Sugar Land-based Imperial Sugar Company has announced the formation and funding of a three-way joint venture with Sugar Growers and Refiners, Inc and Cargill, Incorporated to build and operate a new state-of-the-art cane sugar refinery in Gramercy, Louisiana adjacent to Imperial’s existing sugar refinery.
The venture, Louisiana Sugar Refining, will be one-third owned by each member. On Friday, the three companies closed financing agreements totaling $145 million to provide construction and working capital financing for the project.
The existing Gramercy refinery will operate during the construction and start-up phase of the new refinery, which is expected to be 18 to 24 months.
Imperial President and CEO John C. Sheptor said the deal allows for the closure of the existing refinery and its dated technology while providing for a new state-of-the-art facility without a significant capital outlay by Imperial.
“Following the completion of the construction of the LSR refinery and the rebuild of the Port Wentworth facility, Imperial will own or participate in two of the most modern sugar refineries in the country,” Sheptor noted.
Each member of LSR agreed to contribute $30 million in cash or assets as equity to capitalize the venture. Imperial’s contribution, which will occur in three stages, consists of the existing refinery assets with a book value of approximately $22 million, including approximately 207 acres of land.
The existing refinery will be operated by Imperial until Dec. 31, 2010, during which time it is obligated to complete certain improvements currently estimated to cost approximately $6 million. The equipment and personal property in the existing refinery will then be contributed to LSR on Jan. 1, 2011.
After Jan. 1, 2011, Imperial will continue to operate the small bag packing facility in Gramercy, with refined bulk sugar purchased from LSR under a long term, market-based supply agreement.
The footprint parcel of approximately seven acres of land for the new refinery was contributed by Imperial at the initial closing.
Terms of the operative agreements require that LSR and Imperial jointly enroll the entire site, including the footprint, in the Voluntary Remediation Program created by the Louisiana Department of Environmental Quality to conduct an environmental assessment of the site and complete remediation of any identified contamination.
Imperial is obligated to pay for the cost of remediation, if the Voluntary Remediation Program uncovers contamination above the applicable industrial standard. Imperial will convey the remainder of the property to LSR upon completion of the remediation program.
LSR’s raw cane sugar will be supplied by Sugar Growers and Refiners, Inc., through an evergreen raw sugar supply agreement. Cargill will serve as marketer of the refined sugar produced by LSR, other than refined sugar sold to Imperial.
“Many of our associates at the Gramercy plant will benefit from the construction of the new refinery on the existing site with the creation of sustainable jobs for the foreseeable future,” Sheptor said. “This joint venture secures a source of raw sugar and assures the viability of refining operations in Gramercy for generations to come. I am very pleased with Imperial’s participation in the LSR venture.”
