Stuttgart Ethanol_ LLC Ethanol Plant Feasibility Study

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					Stuttgart Ethanol, LLC
Ethanol Plant Feasibility Study



Report Prepared for:

Stuttgart Ethanol, LLC
2018 Main Street
Stuttgart, AR 72160




July 2006


This report is the property of Stuttgart Ethanol, LLC and cannot be
disclosed or reproduced in whole or in part without the written
permission of Stuttgart Ethanol, LLC.
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                   DRAFT REPORT JULY, 2006


                                            NOTICE

This report was prepared as an account of work sponsored by Stuttgart Ethanol, LLC. Neither
BBI International, nor any of their employees, makes any warranty, expressed or implied, or
assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any
information, apparatus, produce, or process disclosed, or represents that its use would not
infringe privately owned rights. Reference herein to any specific commercial product, process, or
service by trade name, trademark, manufacturer, or otherwise does not constitute or imply its
endorsement, recommendation, or favoring by BBI International.




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                                                   Table of Contents

I. EXECUTIVE SUMMARY .......................................................................................... 1-1
      Introduction........................................................................................................................... 1-1
      Site Evaluation and Recommendation.................................................................................. 1-1
      Feedstock Supply.................................................................................................................. 1-2
      Ethanol Market ..................................................................................................................... 1-3
      Coproducts............................................................................................................................ 1-4
      Financial Forecast................................................................................................................. 1-4
      Recommendations................................................................................................................. 1-6
      Next Steps............................................................................................................................. 1-6
II. PROJECT OVERVIEW ............................................................................................ 2-1
      Purpose of Study................................................................................................................... 2-1
      Scope of Work ...................................................................................................................... 2-2
III. SITE ASSESSMENT............................................................................................... 3-1
      Study Area ............................................................................................................................ 3-1
      Port of Pine Bluff Industrial Harbor District Site................................................................. 3-1
      Stuttgart Industrial Park Site................................................................................................. 3-3
      Port of Phillips County Site, Helena..................................................................................... 3-5
      Site Evaluation Criteria......................................................................................................... 3-8
      Site Evaluation Results ....................................................................................................... 3-12
      Required State and Federal Permits.................................................................................... 3-13
      Site Issues and Recommendations...................................................................................... 3-14
IV. FEEDSTOCK AVAILABILITY AND PRICE ........................................................... 4-1
      Feed Grain Supply and Demand Overview .......................................................................... 4-1
      Local Grain Availability ....................................................................................................... 4-1
      National Grain Production.................................................................................................... 4-4
      Disappearance....................................................................................................................... 4-5
      Local Feed Use ..................................................................................................................... 4-6
      Local Industrial Use.............................................................................................................. 4-7
      Historical and Seasonal Pricing Patterns .............................................................................. 4-8
      Spatial Equilibrium Model and Analysis Approach........................................................... 4-15
      Sourcing Corn by Rail ........................................................................................................ 4-15
      Sourcing Corn by Barge ..................................................................................................... 4-17
      Sourcing by Truck .............................................................................................................. 4-19
      Conclusions Regarding Feedstock...................................................................................... 4-21
V. REVIEW OF FUEL ETHANOL MARKETS ............................................................. 5-1
      World Fuel Ethanol Industry ................................................................................................ 5-1
      International Markets............................................................................................................ 5-1
      U.S. National Ethanol Market .............................................................................................. 5-2
      Regional Ethanol Market...................................................................................................... 5-7
      Local Ethanol Market ........................................................................................................... 5-8
      State Producer Payment........................................................................................................ 5-9
      Ethanol Pricing ..................................................................................................................... 5-9
      Ethanol Shipping Costs....................................................................................................... 5-12
      Ethanol Market Summary................................................................................................... 5-13


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VI. REVIEW OF CO-PRODUCTS ................................................................................ 6-1
     Distillers Grains .................................................................................................................... 6-1
     Local Market for Distillers Grain ......................................................................................... 6-2
     Regional Markets for DDGS ................................................................................................ 6-2
     Distillers Grain Pricing ......................................................................................................... 6-3
     Distillers Wet Grain.............................................................................................................. 6-5
     CO2 Markets ......................................................................................................................... 6-5
     Conclusion for Co-Products ................................................................................................. 6-6
VII. OVERVIEW OF ETHANOL TECHNOLOGIES...................................................... 7-1
     Technology Supply and Construction Services.................................................................... 7-3
VIII. PROJECT STATISTICS ....................................................................................... 8-1
     Ethanol Plant Statistics ......................................................................................................... 8-1
     Personnel Requirements ....................................................................................................... 8-2
IX. FINANCIAL ANALYSIS ......................................................................................... 9-1
     Assumptions Used in the Financial Forecast........................................................................ 9-1
     Economic Modeling Results................................................................................................. 9-4
     State Incentives..................................................................................................................... 9-7
     Sensitivity and Breakeven Analysis ..................................................................................... 9-7
     Capital Cost Sensitivity ........................................................................................................ 9-8
X. PROJECT FINANCING ......................................................................................... 10-1
     Commodity Credit Corporation Program ........................................................................... 10-1
     Comments on Profitability and Economic Forecasts.......................................................... 10-1
     Risk Factors ........................................................................................................................ 10-2
XI. CONCLUSIONS AND RECOMMENDATIONS .................................................... 11-1
APPENDIX A: Site Evaluation Matrices ................................................................... A-1
APPENDIX B: Financial Forecast – 100 MMGY Plant in Stuttgart ......................... B-1




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                                                  List of Tables

Table 1-1 – Financial Modeling Results...................................................................................... 1-5
Table 3-1 – Ethanol rail shipment analysis.................................................................................. 3-8
Table 3-2 – DDGS rail shipment analysis ................................................................................... 3-9
Table 3-3 – Summary of Site Analysis Scores .......................................................................... 3-12
Table 4-1 – Composition and Yields for Corn............................................................................. 4-1
Table 4-2 – Grain Requirements Versu Ethanol Plant Capacity ................................................. 4-1
Table 4-3 – Annual Corn Price Variation: Pine Bluff, AR.......................................................... 4-8
Table 4-4 – Annual Corn Price Variation: Stuttgart, AR............................................................. 4-8
Table 4-5 – Annual Corn Price Variation: Helena, AR ............................................................... 4-9
Table 4-6 – Best Markets for Rail Delivery to Pine Bluff, AR ................................................. 4-17
Table 4-7 – Best Markets for Rail Delivery to Stuttgart, AR .................................................... 4-17
Table 4-8 – Best Markets for Rail Delivery to Helena, AR....................................................... 4-17
Table 4-9 – Best Markets for Barge Delivery to Pine Bluff and Helena, AR ........................... 4-18
Table 4-10 – Net Corn Supplies Within Driving Miles of PineBluff, AR ................................ 4-19
Table 5-1 – Ethanol and Gasoline Use in Arkansas and Neighboring States.............................. 5-9
Table 5-2 – Missouri and Tennessee Ethanol Plants ................................................................... 5-9
Table 5-3 – Basis for Ethanol Pricing 100 mmgy Plant ............................................................ 5-10
Table 5-4 – Ethanol Shipping Costs from Stuttgart................................................................... 5-12
Table 6-1 – Typical Corn DDGS Composition ........................................................................... 6-1
Table 8-1 – Ethanol Plant Statistics ............................................................................................. 8-1
Table 8-2 – Personnel Requirements for Dry Mill Gallon Plant ................................................. 8-2
Table 9-1 – Assumptions Used In the Financial Forecast ........................................................... 9-3
Table 9-2– Stuttgart Ethanol, LLC Project Capital Cost Estimate .............................................. 9-4
Table 9-3 – Financial Modeling Results...................................................................................... 9-5
Table 9-4– Income Statement for Year 2..................................................................................... 9-6
Table 9-5 – Sensitivity and Breakeven Analysis for the Stuttgart Ethanol Project .................... 9-9




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                                                  List of Figures

Figure 1-1 – Project Structure Diagram....................................................................................... 1-7
Figure 3-1 – Study Area............................................................................................................... 3-1
Figure 3-2 – Location of the Site in the Port of Pine Bluff.......................................................... 3-2
Figure 3-3 – Proposed Site in the Port of Pine Bluff Harbor Industrial District ......................... 3-2
Figure 3-4 – Panoramic Photo of the Pine Bluff Site (View of Tyson's Mill to the NEast)........ 3-3
Figure 3-5 – Panoramic Photo of the “Front 20” of the Pine Bluff Site (View to the West) ...... 3-3
Figure 3-6 – Panoramic Photo of the “Back 20” at the Pine Bluff Site (View to the SWest) ..... 3-3
Figure 3-7 – Proposed Site in Stuttgart Industrial Park ............................................................... 3-4
Figure 3-8 – Location of Proposed Stuttgart Site ........................................................................ 3-4
Figure 3-9 – Panoramic Photo of the Stuttgart Site (Looking Southeast) ................................... 3-5
Figure 3-10 – Panoramic Photograph of the Stuttgart Site (Looking Southwest) ....................... 3-5
Figure 3-11 – Photo of Eastern 1100-Acres in Helena Harbor Ind. Park .................................... 3-6
Figure 3-12 – Photo of Eastern 1100-Acres in Helena Harbor Industrial Park Rail Line ........... 3-6
Figure 3-13 – Photo of Potential Site near Bridge Crane under Construction............................. 3-6
Figure 3-14 – Photo of Potential Site near Rail Looking Southwest........................................... 3-7
Figure 3-15 – Photo of Gas Main and Rail Line in Background ................................................. 3-7
Figure 3-16 – Electrical Transmission Lines near Rt. 20 ............................................................ 3-7
Figure 4-1 – Total Corn Supplies for Stuttgart-Pine Bluff-Helena, AR Region ......................... 4-2
Figure 4-2 – Corn Net Supplies for Stuttgart-Pine Bluff-Helena, AR Region ............................ 4-3
Figure 4-3 – Local Production – Pine Bluff................................................................................. 4-3
Figure 4-4 – Local Production – Stuttgart .................................................................................. 4-4
Figure 4-5 – Local Production – Helena...................................................................................... 4-4
Figure 4-6 – U.S. Corn Production .............................................................................................. 4-5
Figure 4-7 – U.S. Corn Utilization............................................................................................... 4-6
Figure 4-8 – Proximity of Existing Ethanol Plants to the Stuttgart Site...................................... 4-7
Figure 4-9 – 10-Year Average Seasonal Corn Price in Pine Bluff, AR ...................................... 4-9
Figure 4-10 – 10-Year Average Seasonal Corn Price in Stuttgart, AR ..................................... 4-10
Figure 4-11 – 10-Year Average Seasonal Corn Price in Helena, AR........................................ 4-10
Figure 4-12 – 10-Year Average Corn Price............................................................................... 4-11
Figure 4-13 – 10-Year Average October Corn Price ................................................................. 4-12
Figure 4-14 – 10-Year Average October Corn Basis................................................................. 4-12
Figure 4-15 – 10-Year Average February Corn Price ............................................................... 4-13
Figure 4-16 – 10-Year Average February Corn Basis ............................................................... 4-13
Figure 4-17 – 10-Year Average June Corn Price....................................................................... 4-14
Figure 4-18 – 10-Year Average June Corn Basis ...................................................................... 4-14
Figure 4-19 – Price Spread between Pine Bluff, AR and Fall Creek, WI ................................. 4-16
Figure 4-20 – Grain Terminals on the Mid and Upper Mississippi........................................... 4-18
Figure 4-21 – Corn Sourcing by County-Pine Bluff, AR .......................................................... 4-20
Figure 4-22 – Corn Sourcing by County-Stuttgart, AR............................................................. 4-20
Figure 4-23 – Corn Sourcing by County-Helena, AR ............................................................... 4-21
Figure 5-1 – Worldwide Ethanol Production (000 Liters)........................................................... 5-1
Figure 5-2 – Worldwide Ethanol Production by Continent ......................................................... 5-2
Figure 5-3 – U.S. Ethanol Production and Use............................................................................ 5-4
Figure 5-4 – Fuel Ethanol Plants and Projects in the U.S............................................................ 5-4


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Figure 5-5 – Projected Renewable Fuels Growth in the U.S....................................................... 5-5
Figure 5-6– States that have banned MTBE ................................................................................ 5-5
Figure 5-7– Mandates and Potential Mandates for Ethanol......................................................... 5-6
Figure 5-8– States with Production Incentives ............................................................................ 5-6
Figure 5-9 – Regional Ethanol Markets and Ethanol Plants........................................................ 5-8
Figure 5-10 – Historic Relationship between Prices of Oil, Gas, and Ethanol.......................... 5-11
Figure 5-11 – Rack Ethanol Prices Omaha, NE ........................................................................ 5-11
Figure 5-12 – Average Annual Price for Regular Unleaded Gasoline in PADD III ................. 5-12
Figure 6-1 – Cattle within 70 miles of Stuttgart, AR................................................................... 6-3
Figure 6-2 – Historical Pricing of DDGS and Corn .................................................................... 6-4
Figure 6-3 – Historical DDGS pricing for Select National Markets ........................................... 6-4
Figure 7-1 – Flow Diagram for Dry Mill Ethanol Plant .............................................................. 7-2
Figure 9-1 – Industrial Natural Gas Prices in Arkansas .............................................................. 9-3
Figure 9-2 – Effect of Corn Price on ROI.................................................................................. 9-10
Figure 9-3 – Effect of Ethanol Price on ROI ............................................................................. 9-10
Figure 9-4 – Effect of DDGS Price on ROI............................................................................... 9-11
Figure 9-5 – Effect of Natural Gas Price on ROI ...................................................................... 9-11
Figure 9-6 – Effect of Electricity Price on ROI......................................................................... 9-12
Figure 9-7 – Effect of % of Distillers Grains sold Wet on ROI ................................................ 9-12
Figure 9-8 – Effect of Project Capital Cost on ROI................................................................... 9-13




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STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                       DRAFT REPORT JULY, 2006


                                I. EXECUTIVE SUMMARY
Introduction

Stuttgart Ethanol, LLC (SELLC) has retained BBI International (BBI) to conduct a study to
determine the feasibility of an ethanol plant located in either Helena, Pine Bluff, or Stuttgart,
AR. The ethanol plant would be a dry-mill production facility that would produce ethanol,
distillers grains and carbon dioxide from local corn.

