Noble, Citi and Goldman up ethanol ante via deal

In a further push into alternative energy, Asia's Noble Group, joins a global effort to up ethanol production - and boost employment in the northeast of the United States.

Noble Americas, a wholly owned subsidiary of global supply chain manager Noble Group announced Monday (July 10) that it has added 114 million gallons in offtake per year to its ethanol business through an arrangement with Northeast Biofuels LPÆs (NEB) ethanol plant. Commercial production is expected to commence by December 2007.

The plant will be located in Volney, New York, about 25 miles north of Syracuse, at the site of a closed brewery. In addition an equity investment was made by US-based Permolex International, which also announced that it had received "a significant equity investment" from Citigroup Venture Capital International Growth Partnership (CVCI). It will own and manage the plant. Debt financing was arranged by Goldman Sachs, and marketing of the ethanol will be handled by Noble Americas.

The companies declined to disclose the amount of the investments.

CVCIÆs investment in Permolex International underscores Citigroup's ongoing commitment to alternative energy as factors such as high energy prices, energy security and environmental impact drive the need for new energy sources. Managing a $1.6 billion private equity fund, Citigroup Venture Capital International is also responsible for Citigroup's Sustainable Development Investment Programme, which focuses on private equity investments in renewable energy (including wind, solar, biofuels and hydro), sustainable forestry, waste and water management. CVCIÆs recent investments in the sector include Suzlon, the leading India-based wind energy company, and Solarfun, a China-based solar power company.

Goldman Sachs, which acted as sole lead arranger and placement agent for the associated credit facilities, has also been active in the alternative energy sector. For example, NEB also executed a multi-year crush spread hedge with Goldman's global commodities unit. The financing achieved the highest credit ratings from S&P and MoodyÆs of any ethanol producer to date.

As for Noble, the deal bolsters its position in the sector as well.

"The volume from this plant is in addition to other Noble existing fuel grade ethanol projects and increases NobleÆs annual distribution to over 300 million gallons by 2007,ö says Fabrizio Zuchichi, Noble's US-based executive vice president of Clean Oil Products. "This project, being the first one located near the large US and Canadian east coast markets, will further enhance Noble's established distribution presence in those areas."

Most United States ethanol projects to date have been located in the midwest of the country. According to Permolex, the plant will produce 114 million gallons of corn ethanol per year, 367,000 tonnes of distillers dried grains for high protein animal feed, and 326,000 tonnes of carbon dioxide ("CO2") for commercial uses in the food and beverage industry. NEB and its on-site project participants, BOC and Perdue Farms, will directly and indirectly employ approximately 100 workers, with an estimated 1,500-plus "spin-off jobs" created in agriculture, transportation and other sectors of the upstate New York economy, which has historically been one that struggles.