stock Exchange under the symbol UEG. There are 36,272,728 common shares outstanding.
LaFrance said construction at Belle Plaine is on time, even with the recent cold weather.
“We’re pretty committed to the whole idea of doing it right,” he said.