BBI is an independent consulting firm with no vested interest in the proposed project. The
information detailed in this report reflects to the best of our ability, a true and accurate evaluation
of the current ethanol industry, applicable markets and the feasibility of the project.

Several possible sites for the plant were evaluated by BBI with regard to the infrastructure and
attributes needed for a modern ethanol plant. Key site evaluation considerations include:

   •   Grain availability
   •   Road, rail and barge access and transportation infrastructure at the site
   •   Utilities including electricity, natural gas, water and wastewater disposal
   •   Ethanol and co-product market proximity
   •   Labor availability
   •   Community services such as welding, electrical shop, plumbing, schools, fire protection,
       hospital and airport
   •   Location relative to communities and homes

Historical local corn production and “net exportable” corn were determined for the project; the
estimated average price of corn delivered to the site was also determined. BBI also evaluated the
local, regional and national ethanol markets and the possible impacts of various market issues on
the project. Local and regional markets for distillers grain and carbon dioxide were also
evaluated.

The feasibility study considered a dry mill ethanol plant with a capacity of 100 million gallons
per year (mmgy). The cost and performance of the plant is based on a state-of-the-art plant built
by one of the leading U.S. design/build firms.

Site Evaluation and Recommendation

The site evaluation indicates that all three sites are excellent sites with the necessary attributes
for an ethanol plant. However, the Pine Bluff site is too small to support a 100 mmgy plant with
the necessary rail sidings. In the site evaluation, the Helena/Phillips County Port Authority site
scored slightly higher than the Stuttgart Industrial Park site, mainly due to the advantage of barge
shipments at the Helena site. Currently, another group is working to secure the Helena site, and
thus, this site may not be available. The Stuttgart site is therefore the primary focus of this
analysis, although Stuttgart Ethanol, LLC should work to secure the Helena site should the other
group fail to secure the site in the Phillips County Port Authority. The site development costs for



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the two locations may be slightly different – a rail spur would have to be added in Stuttgart,
while a dock and barge loading/unloading equipment would need to be installed at Helena.

Therefore, BBI recommends that SELLC pursue both the Stuttgart Industrial Park site and the
Phillips County Port Authority site in parallel, focusing on the Stuttgart site, until one site or the
other distinguishes itself in price, availability, or proximity to the natural gas and electrical
transmission lines, as well as the water and sewer infrastructure. If the competing project fails to
secure the Phillips County Port Authority site, SELLC should move to acquire it.

BBI also makes the following recommendations regarding siting of the project:

   •   Ascertain the level of acceptance of the project by the city and community.
   •   Investigate the exact nature, availability and amount of local, state and federal tax
       incentives that may be available to the project.
   •   Have the three sites evaluated by an ethanol process design company from an engineering
       and construction perspective. There should be no cost for this “second” opinion.

Feedstock Supply

This region of Arkansas has insufficient grain to support a 100 MMGY plant at any of the three
proposed sites. A 100 MMGY plant would require 39 million bushels of corn annually, while the
farms in a 50 mile radius surrounding the three sites could only supply 2.6 to 9.2 million bushels
of corn, after accounting for feed uses. The plants would consequently need to rely on rail or
barge shipments to secure sufficient corn. Plants in Pine Bluff and Stuttgart would only obtain 16
to 20% of their corn locally, with the balance brought in by rail. A plant in Helena would obtain
10% of its corn locally, and 90% would be brought in by barge.

The ten-year average price for corn has ranged from $2.31/bu in the region surrounding Stuttgart,
to $2.32/bu and $2.35/bu in the regions surrounding Pine Bluff and Helena, respectively. A 100
mmgy plant in Stuttgart or Pine Bluff would create a basis impact of $0.29/bu, while a plant in
Helena would create a $0.17/bu basis impact. If all of the plant’s corn were sourced by truck, the
basis impact could be even greater, reaching $0.64/bu.

The resulting price for corn will thus range from $2.52/bu to $2.61/bu, taking into account the
ten year average cash corn price in the local area and the $0.17/bu or $0.29/bu basis impact. A
price of $2.52 per bushel was used for the financial analysis for the Helena site, and a price of
$2.60/bu was used to evaluate the Stuttgart site. A sensitivity analysis was performed to establish
the impact of corn price on the financial returns for the plant.

The significant seasonal variations in corn price also imply that it may be valuable to install
additional on-site grain storage, allowing more grain to be purchased in the fall, when prices are
low.




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Ethanol Market

The national demand for ethanol is growing at a very rapid rate and the market is expected to
nearly double in size in the next few years. The strong market growth is being driven by the
phase out of the oxygenate MTBE and the price of ethanol relative to gasoline.

Historically, only limited quantities of ethanol have been consumed in Arkansas. In the
surrounding regional market, which includes Missouri, Texas, Illinois, and Indiana, ethanol
consumption has grown steadily, averaging 575 million gallons per year from 2000 to 2004,
while reaching 735 million gallons in 2004. The regional market potential based on an E10 blend
is nearly 4 billion gallons, with Arkansas contributing 150 million gallons to this total. There are
currently four ethanol plants in Missouri and Tennessee with a combined annual production
capacity of 162 million gallons. Plants in the regional market, including Illinois and Kansas,
have total production capacities nearing 1 billion gallons per year.

The proposed ethanol plant is well-positioned to serve the local Arkansas and northwestern
Mississippi markets, as well as ethanol markets in Tennessee, Missouri, Texas and on the gulf
coast. Ethanol use in Louisiana is about 50 million gallons per year, and there are significant
opportunities for growth in Alabama, Louisiana, Mississippi, Texas, and Tennessee.

The ability to divide product effectively between local, regional and national markets is
extremely important - so much so that it is imperative that either an experienced marketer is
hired, or the ethanol marketing be contracted to a broker or a cooperative marketing group.

The best scenario for the Stuttgart Ethanol, LLC plant would be to supply ethanol locally within
Arkansas, while developing local and regional markets, particularly to the south, where there is
little competition. Memphis would be within the local market for the plant; developing the
market to serve Memphis and other major municipalities in Tennessee would be advantageous.
For a 100 mmgy plant, BBI estimates that 20 to 30% of the plant’s ethanol could be sold to local
markets, 40% would be sold regionally, and the balance would be sold to East Coast markets.
The average shipping cost for this scenario is estimated to be $0.08 per gallon of ethanol, falling
to $0.060 per gallon if barge transportation is used for national markets.

Ethanol prices are normally equal to the rack or wholesale price of unleaded gasoline, plus the
51¢ per gallon Federal Excise Tax Exemption for ethanol blends. The resulting price may be
higher or lower to account for ethanol supply and demand in local and regional markets. The
5-year average spot ethanol prices in the local, regional and East Coast markets were used to
establish a weighted average price for ethanol sold by the plant. For a 100 mmgy plant, the
weighted average price is $1.468 per gallon.

Based on historical pricing trends in the projected target markets, the price of ethanol used in the
financial analysis is $1.46 per gallon, with a weighted transportation cost of $0.06 to $0.08 per
gallon. A marketing fee of 1¢/gallon will also be deducted from the ethanol price in the financial
analysis.




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Coproducts

Coproducts produced by a dry mill ethanol plant with corn as the feedstock include distillers
grains and carbon dioxide. The distillers grain will be sold to local cattle either wet or dry and to
more distant cattle, poultry and swine markets as dry DDGS. The primary uses of carbon dioxide
include the carbonation of beverages and food processing.

Total cattle production in Arkansas averaged 1.8 million head of cattle from 2001 to 2006, with
approximately 944 thousand head of beef cows and 35,000 dairy cows. In the 70-mile radius
around Stuttgart, there are 234,000 head of cattle (6 year average).

For the proposed ethanol project, there are sufficient numbers of livestock in the local market to
support selling some DWG, but the market would have to be developed. Therefore, the financial
analysis for the plant is based on initially selling all of the distillers grain dry. Although the
potential local market is substantial, regional markets for DDGS are significant and should be
developed with the aid of a DDGS marketing company.

For the financial projections, the DDGS price was set equal to the price of corn on a dry weight
basis and the DWG price was set at 96% of the corn price on a dry weight basis. With corn at
$2.60 per bushel, the resulting DDGS price is $98.32 per ton and the DWG price is $36.32 per
ton.

Revenue from CO2 sales typically has only a minor impact on an ethanol plant’s revenue (2 or
3%). CO2 manufacturing and marketing companies could be pursued in the project development
stage to gauge their interest, but CO2 sales will not be included in the feasibility study financial
forecast.

Financial Forecast

Various scenarios were evaluated using the financial model, comparing the Stuttgart and Helena
sites for a 100 mmgy ethanol plant. Financial forecasts were based on historical average prices
for ethanol and corn, which, correspond to $1.46/gallon, and, including a basis adjustment and
shipping, $2.52/bu for the Helena site, and $2.60/bu for the Stuttgart site, respectively. Financial
analyses do not include any state incentives.

Pre-tax average annual Return on Investment (ROI) and Internal Rate of Return (IRR) were used
to measure the projected profitability of the Stuttgart Ethanol, LLC project. The results are
summarized in Table 1-1. The ROI is the average of the return for the 11 years of the financial
forecast including the construction year. More detailed results are shown in the financial analysis
section and the complete 10-year economic forecasts for the project are included in Appendix B.
The corresponding IRRs are also shown in Table 1-1. The IRR is based on the cash flows
consisting of the equity investment at the start of construction followed by the net increase in
cash at the end of years 1 through 11. In year 11, we have assumed that the plant is sold for 4
times the previous year’s EBITDA. The equity investment is assumed to be 40% of the total
project cost. The cash flows are shown in the Proforma Statements of Cash Flows in
Appendix B.



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                             Table 1-1 – Financial Modeling Results
               Stuttgart Ethanol Project      100 mmgy Stuttgart    100 mmgy Helena
             11-year Average Annual ROI             32.4%                 35.9%
             Internal Rate of Return                33.2%                 35.8%
             Average Annual Income                $17,877,000          $19,829,000
             Installed Capital Cost ($/gal)          $1.15                $1.15
             Plant Capital Cost                  $114,950,000          $114,950,000
             Owner's Costs                        $23,005,000          $23,005,000
             Total Project Investment            $137,955,000          $137,955,000
             40% Equity                           $55,182,000          $55,182,000

Another method BBI uses to measure projected profitability is the average annual pre-tax Return
on Investment (ROI) for the 11-year financial forecast. In general, BBI use a hurdle rate of 25%
average annual pre-tax ROI for ethanol project go/no go recommendations. BBI uses the
following guidelines for determining the feasibility of a project and as a guideline for
determining if a project will be able to compete in today’s competitive ethanol industry.

       Average Annual ROI (40% equity)         Competitive Status of the Project
              Less than 20%                    project is typically not worth pursuing
              20% to 24%                       less than average project – needs improvement
              25% to 29%                       a good project – should be able to compete
              30% and higher                   an excellent project

The above scale is based on BBI’s methods and history of evaluating over 75 ethanol projects.
This scale should not be used for financial projections done by others. Also as projects progress,
the assumptions used in the financial analysis may change and the resulting projected returns
may change significantly.

The financial analysis established that a 100 mmgy facility at either Stuttgart or Helena would be
viable, based on a corn purchase price of $2.52 – 2.60/bu, and an ethanol selling price of
$1.46/gallon. The Stuttgart plant has an ROI of 32%, and is considered an “excellent” project
based on the criteria listed above. The Helena plant has a slightly higher ROI – 35% - due to the
lower feedstock cost resulting from grain shipments by barge. Sensitivity analyses also
demonstrated that the plant would be cash-flow positive if ethanol prices dropped as low as
$1.28/gallon with corn at $2.60/bu, and corn prices as high as $3.05/bu with ethanol at
$1.46/gallon. The relatively narrow window for positive cash-flow is due to the comparatively
higher feedstock prices in the region.

The total project investment for a 100 mmgy plant is $138 MM, requiring an equity investment
of $55 MM.




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Recommendations

Given the expected growth and vitality of the ethanol industry and the strength of the financial
projections, the Stuttgart Ethanol, LLC project is a viable opportunity to add value to agriculture
and the economy in Arkansas. Although the region does not produce a significant quantity of
corn, it is still relatively economical to bring in corn by rail and by barge. Furthermore, the plant
would have ready access to a growing ethanol market in the southern U.S, and thus, the ROI is
sufficient to classify the project as an excellent one.

If the decision is made to proceed with further development of the project, Stuttgart Ethanol,
LLC and its partners should focus their efforts on (1) developing a corn supply and procurement
plan for the project, (2) developing the required marketing relationships for ethanol and distillers
grain, and (3) developing a risk management strategy for the operation of the plant. Special
emphasis should be placed on the issues that have the greatest impact on the project profitability:
maximizing revenue from ethanol and distillers grain, reducing grain shipping and handling
costs, and obtaining or natural gas, water and electricity at favorable long-term rates.

Next Steps

The major activities and issues for the project that must be addressed as the project moves
forward after the feasibility study include the following:

   •   Project Leadership and establishment of an ownership group
   •   Project Management Team and Advisors
   •   Debt and Equity Plans and Contingency Plans
   •   Utility Supply Negotiations
   •   Site Purchase Agreement
   •   Design-Build Contract
   •   Permits
   •   Corn Procurement Plan
   •   Ethanol Marketing and Market Development Plan
   •   Distillers Grain Marketing and Market Development Plan
   •   Utility Contracts
   •   Risk Management Plan
   •   Equity Capitalization
   •   Senior Lender

The recommended project structure is shown in the following figure. This diagram shows all of
the key contracts and relationships that must be developed prior to financial close.




