Below are a series of questions members have raised after the new lease beginning on January 1, 2018 was announced. We have answered them to the best of our ability while maintaining the confidentiality of the agreement.
What is the length of the term?
- This is a five year lease beginning on January 1, 2018, with the possibility of an optional year.
What is the deal with the optional year?
- ProGold and Cargill could agree to an additional year depending on conditions at some point in time. We can’t speculate on what would trigger the optional year at this time.
The term of the lease is half of the prior lease and the base rent is less. Why did that occur?
- The corn wet milling industry continues to evolve. Because of questions about declining HFCS consumption and transitions occurring within the industry, it was difficult to secure a longer lease.
ProGold has committed to $750,000 in infrastructure spending each year. Is this different from the prior leases and if so, why?
- ProGold has made an upfront commitment to maintain the plant in the best condition possible. These types of expenditures are focused on areas that maintain the long term viability of the plant, but are not directly related to maintaining current processing capacity. These items might include the painting of structural steel and replacing of roofs.
It appears that Cargill has the option to purchase a 50% interest in ProGold from ACSC and that if they do, Cargill will become a JV partner with GGC.
Under what circumstances would Cargill exercise this option?
- Cargill has a history of involvement with the ProGold plant. They wanted to secure the possibility of a long-term commitment if conditions are favorable.
What will Cargill pay ACSC for 50% interest if they choose to exercise the option?
- The price Cargill might pay ACSC would be a confidential matter between the parties.
Does ACSC want to sell their interest to Cargill?
- ACSC is a proud partner in ProGold. Under certain conditions, ACSC sees a sale as a method to secure a long-term future for the ProGold plant.
How does GGC feel about becoming a partner with Cargill should they exercise the option?
- GGC believes Cargill has demonstrated their commitment to ProGold for nearly twenty years. Based on that record, GGC believes a partnership with Cargill can provide for a long term future for the plant and its members.
How would the new JV work between Cargill and GGC?
- Cargill and GGC have a general framework for a 50/50 JV, but a true JV agreement would be completed in advance if Cargill chooses to exercise their option.