Orion Ethanol buys Texas wet milling facility

Pratt, Kan.-based Orion Ethanol (OTC: OEHL) announced today that it acquired a Texas wet milling facility for $2.5 million in cash due at closing, a subordinated promissory note of $2.5 million, and 8 million common shares.

Orion grabbed the site in Dimmitt, Texas, from Dimmitt Ethanol.

"Dimmitt Ethanol's wet milling facility is the ideal platform upon which we plan to develop an integrated renewable fuels campus that will include production of cellulosic ethanol, biodiesel, biomethane, and wind power," said Patrick Barker, chairman of Orion.

The company plans to convert the facility into a fully integrated renewable fuels campus in three phases over three years.

Orion said the site, which was idle at the time of purchase, previously operated as a corn fructose facility with a grinding capacity of over 60,000 bushels of corn per day.

The company, which already has a 55 million gallon per year dry-mill ethanol plant in Kansas, believes the conversion will save money for Orion.

"We estimate the conversion cost to retrofit this facility will be approximately $1.10 per gallon," said Barker.

"By comparison, the capital cost to develop a new dry milling ethanol facility would be approximately $2.20 per gallon of capacity, while the capital cost for a new wet milling facility would be nearly $3.50 per gallon, or over three times Orion's installed capital costs."

Orion said the first phase of construction at the Texas mill would convert the facility into a 60 million gallon per year ethanol plant and 10 million gallon per year edible oil extraction plant.

The company said phases two and three would consist of adding a 10 million gallon per year cellulose to ethanol process, a 12 million gallon per year biodiesel plant, a 25,000 ton per year yeast plant, and a 60 megawatt to 75 MW wind and biomethane based electrical generation facility.

Orion said it's currently seeking strategic partners for the construction of a wind farm project at the site.

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