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                           Figure 1-1 – Project Structure Diagram

                                     Project Structure

                                           Ethanol Marketer
                    EPC Contractor                              DDGS Marketer

             Grain Procurement
                                                                  CO2 Contract
              Legal Counsel                   Stuttgart
                                            Ethanol, LLC
             Utility Contracts                                  Accounting/CPA
                Permitting                                      Rail Contract
                 Plant Management                             Energy Management

                                           Risk Management




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STUTTGART ETHANOL FEASIBILITY STUDY                                            DRAFT REPORT JULY 2006


                                 II. PROJECT OVERVIEW
Purpose of Study

Stuttgart Ethanol has retained BBI International (BBI) to conduct a study to determine the
feasibility of an ethanol plant located in the area of Pine Bluff, Stuttgart and Helena, Arkansas.
The purpose of the feasibility study is to examine the site specific criteria relating to the siting
and financial performance of the proposed plant, and to generate a financial model that will
estimate the economic robustness of the potential business. Based on the results of the report,
Stuttgart Ethanol will then be able to decide whether or not to proceed with the development of
the project.

BBI is an independent consulting firm with no vested interest in the proposed project. The
information detailed in this report reflects to the best of our ability, a true and accurate evaluation
of the current ethanol industry, applicable markets and the feasibility of the project.

Scope of Work

The ethanol facility is envisioned to be a state-of-the-art dry-mill ethanol plant with a nameplate
capacity of 100 million gallon per year (mmgy). The plant would produce fuel ethanol, distillers
grains and carbon dioxide from corn feedstock. Thermal energy for the production of steam and
drying distillers grain would be provided by either natural gas.

This full feasibility study makes an evaluation of the following areas:
   • Review and assess the project site including
            o Transportation
            o Utilities
            o Water
            o Land Cost
            o Roads
            o Wastewater disposal
            o Site location relative to communities
            o Numerical ranking of site attributes
            o Required State and Federal permits
            o Site recommendation
   • Appraisal of feedstock availability and price
   • Review of fuel ethanol markets including
            o Local
            o Regional
            o National
   • Review of the co-products, their markets, and feasibility of servicing those markets
       including
            o Dried Distillers Grain and Solubles (DDGS)
            o Distillers Wet Grain (DWG)
            o Carbon Dioxide (CO2)
   • Overview of the dry mill ethanol technology


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STUTTGART ETHANOL FEASIBILITY STUDY                                      DRAFT REPORT JULY 2006


   •   Description of project statistics including
          o Plant inputs
          o Plant outputs
          o Transportation
          o Energy demands
          o Personnel requirements
   •   Develop a Financial Model, including a construction budget, interim funding schedule
       and a ten-year operating forecast
   •   Sensitivity analyses
   •   Executive summary and recommendations




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III. SITE ASSESSMENT

Study Area

The proposed project area is eastern Arkansas and there are three sites under consideration, one
in each of the three towns of Pine Bluff, AR, Stuttgart, AR and Helena-West Helena, AR (Figure
3-1).

                                     Figure 3-1 – Study Area




The three sites under consideration for the proposed Stuttgart Ethanol LLC (SELLC) ethanol
plant are shown in Figures 3-2 to 3-6 on the following pages.

Site 1: The Port of Pine Bluff Industrial Harbor District Site

The first site BBI visited was in the Port of Pine Bluff Harbor Industrial District. The site is a 39-
acre parcel within the harbor industrial park. The site is flat and already graded. The site is
bordered on the south by a working siding off the mainline UP; UP has a very large maintenance
and switching yard located within 1 mile of the site, and a reciprocal switching agreement with
the BNSF. The site is bordered on the north by the slackwater bay that is part of Lake Langhofer,
providing direct access to the Mississippi River via the extensive barge system that runs through
Arkansas. The site is bordered on the west by an industrial facility operated by Allied Tube and
Conduit; on the east the site is bordered by The Strong Company, Inc. a distributor of vermiculite
and other aggregate products.

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                    Figure 3-2 – Location of the Site in the Port of Pine Bluff




       Figure 3-3 – Proposed Site in the Port of Pine Bluff Harbor Industrial District




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The Strong Co. has indicated an interest in sharing the cost of installing a barge facility with
SELLC, should the Pine Bluff site be selected for the ethanol plant. There is a Tyson feed mill
located two parcels away.

A 4”, low pressure gas main is available, however a 100 mmgy fuel ethanol plant will require
additional capacity via a larger or high pressure main. An on-site substation provides access to a
13.8kV electrical transmission line. A 12” water main is available, as are 15” and 18” municipal
sewer mains.

  Figure 3-4 – Panoramic Photo of the Pine Bluff Site (View of Tyson's Mill to the NEast)




 Figure 3-5 – Panoramic Photo of the “Front 20” of the Pine Bluff Site (View to the West)




     Figure 3-6 – Panoramic Photo of the “Back 20” at the Pine Bluff Site (View to the
                                       Southwest)




Site 2: Stuttgart Industrial Park Site

The second site BBI visited was in Stuttgart, AR, in an industrial park owned by the Stuttgart
Industrial Development Corporation (Figure 3-7). There are 227 acres available at the proposed
site that is currently being used to grow rice. Immediately north of the site is a soybean solvent

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extraction plant operated by the soy division of Riceland Foods. The site has access to the UP
mainline rail, and Class A roads; a source of municipal water, sewer lines, natural gas and
electricity are all located within 100-600 feet of the site and will require minor extensions to
service the proposed site. A higher capacity natural gas line will be required. Pictures of the site
are shown in Figures 3-8 to 3-10.

                    Figure 3-7 – Proposed Site in Stuttgart Industrial Park




                       Figure 3-8 – Location of Proposed Stuttgart Site




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           Figure 3-9 – Panoramic Photo of the Stuttgart Site (Looking Southeast)




      Figure 3-10 – Panoramic Photograph of the Stuttgart Site (Looking Southwest)




Site 3: The Port of Phillips County Site, Helena-West Helena, AR

The third site BBI visited was in the Phillips County Port Authority near Helena-West Helena,
AR. Pictures of the site are shown in Figures 3-11 to 3-14.

The Phillips County Port Authority has developed a 2.3 mile long slackwater harbor and
industrial park complex. The adjoining Helena Harbor Industrial Park has rail service, natural
gas, electrical power and water utilities. Approximately 4000 acres of publicly owned, flood
protected land are available for industrial development. Currently there is just one commercial
operation in the industrial park.

The site is protected by a series of levees that are graded 1-ft above the 100-year floodplain. The
site is serviced by a shortline rail spur owned by the port and operated under contract by the local
shortline rail. In addition to road and rail access, the port has a slackwater harbor channel with a
9-ft draft that connects directly to the Mississippi River; the port is currently installing a 60-ton
bridge crane capable of unloading river barges.

In addition to being served by three alternate modes of transportation, the site has all utilities
available at the site. There is a 10” high pressure natural gas main available that provides access
to four natural gas suppliers (Figure 3-15). The site also has access to 13.8 kVa electrical service
(Figure 3-16), a source of municipal water as well as the potential to drill new wells, and the port
has indicated a willingness to install wastewater service as required for the plant. Land
application and discharge to surface waters may also be possible with the appropriate permits.

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Figure 3-11 – Photo of Eastern 1100-Acres in Helena Harbor Ind. Park (Looking Southeast
                                     toward Levee)




  Figure 3-12 – Photo of Eastern 1100-Acres in Helena Harbor Industrial Park Rail Line
                               from Levee (Looking West)




   Figure 3-13 – Photo of Potential Site near Bridge Crane under Construction (Looking
                              Southwest toward Mississippi)




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               Figure 3-14 – Photo of Potential Site near Rail Looking Southwest




                 Figure 3-15 – Photo of Gas Main and Rail Line in Background




Figure 3-16 –Electrical Transmission Lines near Rt. 20 at Northern Boundary of Industrial Park




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Site Evaluation Criteria

Below is a discussion of each of the key items that determine the suitability of an ethanol plant
site. A more detailed review of the availability of feedstock and the ethanol and co-product
markets occurs in following sections of this report. Each of the key site attributes received a
score and the site evaluation scores follow the discussion below. The plant inputs and outputs
discussed are typical for a 100-mmgy dry-mill fuel ethanol plant. Each site’s score is presented at
the end of this section rather than during the discussion of each criterion.

Feedstock Proximity

The proximity of feedstock is an important component of the site evaluation as well as the
overall feasibility of an ethanol plant. Reviewed briefly here, an in-depth discussion and analysis
of the availability of feedstock is in the Feedstock section of this report. Feedstock proximity
takes into account the plant’s feedstock requirement and the feedstock production within various
distances. The feedstock requirement for a 100-mmgy plant is approximately 36 million bushels
of corn per year. The surrounding area needs to have at least twice as much production as the
plant’s requirement in order for the plant to be able to source all of its corn locally. Production
numbers are county 10-year production averages from USDA NASS. 10 points are possible in
this section.

Transportation

Access to Class A roads is an important requirement for an ethanol plant. Feedstock is typically
delivered by truck; the product or co-products may be shipped to market by truck. Access to rail
provides an important and possibly primary mode of transportation for receiving feedstock and
shipping product to more distant markets. Rail access can be a distinct advantage over other plant
sites, and while a site on a mainline rail line is generally better than a location on a short line rail
line, there can be advantages to a short line. Access to two mainlines is a great advantage when it
comes to negotiating transportation rates. Access to barge provides yet another alternative model
of transportation for feedstocks and products. The site evaluation matrix factors in these
considerations and reflects them in the scoring for the site. 8 points are possible in this section.

Rail Access and Siding

BBI evaluated the adequacy of the proposed sites with respect to rail access and the amount of
rail siding required for receiving feedstock and shipping the plant’s ethanol and DDGS to
market. An analysis of the ethanol rail shipments for a 100-mmgy plant is in Table 3-1. To
determine the amount of rail siding required, BBI assumes that all of the ethanol ships by rail and
that five days of loaded ethanol rail car storage is needed at the plant.

At 100-mmgy, the ethanol plant will produce about 284,000 gallons of denatured ethanol daily.
An ethanol rail car holds about 30,000 gallons, filling an average of 9.4 rail cars each day.
Therefore, five days of storage requires 48 rail cars. Recommended loaded ethanol rail car
storage is 50 cars. Empty ethanol rail car storage capacity should be twice loaded storage or 100
cars.

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                Table 3-1 – Ethanol Rail Shipment Analysis (100-mmgy plant)

                         ETHANOL RAIL SHIPMENTS
                    Annual ethanol production, gal                    100,000,000
                    Production days per year                                  353
                    Daily ethanol production, gal                         283,286
                    Rail car capacity, gal                                 30,000
                    Rail cars per day                                         9.4
                    Days rail car storage needed                                5
                    # loaded rail car storage needed                           47
                    Loaded ethanol rail car storage recommended                50
                    Empty ethanol rail car storage recommended                100

An analysis of the rail shipping of distillers dried grain and solubles (DDGS) for a 100-mmgy
plant is in Table 3-2. To determine the required rail siding for DDGS, BBI assumes that all of the
DDGS ship by rail (at least initially) and that four days of loaded DDGS rail car storage is at the
plant. BBI also assumes that the plant produces 18 pounds of DDGS from each bushel of corn
processed.

At 100-mmgy, the ethanol plant will produce about 322,000 tons of DDGS annually or nearly
910 tons each day. A DDGS rail car will hold 100 tons, filling 9.2 rail cars on average each day.
Four days of storage requires 37 rail cars. The recommended number of loaded rail car storage is
40 cars. Recommended empty DDGS rail car storage capacity is 40 cars.

                Table 3-2 – DDGS Rail Shipment Analysis (100-mmgy plant)

                             DDGS RAIL SHIPMENTS
                      Annual DDGS production, tons                      321,428
                      Production days per year                              353
                      Daily DDGS production, tons                           910
                      Rail car capacity, tons                               100
                      Rail cars per day                                      9.1
                      Days rail car storage needed                             4
                      # loaded rail car storage needed                        37
                      Loaded DDGS rail car storage recommended                40
                      Empty DDGS rail car storage recommended                 40

The longest siding would be for the 100 empty ethanol cars. Each car is approximately 65 feet
long, and so this siding would be 6,500 feet, with 100 feet added to each end to clear the switch.
The actual rail siding layout is usually the responsibility of the ethanol design firm, the railroad,
and the rail-yard design company. 25 points are possible in this section.




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Electrical Service

Based on a typical electrical energy input requirement of 0.75 kWh per gallon of anhydrous
ethanol produced, a 100-mmgy plant will require approximately 8.8 MW of power, or
76,000,000 kWh per year (assuming 90% capacity factor). A site with an existing electrical
supply (substation with adequate capacity), or one adjacent to a transmission or distribution line,
has an advantage over a Greenfield site located miles from a power line. 8 points are possible in
this section.

Natural Gas

Most ethanol plants use natural gas to generate process steam and to fire the direct-fired distillers
grain dryers. Natural gas use is typically about 34,000 BTUs for each gallon of 200-proof
ethanol produced with drying the distillers grains. A 100-mmgy ethanol plant requires about
400,000 cubic feet of natural gas per hour. The plant operates 24 hours a day, about 350 days per
year.

Natural gas typically comes from a large gas transmission line with the ethanol plant installing a
new line to the gas source, or from an existing gas distribution line with distribution costs paid to
the local gas company. Either way, the natural gas is purchased on the open market with
transmission fees paid to the transmission pipeline company and then distribution costs paid to
the local gas company if local distribution lines are utilized. The transmission and distribution
costs are usually negotiable. 17 points are possible in this section, accounting for service
availability and proximity.

