BioNitrogen's president, Bryan Kornegay Jr., says Louisiana and Florida are ideal sites for its bond-financed new technology fertilizer factories.

BRADENTON, Fla. — Rural Pointe Coupee Parish, La., relishes the idea of luring a start-up clean technology company bringing jobs to an area where agriculture is the main business.

The parish used a big selling point to clinch the deal: a port with access to the Mississippi River.

With sugar cane and other agricultural byproducts to supply the feedstock and the port for shipping, BioNitrogen Holdings Corp. selected Pointe Coupee to build five plants using a new, proprietary technology to convert biomass into urea fertilizer, which has high nitrogen content.

"We're a diamond in the rough here and they are going to see it is a wonderful place to establish a business," said Melanie Bueche, who has been president of the Pointe Coupee Parish Police Jury for eight years. "We're a very rural parish but we have a great deal to offer."

The BioNitrogen project will help with employment, said Bueche, noting that many parish residents drive some 30 miles to Baton Rouge for higher paying jobs.

"Our residents will be able to stay and work here in Pointe Coupee and draw a high-paying job," she said.

The Louisiana State Bond Commission last week approved the sale of the first $300 million of a planned $1.25 billion in bonds to build the first of the five plants.

The remaining bonds will be allocated as private-activity volume cap becomes available.

Two other plants are currently on the drawing board in rural Florida counties where orange, grapefruit, and vegetable farming are among the agricultural products.

"Louisiana and Florida are two ideal sites" for the company to begin operations, said Bryan Kornegay Jr., who is president and chief financial officer of West Palm Beach-based BioNitrogen.

Both states offer year-round feedstock critical to plant operations.

"We can't be in a situation where there's drought or it freezes and Mother Nature is not nice," he said, adding that both states are susceptible to hurricanes, which also create more feedstock.

A $175 million bond allocation has already been approved for a plant in Hardee County, Fla. But Kornegay said the company is looking to upsize the plant and the bond request to $300 million.

In Hendry County, Fla., which solicited BioNitrogen with tax abatement offers, discussions are under way for a single plant for which up to $300 million of bonds also will be requested, he said, adding that all three areas where the first plants are planned have offered tax incentives.

"We are very happy to have a healthy competitive environment between Hardee, Hendry, and Pointe Coupee," he said. "All three are vying to be plant No. 1."

BioNitrogen was granted a patent for the technology it will use to convert biomass feedstock into urea fertilizer in early September.

Kornegay called the patent a "key intellectual property asset" that would significantly enhance the company's competitive position in the marketplace.

The technology converts biomass such as sugarcane bagasse, palm waste, and other agricultural by-products to urea with high nitrogen content.

During the process, the biomass is gasified. Steam is recycled through the system to produce electricity and ash can be sold as a concrete additive.

The final product, syngas, is cleaned and processed through catalytic reaction stages to produce a nitrogen-rich fertilizer that is sought globally.

BioNitrogen is an investor-owned company whose stock is traded on the Pink Sheets.

It qualifies to issue tax-exempt municipal bonds because the plants are considered exempt solid waste disposal facilities under section 142 of the Internal Revenue Service code, according to a bond attorney.

Bonds could be sold for the first plant by the end of November, but the timing depends on finalizing a contract for engineering, procurement, and construction with CCC Group, and determining costs for subcontractors, Kornegay said.

The bonds for the first plants are not expected to be rated because they are start-up greenfield projects that would have difficulty obtaining an investment grade-rating, Kornegay said.

Whether an investment-grade rating can be obtained for a project using new technology depends on many factors, including the contractors constructing the project and the availability of replacement builders, according to Fitch analysts in a special report Oct. 16 about the risk associated with project completion.

Project complexity and scale vary significantly and provide the context against which the contractor's implementation plan and contractual arrangements will be assessed, the analysts said.

Highly complex or large-scale projects can still achieve investment grade if these aspects are properly managed.

"However, projects using unproven technology are unlikely to achieve investment grade, unless associated completion and operation risks are assumed by investment-grade counterparties," said Fitch.

Projects using established technology in predictable conditions, and with sufficient time and cost budgets, are more likely to be able to replace the construction contractor if required should problems such as insolvency arise.

"In contrast, more specialized or challenging projects may be limited to a small number of replacement contractors, which is likely to prevent the debt rating from exceeding the contractor's rating," the analysts said.

BioNitrogen's technology is new, but it offers a clean process to replace the current tradition of burning waste in rural areas, which goes into the atmosphere, Kornegay said.

The process the company plans to use is one of few that takes waste and converts it into a product that farmers currently use: fertilizer.

"This is an opportunity where we're taking ag waste and converting it into something farmers use in a very green way," he said.

AT A GLANCE:
Parent company: BioNitrogen Holdings Corp. (PINKSHEETS: BION).
Headquarters: West Palm Beach, Fla.


LOUISIANA
Subsidiary: BioNitrogen Louisiana Holdings LLC.
Bonds: $1.25 billion approved by the State Bond Commission; $300 million of private activity bonds allocated with additional amounts allocated as volume cap becomes available.
Issuer: Louisiana Community Development Authority.
Bond counsel: Jones Walker LLP.
Underwriter: Stifel, Nicolaus & Co. Inc.
Plants: 5 to be built in Pointe Coupee Parish.


FLORIDA
Subsidiary: BioNitrogen Florida Holdings LLC.
Bonds: $175 million approved to date; up to $600 million of private activity bonds may be sought for the two projects currently envisioned.
Issuer: Florida Development Finance Corp.
Financial advisor: Kosan Associates.
Bond counsel: Peck Shaffer & Williams LLP.
Underwriter: Stifel, Nicolaus & Co. Inc.
Plants: 1 confirmed in Hardee County and another under discussion in Hendry County.

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