New Cane Sugar Refinery Being Built in Louisiana

Imperial Sugar Company of Sugar Land, Texas, Sugar Growers and Refiners (“SUGAR”), Inc., of Breaux Bridge, La., and Minneapolis-based Cargill, Inc., announced on November 19 the completion of a joint venture agreement that will lead to the construction of a new sugar refinery at Gramercy, La.

“Construction of the refinery will begin immediately,” said Lonnie Champagne, chief executive officer of SUGAR. “We expect that the new facility will commence operation in the first half of 2011.”

In conjunction with its closing, the joint venture successfully completed a $145 million financing package that will support the $100 million in tax-exempt Gulf Opportunity (GO) Zone Bonds issued by the Parish of St. James, La., and provide working capital financing. GO Zone Bonds are part of a federally backed and state-run program designed to support capital investments in local and regional economies in parts of the Gulf South that were impacted by hurricanes Katrina and Rita in 2005.

“Having the new facility at the Gramercy site provided the joint venture with substantial cost savings from existing infrastructure and operational assets that will be utilized by the new facility,” said John Sheptor, president and CEO of Imperial Sugar. “Louisiana Sugar Refining (LSR) will also have the flexibility of operating parts of the existing Gramercy refinery for a period of time during the transition to the new refinery once it is completed.”

Imperial, SUGAR and Cargill each have a one-third interest in LSR, which will build and operate the largest sugar refinery in the United States adjacent to Imperial’s existing Gramercy facility. The new facility will have an annual refining capacity of one million tons.

Sugar Growers and Refiners (SUGAR) is a cooperative made up of eight sugarcane mills and approximately 700 cane growers. The cooperative noted that this venture “will bring together the raw sugar supply from SUGAR, the bulk marketing expertise of Cargill and the sugar refining and packaging expertise of Imperial.” The joint venture will refine approximately 75% of the raw sugar from cane grown in Louisiana.

“This is indeed a red letter day for the sugarcane industry in Louisiana,” Champagne stated. “We have been growing sugarcane for over 200 years, but we have never been integrated from the sugarcane fields through milling, refining and into the market until now. SUGAR and its members will enjoy the rewards of the sugar market under special arrangements worked out with the joint venture. This will allow the members of SUGAR, including both mills and growers, to share in the benefits of higher sugar prices while at the same time realizing a return from the joint venture.”

SUGAR was able to invest in the joint venture without obtaining contributions from the mills and growers because of an accommodation by a syndicate of financial institutions, including ING Capital, Natixis (a French bank), First South Farm Credit and a sub-syndicate of community banks from throughout Louisiana led by Bank of Commerce.

Frank Minvielle, SUGAR’s board chairman, expressed deep appreciation to the banks for their financial accommodation and to the growers for their patience while this venture was put together. “Now, when growers harvest their sugarcane crop, they will know that the sugar will ultimately be refined by a refinery in which they have an interest, and that as profits are realized from refining and marketing, that they will realize the benefit,” Minvielle noted. “Growers will also realize that they will have an asset that they can sell to others or pass on to their children. This is indeed a significant day for the sugarcane growing industry in Louisiana.”

The effort to integrate the Louisiana sugarcane industry stretches back seven years, noted SUGAR’s board of directors in a letter to its members. Several options were explored prior to finalizing the LSR venture. The eventual integration plan was first formally presented to growers in the summer of 2006.

At one point, SUGAR and Cargill were planning to build a new refinery on Cargill-owned land at Reserve, La., not far from Gramercy. A groundbreaking ceremony was actually held there in April 2008. It was a project that was opposed at the time by Imperial — the current third partner and owner of the existing Gramercy facility, known as Colonial Sugars Refinery. Colonial has been in operation since 1895.