Water

There are three basic sources of water used for ethanol plants: well water, municipal or district
water, and surface or river water. Most plants use well water due to their rural location. Over the
long term, well water is often less expensive. Cost of drilling, quality of well water, and long-
term supply are important considerations when considering a water supply. The second option as
a water source is city water or a rural water district, which may provide a more reliable source of
water, but usually at a higher cost. The third option is surface or river water if a reliable source is
available nearby. Water quality and long-term supply are important considerations just as they
are with well water. The factors driving the choice of water supply are reliability, water quality,
and price. With municipal or city water supply, special water conditioning systems are usually
not required; reducing capital cost. Water requirements for a 100-mmgy ethanol plant are about
840 gallons per minute (1,200,000 gallons per day) depending on the design of the plant and the
quality of the makeup water. 7 points are possible in this section.

Wastewater

Today’s ethanol plants typically do not discharge process water; they recover and recycle it in
the dry-mill process. Most plants do have utility blow-downs where water periodically
discharges from the cooling tower and steam boiler to prevent scale buildup in the equipment.
There may also be wastewater discharged from makeup water treatment equipment, such as a

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reverse osmosis system. The blowdown water is typically very similar to the makeup water, but
with an increase in the hardness. Cooling tower and boiler blowdown typically meet the
discharge requirements for release to a local sewer, to surface water with appropriate permits, or
to an evaporation pond. The wastewater can also be used for irrigation of crops or landscaping. 7
points are possible in this section.

Ethanol Market Proximity

A large local ethanol market provides a distinct advantage for an ethanol plant through lower
shipping costs. Local, regional, and national markets for ethanol are differentiated by distance
and transportation cost. Local markets are within 150 miles and are usually serviced by truck.
Regional markets are generally considered to be within 450 miles and are serviced by truck and
rail. National markets are more than 450 miles away and utilize rail. 10 points are possible in this
section.

Co-product Market Proximity

A large local market for the plant’s co-products can provide a distinct advantage for an ethanol
plant through lower transportation costs. Approximately 18 pounds of DDGS are produced from
each bushel of grain processed. If the plant is located near a significant number of feedlots,
livestock operations, or dairies, the plant may be able to reduce or eliminate the drying step and
sell its distillers grains as distillers wet grains (DWG). While this reduces the plant’s natural gas
consumption by up to one-third, it results in a perishable product that needs to be sold
immediately (within one week). 10 points are possible in this section.

Labor Availability

The exact number of employees varies depending on the plant design and operating plan. It is
usually preferable for the plant to obtain the majority of its workforce locally. However, the
specialty positions such as the plant manager and microbiologist may require recruiting from
greater distances. 7 points are possible in this section.

Community Services

Community services within 20 miles of the processing plant site are important to provide quick
response to the needs of the plant and to attract and retain top employees. Desirable community
services include electrical maintenance, machine shop, welding, plumbing, hospital, airport,
good schools, and fire protection. 35 points are possible in this section.

Proximity to Communities

Ethanol plants bring numerous benefits to communities including job creation, adding value to
local crops with diversified products, increased local tax revenues, and significant economic
development across the community. There are, however, potential negative impacts associated
with such facilities as well, such as increased traffic volume, visual impacts, and noise. While
noise and odors from modern processing facilities are dealt with using engineering controls and

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operating procedures, issues such as traffic and visual impacts on the community must be
considered during site selection.

In the context of site evaluation, a site in close proximity to a community or residential area will
receive a lower score than a site located in a more isolated or industrial area or with a “buffer” of
undeveloped land between it and its neighbors. 6 points are possible in this section.

Site Evaluation Results

BBI examined each of the candidate sites and rated them using the BBI Site Evaluation Matrices,
included in Appendix A. A summary for each category is shown in Table 3-3, below. A score of
105 to 130+ is excellent, 90 to 104 points indicates a good site, and less than 90 indicates a
marginal site.

The site evaluation score is an indication of the suitability of a site; it is not a measure of the
overall economic feasibility of the proposed project.

                          Table 3-3 – Summary of Site Analysis Scores

Site Characteristic                            Pine Bluff           Stuttgart         Helena Harbor
Feedstock Proximity                                2                   2                    2
Proximity of Communities                            6                   6                   6
Rail & Barge                                       18                  10                   18
Existing Rail Siding                                7                   0                   0
Roads/Highways                                      8                   6                   6
Electricity                                         8                   8                   8
Natural Gas                                        14                  14                  17
Water                                               7                   7                   7
Wastewater Discharge                                7                   7                   5
Co-product Market Proximity                         1                   1                   1
Labor Availability                                  7                   7                   7
Ethanol Market Proximity                            2                   2                   2
Community Services Within 20 Miles                 35                  35                  35
                            TOTAL:                122                 105                  114


RATING
     105 to 130+ – Excellent
     90 to 104 – Good
     Less than 90 – Marginal to Poor

Based on these results, any of the three sites would be an excellent location for a fuel ethanol
plant.


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Required State and Federal Permits

The following is a list of permits normally required for an ethanol project. However, the size and
design of the ethanol plant, the method of steam and power generation, and local permitting
requirements ultimately affect the actual permits required.

Federal Permits

Clean Air Act
   • Prevention of Significant Deterioration (PSD) and Construction Permits
   • Applicable Federal New Source Performance Standards (NSPS)
   • Applicable National Emission Standards for Hazardous Air Pollutants (NESHAPS)
   • Title V Operating Permit of the Clean Air Act Amendments of 1990
   • Risk Management Plan

Clean Water Act
   • National Pollutant Discharge Elimination System (NPDES)
   • Oil Spill Prevention and Control Countermeasures

Comprehensive Environmental Response Compensation and Liability Act & Community Right
to Know Act (CERCLA/EPCRA)
    • Tier II Forms – listing of potentially hazardous chemicals stored on-site
    • EPCRA Section 313 and 304 and CERCLA Section 103 track use and release of
      regulated substances above threshold and/or designated quantities annually.

Bureau of Alcohol, Tobacco, and Firearms (BATF)
   • Alcohol Fuel Permit (AFP)

State Permits

   •   Air Quality Permits                                  o Other waters and wetland
   •   Storage Tank Permits                                   consideration
   •   Water Quality Permits
   •   State Liquor License
   •   State Department of Motor Fuels
   •   State Department of Transportation
       o Highway Access Permit
       o Possible Easement rights
   •   State Department of Health
   •   State Department of Public Service
       o Boiler License
   •   State Department of Natural
       Resources
       o Water appropriation permits


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Site Issues and Recommendations

Based on the results of the site evaluation and the BBI Site Evaluation Matrix scores, any
of the three proposed sites would be suitable for a commercial fuel ethanol plant. Based
on the following discussion, BBI recommends the Stuttgart Industrial Park and the
Phillips County Port Authority sites for further consideration.

The site in the Harbor Industrial District at the Port of Pine Bluff scored the highest site
evaluation due to access to transportation by barge and the presence of an existing rail
siding. It also has the advantages of immediate local access to the interstate highway
system via I-530, as well as municipal water and wastewater service. Unfortunately, the
acreage available at the site in the Port of Pine Bluff (39 acres) is too constricted (i.e., too
small) to accommodate the unit trains that would be necessary to service a 100 mmgy
fuel ethanol plant, so the site is not recommended.

The site in the Phillips County Port Authority Industrial Park near Helena-West Helena is
the next-highest rated site, again due primarily to the availability of barge access, plus
this site has the space required to accommodate a unit train for delivery of feedstock and
shipment of products. Were it not for the previously-announced intention of a competing
project to site on the same acreage, the site in the Phillips County Port Authority
Industrial Park would be highly recommended as an excellent site for the SELLC ethanol
project.

The site in the Stuttgart Industrial Park is another excellent site for consideration by
SELLC. The Stuttgart site has all the requirements for a 100 mmgy fuel ethanol plant; the
reasons the Stuttgart site scored lower than the other two sites is the lack of barge access
and the lack of an existing rail siding. Were these two attributes present, the Stuttgart site
would be essentially equivalent to the Phillips County site, and superior to the Pine Bluff
site.

Using the matrix’s results, BBI recommends the Pine Bluff, Stuttgart, and Phillip County
Port Authority sites. The Pine Bluff site is only large enough to accommodate a 50-mmgy
plant. Therefore, BBI recommends the Stuttgart Industrial Park site and the Phillips
County Port Authority site as the best options for the siting the proposed plant.
Advantages of the sites include access to natural gas transmission lines, rail system, road
networks, community support services, and a skilled local labor pool.

The Phillips County Port Authority site has the added advantages of the slackwater
harbor and the existing rail spur. Unfortunately, another group is already working to
secure the site, and the site cannot accommodate two large, competing fuel ethanol
plants.

Therefore, the Stuttgart Industrial Park site is the best option, assuming the Phillips
County Port Authority site is unavailable. And, if it weren’t for the lack of barge access,
this would be the superior site for a corn ethanol plant. The lack of barge access is not a
fatal flaw, and in fact nearly all operating ethanol plants rely solely on unit trains for

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feedstock delivery and product shipment. Even without barge access, the Stuttgart is an
excellent site for a fuel ethanol plant. It is also sufficiently distant from Helena-West
Helena (50-miles) to support a second 100 mmgy fuel ethanol plant within the same
region.

Therefore, BBI recommends that SELLC pursue both the Stuttgart Industrial Park site
and the Phillips County Port Authority site in parallel, focusing on the Stuttgart site, until
one site or the other distinguishes itself in price, availability, or proximity to the natural
gas and electrical transmission lines, as well as the water and sewer infrastructure. If the
competing project fails to secure the Phillips County Port Authority site, SELLC should
move to acquire it.

BBI also makes the following recommendations regarding siting of the project:

   •   Ascertain the level of acceptance of the project by the city and community.
   •   Investigate the exact nature, availability and amount of local, state and federal tax
       incentives that may be available to the project.
   •   Have the three sites evaluated by an ethanol process design company from an
       engineering and construction perspective. There should be no cost for this
       “second” opinion.




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                    IV. FEEDSTOCK AVAILABILITY AND PRICE
Stuttgart Ethanol, LLC has retained BBI International to conduct a feasibility study to determine
the viability of an ethanol plant located near Stuttgart, AR. The present study evaluates the
feasibility of a dry-mill fuel ethanol production facility that produces ethanol and distillers grains
from local and if necessary, railed-in or barged-in corn. The feedstock analysis takes into account
the amount of grain necessary to operate various size ethanol plants, local grain availability and
the delivered cost of grain.

The recommended site for the project is the Stuttgart Industrial Park or the Phillips County Port
Authority. The local feedstock study data presented below are based on a 70-mile radius
surrounding the plant sites.
Feedstock Requirements
The grain analyss evaluates the corn requirements for ethanol plant capacities from 50 mmgy to
100 mmgy. Most design build companies guarantee their plant to produce 2.8 gallons of
denatured ethanol per 56 pound bushel of #2 grade yellow dent corn, based on a starch content of
71% by weight (Table 4-1). The production requirements are therefore based on an assumed
yield of 2.8 gallons of denatured ethanol per bushel of corn. The resulting corn requirements are
shown in table 4-2, below.
                            Table 4-1 – Composition and Yields for Corn
                            Starch                Protein           Ethanol Yield          DDGS Yield
                          (dry basis)           (dry basis)          (gal/bushel)           (lb/bushel)
        Corn                 71%                    9%                    2.8                   18.0
            Corn bushel = 56 lbs, 14% moisture. Ethanol and DDGS yields based on information from ethanol
                     process design companies. Ethanol yield is denatured. DDGS at 10% moisture.

                 Table 4-2 – Grain requirements versus ethanol plant capacity
                     Ethanol Plant Capacity                Annual Corn Requirements
                            (mmgy)                            (millions of bushels)
                               50                                     19.7
                              100                                     39.4

FEED GRAIN SUPPLY AND DEMAND OVERVIEW

Local Grain Availability

Local grain availability is determined by three factors: production, disappearance, and carry-
over. Production is simply the amount of feedstock produced each year. These data are readily
available from USDA on a county-level basis. Disappearance is based on current uses of the
grain. For most grains, there are three major categories for disappearance; animal feed (both on
farm and off farm) industrial/commercial, and export. The local grain not used as feed for local
livestock or used as feedstock in local industrial and commercial applications is known as “net
exportable” corn. Net exportable corn is generally considered what is available for new uses in
the local area. The net exportable corn should be at least twice what is required for the ethanol
plant to meet the feedstock supply requirements of some lenders.


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Limited quantities of corn are grown near the proposed plants. However, feed use is also
relatively low so most of the corn that is grown locally can be used at the proposed ethanol
plants, provided the plant can outbid grain outlets along the River.

Figure 4-1 below shows the total corn supplies in the area, while Figure 4-2 illustrates the net
supply conditions. Net supply, in this case, is total corn production, less the quantity of corn that
is being used for feed.

        Figure 4-1. Total Corn Supplies for Stuttgart-Pine Bluff-Helena, AR Region




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         Figure 4-2. Corn Net Supplies for Stuttgart-Pine Bluff-Helena, AR Region




There has been significant variability in local production from year to year largely driven by
weather. Production has been relatively high for the past three to four years as favorable weather
patterns resulted in above average yields. Local production is the lowest around Pine Bluff, with
zero production accounted for in some years (Figure 4-3). Production is higher around the
proposed Stuttgart plant (Figure 4-4), and it is highest near the Helena plant, where 18 million
bushels were produced in 2003 (Figure 4-5). Low production years, such as 1995 and 1999, can
lead to substantially higher local grain prices.

