Below are a series of questions members have raised after learning of the new 50/50 ProGold partnership between Golden Growers and Cargill.
Question: What is Golden Growers Cooperative’s percentage interest in ProGold, LLC?
- Answer: Prior to Cargill exercising their option, Golden Growers owned 49% and American Crystal Sugar owned 51% interest in ProGold. As of March 1, 2022, Golden Growers and Cargill each own 50% of ProGold.
Question: Does this mean Golden Growers and Cargill will split the profit and loss of the operations at the ProGold corn wet milling plant?
- Answer: No. In conjunction with the change in ProGold ownership, Cargill and Golden Growers agreed that ProGold will continue to lease the corn milling facility to Cargill for the next five years. Golden Growers revenue is based on what is earned from the lease arrangement.
Question: What are the terms of the new lease starting March 1, 2022?
- Answer: Cargill will lease the facility in 2022 and 2023 for $15.5 million/year. In addition, ProGold will be responsible for $750,000 of infrastructure spending each year. For 2024 through 2026, Cargill will lease the facility for $16 million/year and ProGold’s responsibility for infrastructure will be reduced to $500,000/year.
Question: What is infrastructure spending?
- Answer: Infrastructure expense is generally considered facility maintenance expense that is unrelated to the daily operations of the facility. Infrastructure includes, painting structural steel, repairing roofs and floor coverings, etc.
Question: How will spending for capital improvements be handled during the five-year lease?
- Answer: Cargill has agreed to invest capital in the plant for an agreed upon list of projects estimated to cost up to $25 million. Cargill will have a leasehold interest in those capital improvements and have the benefit of depreciation during the lease period. Under certain circumstances, Golden Growers and Cargill could enter into an integrated Joint Venture agreement. In that circumstance, Golden Growers would contribute an amount equal to half of the remaining, undepreciated capital to ProGold. Cargill would contribute the remaining half.
Question: Under what circumstances would Golden Growers and Cargill enter into an integrated Joint Venture to share the profits and losses of plant operations?
- Answer: During the course of the five-year lease, Cargill will seek a Co-Location partner to utilize a significant portion of the grind. If the right partner presents itself, Cargill and Golden Growers will seek to negotiate an integrated Joint Venture Agreement based on certain agreed upon principles. Golden Growers would need to invest capital related to Cargill’s capital contributions during the lease AND costs associated with infrastructure needed to service a co-located partner.
Question: What happens if Cargill is unable to find a co-located partner OR if Golden Growers and Cargill are unable to agree on terms for an integrated Joint Venture?
- Answer: Under these circumstances, Cargill has agreed to purchase Golden Growers remaining interest in ProGold for $81 million, plus half of any remaining lease payments.
Question: Did MDU’s newly announced natural gas pipeline to Wahpeton have anything to do with Cargill’s decision to exercise their option?
- Answer: Having an available supply of natural gas for expansion or for attracting a co-located partner was crucial for the long-term viability of the ProGold plant. We believe the pipeline played a role in Cargill’s decision and that it improves the ability to market the facility to potential co-located partners.
Question: What do you mean by a ‘Co-Located Partner’?
- Answer: As the consumption of High Fructose Corn Syrup declines, corn millers have replaced that capacity with by working with other companies in need of the raw materials to make other products. For instance, at Cargill’s Blair, NE corn milling facility, co-located partners utilize dextrose, supplied by Cargill, to ferment highly concentrated sweeteners, polyoils, lactic acid, etc.
Question: How many Golden Growers membership units are outstanding?
- Answer: 15,490,480