Farmers of North America plans to be “moving dirt” on its fertilizer distribution supercentre project this summer.
The group has raised $15.3 million in offers from farmer investors in its Genesis Grain and Fertilizer project.
“Achieving our minimum target is not only a major milestone in the vision and future of Genesis, it’s historic,” said Terry Drabiuk, vice-president of business development with AgraCity Crop & Nutrition, which is the commercial operations arm of FNA.
“Now we can initiate the construction process on our first supercentre at Belle Plaine, Sask.”
The plan is to combine $13 million net proceeds from the offering with $13 million of bank financing to build the $26 million plant.
The company hopes to use the farmer equity to obtain better bank financing by March.
“We have bank financing but the terms suck,” Drabiuk told a collection of farmers who gathered in a small room at the Western Canadian Crop Production Show to hear details about the venture.
The offering remains open for further farmer investment, which he said will help secure better financing from the banks.
The Belle Plaine facility would be the first in what the company hopes will become seven distribution supercentres with three in Saskatchewan, three in Alberta and one in Manitoba.
If all seven are built, they would be able to service about 20 percent of the cultivated acres in Western Canada.
The first one will be a 50,000 tonne facility that will provide area farmers with nitrogen, phosphorus, sulphur, potash, micronutrients and various liquid blends. It will be able to load eight Super-B trucks in one hour.
“Just the urea bin alone is 20,000 tonnes,” said Drabiuk.
Fertilizer for the plant will come from a variety of sources including manufacturers, resellers and offshore suppliers. It will service farmers in a 300 kilometre radius surrounding the plant, near Moose Jaw.
The long-term goal is to have the nitrogen supplied by FNA’s proposed $2.2 billion ProjectN nitrogen fertilizer plant, which would be located at the same Belle Plaine site.
The supercentre building is expected to cost $14.3 million, the equipment $3.6 million and the loop track rail system another $3.7 million.
Drabiuk said there is a possibility of eliminating the initial outlay for the rail by convincing one of the two national railways to build the track for the Genesis project and pay them back over time.
That would lower the debt financing required for the project but there would also be a drawback.
“You’re tied to that rail. You’ve got to lock in some tonnage. You can’t use the other railway for a period of time,” he said.
The goal is to begin construction in the summer of 2016 and open the facility for business by the spring of 2017.
One investor in the project is upset that future investors will be treated the same as those who stepped up sooner in the process when the status was uncertain.
He said the Genesis people convinced farmers they had to write a cheque before the end of the year and now they are extending the offering.
“It pisses me off a little bit,” said Siegert Wemming from Wroxton, Sask.
“Now the money is there and everybody can carry on without a risk because it’s already a go. So I think the early bird should see a bonus somehow, somewhere.”
Drabiuk said there will be no bonus for the early birds, but all investors will reap rewards in the form of profit sharing.
Over 600 growers have invested in the project from all over the Prairies. He said those investors will likely lose money in the first year of operation but the facility is expected to generate $18.3 million in net earnings by year five based on margins of $50 per tonne.