                                               Figure 4-3. Local Production – Pine Bluff
                                        Annual Corn Production for the Nine County Region Around
                                                             Pine Bluff, AR

                                   6

                                   5
             Millions of Bushels




                                   4

                                   3

                                   2

                                   1

                                   0
                                       1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005




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                                               Figure 4-4. Local Production – Stuttgart
                                        Annual Corn Production for the Eight County Region Around
                                                              Stuttgart, AR

                                   14

                                   12
             Millions of Bushels



                                   10

                                    8

                                    6

                                    4

                                    2

                                    0
                                        1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005



                                                 Figure 4-5. Local Production – Helena
                                        Annual Corn Production for the Nine County Region Around
                                                               Helena, AR

                                   20
                                   18
                                   16
             Millions of Bushels




                                   14
                                   12
                                   10
                                    8
                                    6
                                    4
                                    2
                                    0
                                        1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005



Nationally
As shown in Figure 4-6, U.S. corn production has grown steadily, thanks to innovations in corn
production practices and improved genetics. Although U.S. farmers have kept their corn acreage
fairly stable over the past 20 years, U.S. corn yield per acre has increased at an average annual
rate of 1.5 percent. While the trend over time is for higher yields, significant yield variations
occur due to weather and growing conditions. As a result, U.S. corn production can change quite
readily from one year to the next.




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                                Figure 4-6. U.S. Corn Production




Disappearance

Long-term growth in corn production has been mostly matched by demand-side growth in
animal feed, industrial uses, (ethanol and sweeteners), and export (Figure 4-7). Corn used for
feed is by far the largest component of corn demand, and it has grown from 4 billion bushels in
the mid-1980s to more than 6 billion bushels by 2004. However, changes in livestock feeding
profitability, as well as relative prices of alternative feed stocks, can have an important impact on
how much corn is fed each year. Exports also exhibit significant year-to-year variation, although
this variability has diminished in recent years.

Industrial use of corn, which includes corn utilized in the production of ethanol and high fructose
corn syrup, has been a growing segment of the U.S. corn market. In 1984, industrial use of corn
accounted for only 15 percent of the total corn market, but by 2005 its share will reach 28
percent. With continued expansion in ethanol manufacturing for the coming years, industrial use
of corn will continue to expand. The USDA predicts an additional 500 million bushels of corn
with be used in ethanol production in 2006. The Renewable Fuels Associations numbers suggest
a 750 million bushel increase in corn use. In either case, this growth in corn utilization is
significant and the trend of higher corn use should continue uninterrupted for the next 3 to 5
years.

If future gains in corn production continue to match this demand growth, then prices should hold
relatively consistent with recent history. However, the current economic climate of higher farm
input prices and relatively low corn prices could cause some production cutbacks in the near
future, which would push corn prices higher.


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                                Figure 4-7. U.S. Corn Utilization




Local Feed Use

Beef and dairy cattle, swine, and poultry all feed on the local grain. In the Stuttgart area, poultry
are the largest consumers of corn followed by cattle and finally, swine. The local area within 70
miles of the plant sites supports approximately 4,200 to 12,000 hogs/pigs, depending upon the
site (USDA County Data). Similarly, there are ~190,000 cattle within 70 miles of Helena,
increasing to 237,000 head surrounding Pine Bluff (USDA County Data); less than 3,000 of
these are dairy cows. Poultry are most numerous, with ~28 million broilers and layers within 70
miles of Helena, and nearly 54 million and 88 million within 70 miles of Pine Bluff and
Stuttgart, respectively. There are also approximately 24 million turkeys in Missouri.

The amount of grain used for feed depends on the type of cattle and feeding operations.
According to Kansas Dairy Farmers, the average dairy cow needs 162 bushels a year. Beef cattle
feeding in a feed lot require 88 bushels per year and beef cattle grazing require 12 bushels of
corn annually to supplement their diets (Iowa Beef Center). Both the corn numbers for dairy and
feed lot cattle grain consumption include feeding distillers grains back to the cattle. If the cattle
are not fed distillers grain, an additional 62 bushels of grain for a dairy cow and an additional 34
bushels for a feed lot cow are necessary on a per annual basis to obtain the same protein nutrition
(38% increase).

For this analysis, it is assumed that ten bushels of corn are consumed per hog/pig (Iowa State
University generalized feed recommendations). It is also assumed that 67% of the rations fed to
poultry consist of corn (USDA recommendations); thus, chickens consume approximately 8 lbs


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of corn per animal per year, and turkeys consume approximately 53 lbs of corn per animal per
year.

The total corn requirement as feed for local swine, cattle, and poultry in the study area is
therefore 6.4 to 14.6 million bushels, depending upon the site.

Local Industrial Uses

Existing wet mills and ethanol plants should have a negligible impact on local corn use.
Although there are several plants in Missouri, Kentucky, and points further north, all of these
plants are a significant distance from the proposed plant sites (Figure 4-8). The most significant
competitor could be the alternate plant proposed for the Phillips County Port Authority Industrial
Site. At a capacity of 100 mmgy, the proposed ethanol plant will require 39.4 million bushels of
corn each year. Several other plants have been proposed in Missouri, Kentucky, and Kansas, but
these have not yet secured full financing or reached construction stage.

Nonetheless, this region of Arkansas has insufficient supplies of grain to support a 100 MGY
plant at any of the 3 locations. There are only 4.7 million bushels of grain with 50 driving miles
of the proposed plants. These results thus indicate that is inadequate corn in the study area for the
proposed ethanol plant. Pine Bluff and Stuttgart will thus need to rely on rail to source the
majority of their corn supplies, while Helena will have to source corn by barge to meet feed
stock requirements.

            Figure 4-8 – Proximity of Existing Ethanol Plants to the Stuttgart Site




       The Stuttgart site is shown in light blue; existing plants are represented by green triangles. Circles
       show a 70 mile local feedstock zone surrounding each plant; a feedstock zone is not shown around
       the Louisville plant, because it uses beverage waste




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HISTORICAL AND SEASONAL PRICING PATTERNS

In the past 10 years, corn prices have shown extreme variability, plummeting from a record high
of more than $4.75 per bushel in the summer of 1996 to a low of $1.65 in 2000 and 2005 (Tables
4-3 to 4-5). This variability means that grain prices may be dramatically different from one year
to the next. Over the past decade, the average price at Pine Bluff was $2.32. Stuttgart’s average
price was $2.31 and Helena had an average price of $2.35. Prices tend to be lowest in November
at harvest and reach a peak in May (Figures 4-9 to 4-11).

                    Table 4-3: Annual Corn Price Variation: Pine Bluff, AR
                                  Average          Max            Min
                        1996        352            472            260
                        1997        260            292            236
                        1998        221            263            186
                        1999        202            213            184
                        2000        202            230            169
                        2001        192            204            173
                        2002        221            258            189
                        2003        232            244            215
                        2004        242            299            191
                        2005        203            231            170
                                     (Price in cents/bushel)

                    Table 4-4: Annual Corn Price Variation: Stuttgart, AR
                                  Average          Max            Min
                        1996        355            468            257
                        1997        262            292            234
                        1998        225            262            180
                        1999        198            213            178
                        2000        198            226            165
                        2001        192            206            174
                        2002        220            253            190
                        2003        230            246            209
                        2004        236            297            180
                        2005        195            226            165
                                     (Price in cents/bushel)




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                                        Table 4-5: Annual Corn Price Variation: Helena, AR
                                                    Average               Max           Min
                                           1996       358                 475           261
                                           1997       262                 295           239
                                           1998       228                 267           186
                                           1999       204                 216           183
                                           2000       204                 234           169
                                           2001       196                 211           173
                                           2002       218                 251           189
                                           2003       232                 249           217
                                           2004       248                 307           198
                                           2005       205                 234           173
                                                       (Price in cents/bushel)

                                Figure 4-9. 10-Year Average Seasonal Corn Price in Pine Bluff, AR
                          260



                          250



                          240
      Price (Cents/Bu.)




                          230



                          220



                          210



                          200
                                  Jan   Feb   Mar   Apr   May       Jun     Jul   Aug   Sep   Oct   Nov   Dec
                                                                     Month




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                                Figure 4-10. 10-Year Average Seasonal Corn Price in Stuttgart, AR
                          260



                          250



                          240
      Price (Cents/Bu.)




                          230



                          220



                          210



                          200
                                  Jan   Feb   Mar   Apr   May     Jun   Jul   Aug   Sep   Oct   Nov   Dec
                                                                   Month

                                Figure 4-11. 10-Year Average Seasonal Corn Price in Helena, AR
                          270


                          260


                          250
      Price (Cents/Bu.)




                          240


                          230


                          220


                          210


                          200
                                  Jan   Feb   Mar   Apr   May     Jun   Jul   Aug   Sep   Oct   Nov   Dec
                                                                   Month




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Prices tend to be slightly higher moving north of the plants. Prices are also higher at terminal
markets along the Arkansas and Mississippi River. Helena, with its location along the
Mississippi River, has been the highest priced market. Pine Bluff is the second highest price due
to its access to the Arkansas River.

Figures 4-12 to 4-18 illustrate average price and basis patterns found around the three proposed
plant locations through out the season. Historically there has been as much as a 45 cent
difference between spring and harvest prices near some of the proposed plants.

                          Figure 4-12. 10-Year Average Corn Price




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                     Figure 4-13. 10-Year Average October Corn Price




                     Figure 4-14. 10-Year Average October Corn Basis




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                    Figure 4-15. 10-Year Average February Corn Price




                    Figure 4-16. 10-Year Average February Corn Basis




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                       Figure 4-17. 10-Year Average June Corn Price




                       Figure 4-18. 10-Year Average June Corn Basis




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SPATIAL EQUILIBRIUM MODEL AND ANALYSIS APPROACH

Cash Grain Bids Inc. collects daily grain bid prices from elevators, feedlots, terminals, ethanol
plants, and other key buyers. The data encompasses more than 2,700 markets and 17
commodities, dating back to 1996. These markets include country elevators, feed mills, ethanol
plants, and terminal markets along major export routes. Along with data dissemination, spatial
arbitrage models are deployed that help cash grain traders pinpoint regional buying and selling
opportunities. These models take into account price differences across markets, and also rail,
barge, and truck shipping network systems and rates.

A spatial arbitrage model is employed along with grain trade to conduct the analyses. This model
provides a framework for assessing the impacts of localized structural changes on cash grain
markets. From regionalized production shortfalls to disruptions in grain transportation flows and
the introduction of new sources of demand, the models allow us to ascertain the extent of price
impacts and also to see how these impacts diffuse spatially across the market landscape.

For this study, we began by identifying key markets within a 200-mile radius of Pine Bluff,
Stuttgart, and Helena, AR. Daily price data on these markets was collected from January 1, 1996
through December 30, 2005. From these daily values, an average price for each location is
computed. This dataset serves as the basis for the analysis.

The following analysis examines the price impacts of a 100 MGY plant at each of the three site
locations. To assess the impact of a new ethanol plant, we begin by having the spatial
equilibrium model adjust the plant’s corn price higher until it draws the necessary grain supplies
needed to run the plant at full capacity. Supplies come from nearby elevators that have set prices
and certain supplies based on corn density in their area. The relative price of corn at each
elevator, adjusted for trucking costs, will dictate which markets ultimately deliver corn to the
new ethanol plant. The plant must ultimately raise prices enough to reach its capacity level.

The output of this procedure is a final assessment of the plant price for corn, and a full
accounting of the market share of corn the plant receives from various sources.

SOURCING CORN BY RAIL

The Union Pacific rail line connects key markets in the north to the of the proposed Arkansas
plants. Utilizing rail service allows the plants to search for low-cost markets, which may vary
seasonally or from one year to the next.

Key locations along the Union Pacific rail line were identified in Iowa, Missouri, Wisconsin and
Minnesota. These areas tend to have lower corn prices and more abundant supplies than
Arkansas, making them good candidates as sourcing points for the plants.

Over seventy (70) rail markets were identified in these regions and delivery rates were collected
from each origin facility to either Pine Bluff, Stuttgart, or Helena, AR. Rates ranged from a low
of $0.39 per bushel for corn originated from Dudley, MO to a high of $0.66 per bushel from
Burt, IA. In addition to rail rates, we also collected bid prices from the corresponding elevators.


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Bid prices paid to farmers by each elevator where adjusted higher by 10 cents a bushel to reflect
the normal cost of buying grain from a country elevator. Combining buying prices at each
elevator and the cost of rail delivery from each elevator, we estimated a final delivery price to the
Arkansas plants.

At different points in time the spread between Arkansas prices and Midwest prices will vary.
Time periods where the spread becomes especially large will create buying opportunities for the
plant. Figure 4-19 shows the spread between Pine Bluff, AR and Fall Creek, WI. The Fall Creek
price is typically 40 to 50 cents below the Pine Bluff price.

                         Figure 4-19. Price Spread between Pine Bluff, AR and Fall Creek, WI

                                  Price Spread Between Pine Bluff, AR and Fall Creek, WI

                          10
                          0
        Cents Per Bush




                         -10
                         -20
                         -30
                         -40
                         -50
                         -60
                         -70
                                                                            10/2/05

                                                                                      11/2/05

                                                                                                12/2/05
                               5/2/05

                                        6/2/05

                                                 7/2/05

                                                          8/2/05

                                                                   9/2/05




                                                                                                          1/2/06

                                                                                                                   2/2/06

                                                                                                                            3/2/06

                                                                                                                                     4/2/06

                                                                                                                                                5/2/06

                                                                                                                                                         6/2/06
Tables 4-6 to 4-8 show the estimated least cost combinations of delivered price and rail costs
from potential source markets to the Arkansas plants. The cheapest points for sourcing grain are
mostly in Wisconsin and Iowa where dramatically lower prices outweigh higher freight costs.
However, some corn may also be acquired from Missouri where rail rates are lower.

Helena rail rates have been adjusted higher than the Pine Bluff and Stuttgart markets to account
for the potential higher costs of connecting with Arkansas Midland Railway Company (AKMD)
for the 12 mile stretch of track between Lexa, AR and Helena, AR. Currently AKMD does not
have the capacity for shuttle trains, and so multiple trains would have to be sent to Helena,
increasing rail costs.




