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Published September 28, 2010, 09:51 AM

Canola plant in Minnesota to be completed by end of 2012

FARGO, N.D. — The goal of building the $168 million North Star Agri Industries canola oil processing plant and refinery in Hallock, Minn., took a big step closer to reality on Sept. 22.

By: Mikkel Pates, Agweek

FARGO, N.D. — The goal of building the $168 million North Star Agri Industries canola oil processing plant and refinery in Hallock, Minn., took a big step closer to reality on Sept. 22.

PICO Holdings Inc. of La Jolla, Calif., announced it would invest $60 million into North Star Agri Industries L.L.C., based in Fargo, N.D. The plant and integrated refinery will be built four miles south of Hallock, Minn.

Officials say they expect the plant to be operational by late 2012. If completed as planned, it would be the largest “green field” agricultural processing venture in the Red River Valley since the ProGold L.L.C. corn processing venture in Wahpeton, N.D., in 1996.

Familiar faces

Neil C. Juhnke, president of North Star Agri Industries, is a former executive for American Crystal Sugar Co. who has been working on the project since August 2006. Juhnke spent 16 years at Crystal, including agricultural operations manager for three years, before joining the project. Juhnke will be chief operating officer and president of holding company formed to develop the facility, pending the closing of the deal. The facility will be known as North Star Agri Industries, Juhnke says.

“From my perspective, we’re very happy to have formed a relationship with PICO and look forward to bringing the project to fruition,” Juhnke says.

He anticipates up to 250 temporary construction jobs and 50 permanent jobs in the region, when the company gets started. PICO says it will have an 88 percent ownership. The rest of the ownership is the original founding investors of North Star Agri Industries, including about 100 people — farmers, business people and community residents in the Red River Valley.

Their investment is contingent on successful debt financing, Juhnke says. A $100 million nonrecourse construction loan is in process, but expected to be completed in the fourth quarter of 2011. He declines to name the lender.

‘Average’ capacity

North Star Agri Industries will be about “average” for industry capacity. Two other plants recently started operation — both in Yorkton, Saskatchewan. The only other large plant is operated in Velva, N.D., initially built to handle sunflowers in the 1980s. Construction, engineering and technology contracts are with companies with prior experience. The lead engineer is Karges-Faulconbridge Inc.; construction manager, McGough Construction; and environmental engineer, Wenck Associates Inc.

The deal involves a New Market Tax Credit, which will return 25 cents in tax credits for every $1 invested, for up to $40 million, over a seven-year period.

The plant is expected to process 365,000 tons of canola seed, accounting for 450,000 acres annually. It will produce more than 280 million pounds of high-value, food-grade canola oil (RBD — refined, bleached and deodorized) and 195,000 tons of canola meal. All products and byproducts will be marketed through Land O’Lakes Purina Feed L.L.C. of Shoreview, Minn.

Other opportunities?

In a news release, John Hart, PICO president and chief executive officer, say the project is a “business segment with compelling demographics” and has the potential for “significant recurring cash flow and a return on investment similar to a venture capital project but with Greenfield risk.” He hints at “other similar niche opportunities” that could provide further growth in the segment for PICO.

PICO describes itself as a diversified holding company. It acquires builds and operates businesses where “significant value can be created from the development of unique assets” and to acquire undervalued businesses where its management and operations assets can add value. Among others, the company has Vidler Water Co., a water resource development business, and Union Community Partners, a developer of residential lots in certain California markets.