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                 Table 4-6. Best Markets for Rail Delivery to Pine Bluff, AR
                  State        City        Rail Cost       Delivered Price
                     WI       Fall Creek          62                 253
                     WI         Adams             60                 258
                     WI       Janesville          46                 259
                     IA          Burt             63                 260
                     MO         Dudley            40                 260
                     IA         Beaver            58                 261
                     IA        Scranton           58                 262
                     IA         Algona            61                 262
                     MO         Dudley            41                 262

                 Table 4-7. Best Markets for Rail Delivery to Stuttgart, AR
                  State        City       Rail Cost       Delivered Price
                     WI       Fall Creek          61                 252
                     WI         Adams             59                 257
                     WI       Janesville          45                 258
                     IA          Burt             62                 259
                     MO         Dudley            39                 258
                     IA         Beaver            57                 260
                     IA        Scranton           56                 261
                     IA         Algona            55                 261
                     MO         Dudley            54                 261

                    Table 4-8. Best Markets for Rail Delivery to Helena, AR
                    State        City       Rail Cost       Delivered Price
                     WI       Fall Creek          65                 256
                     WI         Adams             63                 260
                     WI       Janesville          49                 262
                     IA          Burt             66                 263
                     MO         Dudley            43                 263
                     IA         Beaver            61                 264
                     IA        Scranton           61                 265
                     IA         Algona            64                 265
                     MO         Dudley            44                 265


SOURCING CORN BY BARGE

If the Helena or Pine Bluff sites are chosen, there is the potential to bring in corn by barge from
terminals on the Upper Mississippi river. As shown in Figure 4-20, there are a number of grain
terminals on the Upper Mississippi. BBI has evaluated the feasibility of such an approach,
including barge transportation costs and establishing corn prices at representative elevators on
the inland waterway system. Owing to the fact that portions of the Upper Mississippi are closed
during the winter months, corn can only be brought in by barge from approximately April 1 to
Nov 30 each year. Barge rates fluctuate by season, peaking in Q4, and lowest in Q2. The plant
may not have sufficient volume to justify a contract with a barge transportation company. Thus,
the historical spot market was used as the basis for transportation costs. Furthermore, some barge



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operators are reticent to take shipments that terminate partway down the Mississippi, and will
only take shipments that terminate at the Gulf. This adversely impacts shipping costs.
Barge rates are significantly lower than rail rates. However, these cost savings can be
overshadowed by the nature of the markets available on barge routes. River markets are typically
high priced, as the large amount of corn traffic headed to the Gulf for export, bids up basis along
the river. Table 4-9 lists potential markets for sourcing corn by barge, and the delivered prices to
Pine Bluff along the Arkansas River, and Helena, along the Mississippi.

Due to Helena’s location on the Mississippi river, it has greater access to low priced corn by
barge. Pine Bluff faces higher barge rates as grain that comes down the Mississippi must be
diverted up stream along the Arkansas River to reach Pine Bluff.

              Figure 4-20: Grain Terminals on the Mid and Upper Mississippi




         Table 4-9. Best Markets for Barge Delivery to Pine Bluff and Helena, AR
                                                     Pine Bluff           Helena
                                                  Barge Delivered    Barge Delivered
               State        City         Basis    Cost     Price     Cost     Price
                KS     White Cloud        -49      54       262       41       248
                AR     Blytheville        -12      20       264        7       251
                TN     Heloise            -13      21       265        8       252
               MO      Glasgow            -35      43       265       30       252
                AR     Armorel            -12      20       265        7       252
                NE     Brownville         -47      43       265       30       252



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SOURCING BY TRUCK

Looking at road distance and available corn supplies, it is apparent that a 100 million
gallon plant will not be able to meet its full supply needs solely by purchasing corn locally.

Table 4-10 shows the approximate net corn supplies - after feed use- based on the 4-year average
production for corn in the region. Within a 50-mile driving distance of Pine Bluff, there are only
2.6 million bushels of corn available after feed. There are slightly higher supplies, of 8.4 and 9.2
million bushels within 50 miles of Stuttgart and Helena. As mileage from the plants increases,
grain availability increases.

           Table 4-10. Net Corn Supplies Within Driving Miles of PineBluff, AR
                                           (Millions of Bushels)
                                                      Net Supply
                     Miles
                                 Pine Bluff            Stuttgart     Helena
                      25              2.1                   3.3        2.1
                      50              2.6                   8.4        9.2
                      75              7.2                  12.0        17.8
                      100            12.2                  15.9        28.4


While available supplies are an important indicator of sourcing grain in a local area, it is not
necessarily true that all grain within a narrow region will find its way to the plant. This is
because competing uses and alternative market outlets (with potentially more advantageous
prices) will keep some of the available corn from moving to the plant.

With limited corn supplies in the area the basis impact from building a 100 MGY plant at Pine
Bluff would be 64 cents if all corn were sourced by truck. Stuttgart would see a basis impact at
the plant of 62 cents leading to predicted price of $2.93. Helena, with access to larger supplies,
would be faced with a basis impact of 49 cents and a final predicted corn price of $2.84.

Sourcing all of the corn by truck is obviously not a viable option. A combination of truck rail,
and barge must be used instead.

Pine Bluff would be able to source 100% of its corn by offering a bid price of $2.61. At a price
of $2.61 Pine Bluff would receive 16% of its corn supplies from the local market with the
remaining 84% being sourced by rail. Figure 4-21 illustrates the likely source of Pine Bluff’s
corn supplies.

Stuttgart would need to set a bid price of $2.60 to meet its full supply needs. At this price the
plant would be able to pull 20% of its corn supplies from the local market and the remaining
80% would be sourced by rail from the markets listed above. Figure 4-22 details where Stuttgart
would likely originate its grain.




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                    Figure 4-21. Corn Sourcing by County-Pine Bluff, AR




                    Figure 4-22. Corn Sourcing by County-Stuttgart, AR




Helena’s access to low priced corn via barge allows it to access grain at a lower price than the
other two locations. Helena can meet its full supply needs by setting a bid price of $2.52. At this
price the plant would be able to pull 10% of its grain supplies from the local market, with the


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remaining 90% sourced by barge. Figure 4-23 highlights where the plant would likely source
corn.

                     Figure 4-23. Corn Sourcing by County-Helena, AR




For the feasibility study, we will use the Stuttgart bid price of $2.60/bu, which includes
transportation costs and is based on the assumption that 80% of the plant’s corn with be
delivered by rail from Northern Markets. A sensitivity analysis will be performed to show the
impact of corn pricing on financial returns, which will also capture the impact of the lower
projected corn price at the Helena site.

Conclusions Regarding Feedstock

This region of Arkansas has insufficient supplies of grain to support a 100 MMGY Plant at any
of the 3 locations. After feed use, there are only 2.6 million bushels of grain within 50 driving
miles of Pine Bluff. There are 8.4 and 9.2 million bushels of corn within 50 miles of Stuttgart
and Helena respectively. These values are much less than the 39 million bushels per year
required for a 100 MMGY plant. Pine Bluff and Stuttgart will need to rely on rail to source the
majority of their corn supplies, while Helena will source corn by barge to meet feed stock
requirements.

Key findings are as follows:

   •   The ten-year average grain price is $2.32 at Pine Bluff, $2.31 at Stuttgart and $2.35 at
       Helena. Over the past ten years prices have been as high as $4.75 at Helena in 1996 and
       as low as $1.65 at Stuttgart in 2000 and 2005.

   •   The basis impact of building a 100 MG ethanol facility would be 29 cents for both Pine
       Bluff and Stuttgart indicating a ten-year average corn price of $2.61 for Pine Bluff and
       $2.60 for Stuttgart. The price impact at Helena would be 17 cents resulting in a predicted
       ten-year average price of $2.52


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   •   At a price of $2.61 Pine Bluff would source 16% of its corn locally with the remainder
       being sourced by rail. Stuttgart, at a price of $2.60 would obtain 20% locally and the
       remainder by rail. Helena can source 10% locally and 90% by barge at a price of $2.52.

The basis impact from locating a 100 MG plant at Pine Bluff would be as high as 64 cents if all
corn were sourced by truck. Helena, with slightly more access to local corn, would see a basis
impact of 49 cents. However, high corn costs can be mitigated by sourcing by rail or barge.
Over the past ten years, on average, for Pine Bluff and Stuttgart sufficient corn could be
purchased at a price of $2.61 and $2.60 respectively. Therefore, this results in an actual basis
impact of only 29 cents at both Pine Bluff and Stuttgart. Helena can make use of its location
along the Mississippi river to source corn by barge. Sufficient corn supplies can be sourced at a
10 year average price of $2.52, resulting in a basis impact of only 17 cents.

In future years the basis impact may be muted by a supply side response. A 17 to 29 cent basis
impact in the short run will encourage producers to plant more corn acres. This increase in corn
acreage is likely to dampen the basis impact in the long run. However, given the limited corn
supplies in the area currently, it would be surprising if the basis impact were to decrease
substantially. Sourcing corn by rail and barge from low cost markets will continue to be a key
driver of these plants success.

Prices vary significantly over the season, with the lowest prices occurring at harvest and the
highest prices occurring in the spring. Storage strategies that allow for more grain to be
purchased at harvest and less during the spring can help to reduce total grain costs.




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                    V. REVIEW OF FUEL ETHANOL MARKETS
World Fuel Ethanol Industry

World ethanol markets are comprised of three distinct segments: fuel, industrial and beverage (in
order of production and use). At present, world economics as well as environmental and oil
dependency concerns are providing enormous opportunities for world fuel ethanol growth while
population growth will offer modest growth opportunities for the much smaller industrial and
beverage segments.

Worldwide ethanol production reached approximately 12 billion gallons (~45 billion liters) in
2004 (see Figure 5-1), compared to 9.25 billion gallons (~35 billion liters) in 2002.

                    Figure 5-1 – Worldwide Ethanol Production (000 Liters)




                                           (Source: F.O. Licht)

Of the world’s total ethanol production, approximately 75% is now fuel ethanol, which reached
an all-time high of over 9 billion gallons in 2004. Even though the bulk of the world’s fuel
ethanol production still comes from Brazil and the U.S., there are significant developments in
other countries as well. Some of these could result in new production centers being established
beside the traditional ones in the western hemisphere.

International Markets

Brazil has long been the world's number one fuel alcohol producer, with three to five billion
gallons of anhydrous alcohol produced each year. The United States recently surpassed
production in Brazil due to the continuing bipartisan support for the alcohol fuel industry and the
phase out of MTBE as a fuel oxygenate. Figure 5-2 shows fuel ethanol production by continent.


BBI INTERNATIONAL                             5-1
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                     DRAFT REPORT JULY 2006




                    Figure 5-2 – Worldwide Ethanol Production by Continent




North and South America continue to be the world’s leading ethanol production regions, with no
indication of change in the foreseeable future. Total production in the Americas in 2003 reached
nearly 8 billion gallons, about 65% of the world ethanol output. Historically, the world leader for
the past 30 years has been Brazil, with approximately 5 billion gallons produced in 2003. At the
peak of ethanol production, Brazil had 40 to 60% of its vehicles fueled by ethanol (1984 to
2002). Total U.S. ethanol production in 2005 was 3.9 billion gallons.

Even though the majority of production still comes from Brazil and the U.S., there are significant
developments in other countries as well. Some of these could result in new production centers
being established in addition to the traditional ones in the western hemisphere.

Europe now has a major distillery built by the Ecocarburentes Group in Spain, with another
distillery planned. The European community is also putting its weight behind the programs.
There are indications that the EU is working on provisions for a Renewable Fuels Standard,
securing a rising market share for biofuels.

Sizeable new production centers are emerging in Thailand, where the government plans to
produce up to 170 million gallons of fuel ethanol in 2003, as well as China, where recently
announced projects could raise fuel ethanol production capacity to 500 million gallons a year.

In India, 5% ethanol blends are now required in some regions of the country, and the entire
country will soon require ethanol blends. In Latin America, new ethanol production initiatives
are in place in many countries. In Brazil, where the original fuel ethanol distilleries use molasses
and sugar cane as the raw material, expansions are also underway.

U.S. National Ethanol Market

In the U.S., ethanol’s primary purpose is to serve as an octane extender for gasoline, a clean air
additive in the form of an oxygenate, and as an aid in the reduction of America’s dependence on
imported oil, thereby reducing our balance of trade. In order to accomplish these tasks in the face
of resistance from the oil industry, Congress established an incentive in the form of a tax credit


BBI INTERNATIONAL                           5-2
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                   DRAFT REPORT JULY 2006


during the mid-1970’s designed to encourage the oil industry to blend ethanol. The tax incentive
continues today and was recently extended in the 2005 Energy Policy Act (EPACT).

New restrictions on automobile emissions, reductions in carbon monoxide, smog mitigation
programs in major cities, and a general trend toward the reduction of greenhouse gas emissions,
continue to drive the demand for ethanol. Discoveries of ground water contamination by methyl
tertiary butyl ether (MTBE), ethanol’s primary competitor, have spurred even greater interest in
ethanol blends. Until recently, MTBE had the majority of the oxygenate market in the United
States.

Since incidences of ground water contamination have occurred in thousands of wells in
California and in the Northeast, where MTBE was the predominant oxygenate, there have been
demands for the discontinuation of its use. In March 2000, the EPA issued an Advance Notice of
Proposed Rulemaking that could result in a total ban of the use of MTBE. Ethanol, a fully
biodegradable product, stands ready to fill the void left in California and other parts of the
country where the use of MTBE is banned. The EPACT removed oxygenate requirements for
fuel, but also specifically excluded a liability waiver for MTBE; which has led to the near-
complete phase-out of MTBE as of May, 2006.

The petroleum refining capacity in the United States continues to decline while gasoline
consumption continues to increase. The slightest upset in refining capacity (fire, shutdown,
closure) sends gasoline prices soaring. U.S. refining capacity is not keeping pace with increasing
demand. Ethanol plays a key role in helping refiners extend their product by as much as 10%.

Fuel ethanol produced from corn continues to be the mainstay of the domestic fuel ethanol
industry; fuel ethanol production capacity in the United States exceeded 4.5 billion gallons/yr as
of March, 2006, and capacity under construction is exceeds 2.1 billion gallons/yr.

Approximately 95% of U.S. fuel ethanol is manufactured from corn and it follows that the
majority of production capacity and subsequent use of fuel ethanol is in the Midwest Corn Belt.
Ethanol is used in nearly every state in the country including Alaska (see Figure 5-3). While corn
has been the primary feedstock for fuel ethanol in the U.S., other feedstocks including wheat,
sorghum and various waste starch and sugar streams are also used. Grain-based ethanol will
likely continue to be the major contributor to ethanol production in the years ahead.

Currently there over 100 commercial fermentation ethanol production facilities in operation in
the U.S. (as of June, 2006), with 36 new plants under construction and another 5 undergoing
significant expansion (see Figure 5-4).

Ethanol demand is expected to increase at a very aggressive pace with current market,
environmental and political forces all driving demand for renewable fuels, higher (
Figure 5-5). Current demand is driven by the phase-out of MTBE; future demand will be driven
by the mandate in EPACT, along with ethanol’s economic and environmental benefits. Today’s
4.5 billion gallon per year production capacity is thus expected to grow to at least seven billion
gallons over the next few years; indeed, current production capacity plus the capacity under
construction total nearly 6.6 billion gallons per year.



BBI INTERNATIONAL                          5-3
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                   DRAFT REPORT JULY 2006


                        Figure 5-3 – U.S. Ethanol Production and Use




                    Figure 5-4 – Fuel Ethanol Plants and Projects in the U.S.
                          Plants in operation      under construction    plant expansion
                                                Data as of March, 2006




BBI INTERNATIONAL                                  5-4
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                              DRAFT REPORT JULY 2006


                                 Figure 5-5 – Projected Renewable Fuels Growth in the U.S.

                                   Growth of the U.S. Ethanol Industry
                           8.0
                           7.0
                                                                            Actual   Projected
     Annual Production
     billions of gallons



                           6.0
                           5.0
                                                   11% Average Annual Growth
                           4.0
                           3.0
                           2.0
                           1.0
                           0.0
                                  1980
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                                  2004
                                  2005
                                  2006
                                  2007
                                  2008
                                  2009
                                  2010
                                  2011
                                  2012
                                  1992




The recent bans on MTBE and the have greatly expanded the market demand for ethanol,
creating a major stimulus for new ethanol production. Nineteen states have banned or have
MTBE bans pending (Figure 5-6). However, the lack of a liability waiver has also led to the
phase-out of MTBE in regions that did not have an MTBE ban in place, and the use of ethanol as
a replacement oxygenate and octane enhancer.

                                        Figure 5-6 – States that have banned MTBE




BBI INTERNATIONAL                                       5-5
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                  DRAFT REPORT JULY 2006


Various states have also enacted mandates for use of renewable fuels, or are considering their
implementation (Figure 5-7). This will further increase demand, both nationally and regionally.
To encourage local production, various states have also implemented production incentives, as
shown in Figure 5-8.

                    Figure 5-7: Mandates and Potential Mandates for Ethanol




                          Figure 5-8: States with Production Incentives




BBI INTERNATIONAL                          5-6
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                     DRAFT REPORT JULY 2006


At the same time, the continued implementation of new technological and input improvements
(i.e., lower cost enzymes and advanced yeast strains) continue to decrease ethanol production
costs. Gasoline prices also continue to increase due to a decrease in supply, allowing ethanol to
play a more significant role in the U.S. fuel consumption arena. Recent accomplishments of the
ethanol industry include:

   •   Annual production record of 3.9 billion gallons produced in 2005
   •   Monthly record of 375 million gallons (288,000 bbl/d) produced in January, 2006
   •   Currently, 102 ethanol plants are online with an annual production capacity of 4.5 billion
       gallons
   •   Ethanol use prevented nearly 3 million tons of carbon monoxide, 300,000 tons of ozone
       equivalent VOCs, and 5.7 million tons of CO2-equivalent greenhouse gas emissions.

For new ethanol projects, one of the most important strategic marketing decisions to be made
will be the allocation of production to the various markets: ethanol markets should be divided up
into three categories: local, regional and national.

If too much product is sold locally, the local price will be depressed. If too much is sold
regionally or nationally, transportation costs will be increased and opportunities to service a less
expensive local market will be forgone. A good balance between local, regional and national
markets are required to achieve a maximum revenue return to the plant.

On the issue of markets, both for ethanol and the co-products produced from the plant, there are
critical considerations that should be addressed up-front. As new production comes on-line it is
incumbent on the new producer to ensure that there is an active market development initiative
undertaken in the state. Developing new production with no regard to developing new markets,
does not serve the interest of the producer, or the industry at large.

Regional Ethanol Market

Typically, a regional market is one that is outside of the immediate local market, but within the
same state and possibly neighboring states. This market will likely be serviced by truck or rail,
and is within a 450-mile radius of the plant (see Figure 5-9).

Regional pricing tends to follow national pricing less the freight difference. As with national
markets, the use of a group-marketing program or a broker is advantageous, especially in the first
one to three years of operation.

Occasionally there are opportunities to obtain backhaul rates from local trucking companies.
These are rates that are reduced since the truck is loaded both ways. Normally the trucks drive to
the refined fuels terminals empty and load gasoline product for delivery. A backhaul is the
opportunity to load the truck with ethanol to drive to the terminal.




BBI INTERNATIONAL                           5-7
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                              DRAFT REPORT JULY 2006


                 Figure 5-9 – Regional Ethanol Markets and Ethanol Plants




                         Note: operational ethanol plant. under construction.
                Circle represents the 450 mile regional market surrounding the Stuttgart site



The regional markets for an ethanol plant in the Stuttgart area would include Arkansas, Alabama,
Louisiana, Mississippi, Missouri, Tennessee, along with most of Illinois, Kentucky, Oklahoma,
and parts of Georgia, Indiana, Kansas, and Texas. In general, markets to the north of the project
would not be preferred due to the volume of ethanol production in Illinois and Iowa. The
advantage of the current project with respect to the ethanol market is its location relative to
Louisiana, Mississippi, Texas, and other growing Southern markets.

Data on gasoline and ethanol usage in Arkansas and surrounding states were obtained from the
Energy Information Agency of the U.S. DOE. Ethanol use in these states is shown in Table 5-1.
As recently as 2004, there was no ethanol use in Arkansas. In the regional market, ethanol use
has increased from about 473 million gallons in 2001 to an estimated annual usage of 735
million gallons in 2004 – an increase of about 55% over four years. Nonetheless, this still only
represents about 1.4% of total gasoline consumption in the regional market, indicating that there
is significant room for future growth.




BBI INTERNATIONAL                              5-8
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                             DRAFT REPORT JULY 2006


         Table 5-1 – Ethanol and Gasoline Use in Arkansas and Neighboring States
                     Ethanol     Ethanol                        Gasoline                        Market
                    2000 – 04                  Avg            Consumption Ethanol as            at 10%
                       Avg        2004        annual         1999-2004 Avg Percent of            RFS
     State           MMGY        MMGY         growth            MMGY       Gasoline             MMGY
     Arkansas           13.6          31.4        23%             1466              0.9%           147
     Alabama             3.9          5.5         24%             2534              0.2%           253
     Georgia             0.0          0.0          n/a            5039              0.0%           504
     Illinois          328.8         421.3        10%             5241              6.3%           524
     Indiana           118.6         140.2         6%             3255              3.6%           325
     Kansas             15.4           4.3        13%             1366              1.1%           137
     Kentucky           28.3          53.1        84%             2213              1.3%           221
     Louisiana          26.4          50.1       188%              2374             1.1%           237
     Mississippi         0.0          0.0          n/a            1644              0.0%           164
     Oklahoma            0.0          0.0          n/a            1848              0.0%           185
     Tennessee           0.0          0.0          n/a            3055              0.0%           306
     Texas              39.5          28.7        -13%            11136             0.4%          1114
     Total             574.6         734.7                       41169.9            1.4%          4117
                         Source: U.S. Department of Transportation Highway Statistics
           Historically, ethanol has not been used in Tennessee, Georgia, Mississippi, or Oklahoma

The Stuttgart area ethanol plant is very well-positioned to serve the regional ethanol markets in
Arkansas, Oklahoma, Missouri, and Kentucky, along with developing markets south, west and
east of the project.

Local Ethanol Market

The local ethanol market includes municipalities within a 150 mile radius of the plant. The local
market includes most of Arkansas, plus northwestern Mississippi and small parts of Tennessee
and Louisiana. Major cities within the local market include Memphis and Little Rock; Jackson
and Shreveport are just outside the local market area. Thus far, very limited amounts of ethanol
have been sold into these local markets, and thus, these markets would have to be developed.
There are currently no other plants within the local market area, although the competing project
considering the site in Helena would also serve this area. However, there are currently four
ethanol plants in Missouri and Tennessee with a combined production capacity of 162 million
gallons of ethanol annually (Table 5-2). There are another six plants in north-central Illinois,
with about 800 million gallons of capacity, and a further 7 plants in Kansas with about 174
million gallons of capacity. The current plant would thus be within the extended regional market
for many of these existing plants in Missouri, Kentucky, Tennessee, Illinois, Kansas and Iowa.

                      Table 5-2 – Missouri and Tennessee Ethanol Plants
                                                                                       Capacity
         Company                                     City              State
                                                                                       (mmgy)
         Golden Triangle Energy Coop                 Craig             MO                 20
         Mid-Missouri Energy                         Malta Bend        MO                 40
         Northeast Missouri Grain                    Macon             MO                 42
         AE Staley                                   Louden            TN                 60
         TOTAL CAPACITY                                                                   162



BBI INTERNATIONAL                              5-9
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                     DRAFT REPORT JULY 2006


State Producer Payment

There is currently no state producer payment in Arkansas.

Ethanol Pricing

Over the past 10 years the spot prices of fuel ethanol, crude oil and gasoline have had a definite
upward trend (see Figure 5-10 below). It is obvious that the price of crude oil has a significant
effect on the price of gasoline since gasoline is produced from crude oil. A correlation coefficient
of 0.996 for the average annual spot market prices of crude oil and gasoline supports this
conclusion.

There is a correlation of 0.79 between the price of ethanol and crude oil, and a 0.80 correlation
between the price of ethanol and gasoline. These high correlations are not surprising. As
mentioned in the discussion on fuel ethanol pricing, the price of fuel ethanol is often based on the
local rack price of unleaded gasoline plus the value of the federal excise tax exemption. So, most
of the price changes in ethanol are explained by price changes in crude oil and gasoline and not
by the price of corn, distillers grain or the cost of ethanol production.

The rack price for ethanol (FOB Omaha) is shown in Figure 5-11. Over the 10 year period from
1996 to 2005, prices have ranged from a low of $0.90/USG in 1999 to $2.74/USG in September,
2005. Recent 2006 rack/spot prices have been even higher, exceeding $3.50/USG as the demand
for ethanol has rapidly increased. However, prices are expected to moderate as more plants come
on line. Furthermore, much of the ethanol is sold on contract at prices nearer to historical
averages, rather than on the spot market. The ten year average ethanol price for the central and
south/eastern region of the United States is $1.33/USG, while the price has averaged $1.46/USG
over the period from January 2001 to December, 2005. As noted above, this is consistent with
the historical price for gasoline (Figure 5-12), adjusted for the value of the federal excise tax
exemption. Over the period from 2001 to 2005, retail prices for regular unleaded in the regional
market area averaged $1.64/USG. The delivered price for ethanol will be less than this value,
after accounting for retail margins and taxes, to be competitive with the price for regular
unleaded gasoline. Typical delivery costs range from 4 cents/gallon for local deliveries by truck,
to ~10 cents/gallon for national shipments by rail. Barge shipments can be much cheaper, as little
as 2 cents/gallon, depending upon the season and destination. The projected sales price of
ethanol based on historical trends in the target markets is shown in Table 5-3. An ethanol selling
price of $1.468 per gallon will thus be used in the financial analysis for the 100 MMGY plant.

                    Table 5-3 – Basis for Ethanol Pricing – 100 mmgy plant
                                            Ethanol                  % of        Ethanol
                                                         MMGY
                                           Price $/gal            production    Price $/gal
           Local (truck)                      1.46         20         20%          0.292
           Regional                           1.46         40         40%          0.584
           New York                           1.48         10         10%          0.148
           Barge/ Rail to Other Markets       1.48         30         30%          0.444
           Average Ethanol Price                          100        100%          1.468




BBI INTERNATIONAL                          5-10
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                                                                                    DRAFT REPORT JULY 2006




                                          Figure 5-10 – Historic Relationship between Prices of Oil, Gas, and Ethanol


                                                                                   Historical Ethanol Gasoline and Crude Oil Prices

                                                                               $1.80                                                                                                   $45.00
                                                    Etoh & Gasoline ($/gal)

                                                                               $1.60                                                                                                   $40.00
                                                                               $1.40                                                                                                   $35.00




                                                                                                                                                                                                      Crude Oil ($/bbl)
                                                                               $1.20                                                                                                   $30.00
                                                                               $1.00                                                                                                   $25.00
                                                                               $0.80                                                                                                   $20.00
                                                                               $0.60                                                                                                   $15.00
                                                                               $0.40                                                                                                   $10.00
                                                                               $0.20                                                                                                   $5.00
                                                                               $0.00                                                                                                   $0.00
                                                                                             1994
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                                                                                                                                                                      2003
                                                                                                                                                                              2004
                                                                                    Ethanol ($/gal)                          Gasoline ($/gal)                          Crude Oil ($/bbl)


                                                                                        Figure 5-11: Rack Ethanol Prices Omaha, NE
                                                                                                                             Rack Ethanol

                                       $2.50
  U.S. Dollars per gallon, FOB Omaha




                                       $2.00




                                       $1.50




                                       $1.00




                                       $0.50




                                       $0.00
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BBI INTERNATIONAL                                                                                                              5-11
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                     DRAFT REPORT JULY 2006


                                       Figure 5-12: Average Annual Price for Regular Unleaded Gasoline in PADD III

                                                       Annual Average Price for Regular Unleaded - PADD III

                                       300
   Cents per gallon, including taxes




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Ethanol Shipping Costs

The Stuttgart Ethanol plant would likely ship ethanol via truck to local and regional markets and
by rail or barge to more distant markets, e.g., on the East Coast or to New Orleans. The split
between local, regional and national markets is not likely to be known until marketing
agreements and contracts are negotiated in the subsequent business development phase of the
project. Assuming ethanol is marketed 40% locally, 40% regionally, and 20% to the
National/International markets, BBI estimates the average ethanol shipping cost for a 100 mmgy
plant to be about 8.0¢ per gallon, as shown in Table 5-4, below. These values are based on
shipments by truck and by rail. However, if shipping to “other national markets” occurs by
barge, the weighted average shipping cost drops to ~6.0¢ per gallon. Transportation costs will
thus reduce the net ethanol sales price, i.e., FOB plant, to about $1.38 to $1.40/USG.

                                                         Table 5-4 – Ethanol Shipping Costs from Stuttgart

                                                                                                                  % of
                                                                              $/gal              MMGY          production            $/gal
                                                       Local (truck)          0.04                20              20%                0.008
                                                           Regional           0.08                40              40%                0.032
                                                         New York             0.10                10              10%                0.01
                                             Other National Markets           0.10                 30             30%                 0.03
                                             Average Shipping Cost                                100            100%                0.080




BBI INTERNATIONAL                                                                  5-12
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                     DRAFT REPORT JULY 2006


Ethanol Market Summary

Historically, there has been very little ethanol consumption in Arkansas. However, in the
regional market, which includes Missouri, Indiana, Illinois, and Texas, among others, historical
ethanol consumption has averaged 575 million gallons annually from 2000 to 2004, reaching 735
million gallons in 2004. The market potential based on an E10 blend is nearly 4 billion gallons
per year in the states comprising the regional market.

There are currently four ethanol plants in Missouri and Tennessee with a combined annual
production capacity of 162 million gallons; several other plants in the extended regional market,
including Illinois and Kansas, have production capacities totaling nearly 1 billion gallons
annually, with additional plants under construction or in the planning stages.

The proposed ethanol plant is well-positioned to serve the local Arkansas, and northwestern
Mississippi markets, as well as ethanol markets in Tennessee, Missouri, Texas and on the gulf
coast. Ethanol use in Louisiana is about 50 million gallons per year, and there are significant
opportunities for growth in Alabama, Louisiana, Mississippi, Texas, and Tennessee.

The ability to divide product effectively between local, regional and national markets is
extremely important. So much so, that it is imperative that either an experienced marketer is
hired, or the ethanol marketing be contracted to a broker or a cooperative marketing group.

The best scenario for the Stuttgart Ethanol plant would be to supply ethanol locally within
Arkansas and to develop nearby local and regional markets. The Tennessee market, which
includes Memphis and Nashville, needs to be developed, but has significant potential. For a 100
mmgy plant, BBI estimates that 20% of the plant’s ethanol could be sold to local markets, 40%
regionally, and the balance to national and East Coast markets. The average shipping cost for this
scenario is estimated to be $0.08 per gallon of ethanol, dropping to $0.06 per gallon if shipping
by barge.

Ethanol prices are normally equal to the rack or wholesale price of unleaded gasoline, plus the
51¢ per gallon Federal Excise Tax Exemption for ethanol blends. The resulting price may be
higher or lower to account for ethanol supply and demand in local and regional markets. The 5-
year average spot ethanol prices in the local, regional and national/East Coast markets were used
to establish a weighted average price for ethanol sold by the plant, based on the anticipated
distribution of ethanol into these markets. For a 100 mmgy plant, the weighted average price is
$1.468 per gallon.

Based on historical pricing trends in the projected target markets, the price of ethanol used in the
financial analysis is $1.468 per gallon with a weighted transportation cost of $0.06 to $0.08 per
gallon. A marketing fee of 1¢/gallon will also be deducted from the ethanol price in the financial
analysis.




BBI INTERNATIONAL                          5-13
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006


                           VI. REVIEW OF CO-PRODUCTS
This section of the feasibility study reviews the anticipated co-products of the proposed Stuttgart
ethanol project. The primary co-products of alcohol production from a dry mill ethanol plant are
distillers grains and carbon dioxide.

Distillers Grains

Distillers grains are the residues that remain after high quality cereal grains have been fermented
by yeast. In the fermentation process, nearly all of the starch in the grain is converted to ethanol
and carbon dioxide, while the remaining nutrients (proteins, fats, minerals and vitamins) undergo
a three-fold concentration in the beer, which after distillation and centrifugation of the still
bottoms, yields distillers wet grains (DWG) and “thin stillage”. The thin stillage is subsequently
concentrated via evaporation and the “heavy syrup” is added back to the DWG. This material is
then dried to 10% moisture, producing distillers dried grains with solubles (DDGS).

The addition of the soluble fraction increases the protein and vitamin potency of the final product
and also removes the logistical problems associated with marketing wet feed. It also provides a
solid baseline byproduct that can be marketed while allowing development of both the wet feed
and special blend feed markets. DDGS is the most common and highest volume form of feed
product derived from a dry mill facility. Typical composition of DDGS from corn is presented in
the following table.

                         Table 6-1 – Typical Corn DDGS Composition

                          Component                           Weight %
                           Moisture                            9 to 10%
                            Protein                           27 to 30%
                         Carbohydrates                        52 to 56%
                              Fat                             7.5 to 9%
                             Fiber                             8 to 9%
                             Ash                              4.5 to 5%

DDGS derived from corn contain nutrients that have been demonstrated by numerous
experiments to have important growth promoting properties for dairy and beef cattle, poultry and
swine. For dairy cattle the high digestibility and net energy content of DDGS and DWG,
compared to other feed ingredients (soybean meal, canola meal, brewers spent grains as
examples), as well as the high fat content, results in feeds that yield greater milk production. For
beef cattle the improved rumen health, energy effect of the fiber, and palatability has been shown
in feedlot studies to result in faster and more efficient gains.

For poultry, feeding tests have demonstrated that DDGS favorably effects fertility and
hatchability. DDGS is an excellent ingredient for supplying protein to broilers where the diet has
been adjusted to limit certain amino acids. For hogs, research has shown that DDGS can



BBI INTERNATIONAL                           6-1
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006


effectively furnish portions of the energy, protein and other key nutrients during all phases of
production.

More than six million tons of DDGS are produced in North America each year and incorporated
into animal feeds or exported. Several ethanol producers market a portion of their byproducts in
a wet form (65% moisture) where nearby markets make it economical to deliver the product and
avoid drying costs. Some maintain that DWG has a higher nutritive value than DDGS due to the
loss of volatile compounds during drying of the distillers grain.

Local Market for Distillers Grain

Approximately 18 pounds of DDGS (at 10% moisture) or 46.3 pounds of DWG (at 65%
moisture) are produced from each bushel of grain processed. A 100 mmgy ethanol plant will
produce about 321,000 tons of DDGS or 825,000 tons of DWG each year. One feeder cow will
consume up to about one ton of DDGS per year; therefore, a minimum of 321,000 head of cattle
on feed are required for the entire distillers grain output of a 100 mmgy dry mill ethanol plant.

Total cattle inventory in Arkansas averaged 1.83 million head from 2001 to 2006 with
approximately 944,000 head of beef cows and 35,000 head in the dairy industry (USDA NASS).
In the 70-mile radius around Stuttgart (Figure 6-1), there were 235,000 head of cattle, but no
dairy cattle. Over the past six years, the area surrounding Helena supported only ~2,300 head of
dairy cows, and 191,000 head of cattle overall, while the area around Pine Bluff supported
~237,000 head of cattle, but no dairy cows.

Both dairy and beef cattle consume distillers grains in both wet and dry form, however, dairy and
feedlot beef cattle usually receive distillers grains in the wet form (if there is an ethanol plant
within about 100 miles) and beef on farm receive distillers grains in the dry form. Based on the
cattle data, there may be a potential local cattle market for wet distillers grains, but much of the
grains will have to be dried and sold outside the local market. For the financial analysis, BBI has
thus assumed that all of the distillers grain will be dried, but, for comparison, the impact of
selling wet distillers grains will also be evaluated.

Regional Markets for DDGS

Regional markets for the project’s DDGS include Arkansas, Missouri, Kansas, Kentucky,
Tennessee, Illinois, and Indiana, and markets further to the east and south from Arkansas,
including Alabama, Mississippi, Louisiana and Texas. The Illinois and Iowa markets are already
effectively covered by ethanol production in those regions. For the current project, the primary
target markets include poultry, swine and dairy cattle. The number of broilers within 70 miles of
Stuttgart was 87 million in 2002, and approximately 6 billion within 500 miles, encompassing
Alabama, Kentucky, Mississippi, Missouri, Tennessee, and Texas. Over the past 6 years,
approximately 30 million cattle and 975,000 dairy cattle were supported within 500 miles of the
project; and approximately 10 million hogs and pigs were in the project’s regional market. These
markets are currently using local corn and DDGS from Midwest ethanol plants. Because the
current plant would have a lower shipping cost to these markets, it is expected that the Stuttgart
plant will compete favorably with the Midwest DDGS.



BBI INTERNATIONAL                           6-2
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006


                     Figure 6-1 – Cattle within 70 miles of Stuttgart, AR
                                           Stuttgart Plant Site




Distillers Grain Pricing

In the U.S., the base market value for distillers grains historically has been set by producers of
distilled spirits and more recently by the large corn dry-millers that operate fuel ethanol plants.
As shown in the following figure, corn and DDGS prices do not track exactly, but they do
generally follow each other (Figure 6-2).

Distillers grain market price is determined through a number of factors that include the market
value of local feed grain, the market value of soybean meal and other competitive protein
ingredients, the performance or value of distillers grain in a particular feed formulation, the
supply and demand within the market, and, most importantly, acceptance by animal producers.

Historical DDGS pricing for product delivered to select national markets as reported by
Feedstuffs Magazine is shown in Figure 6-3. The data in Figure 6-3 show the relationship
between DDGS prices and point of origin. Prices for DDGS are least in the Minneapolis market,
reflecting the low cost of corn in the state. As DDGS is shipped to more distant markets, the
price increases to reflect the additional transportation costs, and the higher cost of corn which
sets the standard for the DDGS market. This is reflected in the higher price for DDGS in
Chicago, and the highest price per ton in Pacific Northwest markets like Portland.




BBI INTERNATIONAL                            6-3
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                                                                                                                             DRAFT REPORT JULY, 2006


                                                 Figure 6-2 – Historical Pricing of DDGS and Corn


                                                 Price Per Ton Comparison of DDGS and Corn
                  150
                  125
                  100
      $ per Ton




                  75
                  50
                  25
                   0
                   1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

                                                                                                                   DDGS                                      CORN


                        Figure 6-3 – Historical DDGS pricing for Select National Markets



                                             160.00
                                             140.00
                        DDGS Price ($/ton)




                                             120.00
                                             100.00                                                                                                                                                                                  Minneapolis
                                                                                                                                                                                                                                     Chicago
                                              80.00
                                                                                                                                                                                                                                     Portland
                                              60.00
                                              40.00
                                              20.00
                                               0.00
                                                      3/22/99

                                                                6/22/99

                                                                          9/22/99

                                                                                    12/22/99

                                                                                               3/22/00

                                                                                                         6/22/00

                                                                                                                   9/22/00

                                                                                                                              12/22/00

                                                                                                                                         3/22/01

                                                                                                                                                   6/22/01

                                                                                                                                                             9/22/01

                                                                                                                                                                       12/22/01

                                                                                                                                                                                  3/22/02

                                                                                                                                                                                            6/22/02

                                                                                                                                                                                                      9/22/02

                                                                                                                                                                                                                12/22/02

                                                                                                                                                                                                                           3/22/03




                                                                                                                                    Date
                                                                                                Source: Feedstuffs Magazine

For the proposed Stuttgart ethanol project, BBI used a conservative approach to establish pricing
for the plant’s distillers grains (either wet or dry). The price of the plant’s DDGS was set equal to
the price of local corn on a dry weight basis and the DWG price was set at 96% of the corn price
on a dry weight basis. With corn at $2.61 per bushel, the resulting DDGS price is $98.70 per ton
and the DWG price is $36.85 per ton. This approach assumes that the plant receives no credit for
the higher protein and nutritional value of the distillers grain compared to corn. As the local
market for distillers grain is developed after the ethanol plant starts up, a higher price should be
received for the distillers grain as local feeders become familiar with the distillers grain feed and
its benefits.


BBI INTERNATIONAL                                                                                                            6-4
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006




BBI recommends that the plant take advantage of the expertise of a DDGS marketing company
in the marketing of the project’s distillers grains. The advantages of using such a marketing firm
are numerous. It allows the plant personnel to stay focused on plant operations, it eliminates the
need for a marketer as well as clerical billing functions, and it improves cash flow since the plant
receives a check when the scale ticket is submitted. While there is a fee for these services, the
benefits would seem to outweigh the costs. The marketing firm may also be able to obtain better
rail rates due to their volume of rail shipments.

Distillers Wet Grain

Distillers Wet Grain (DWG) is the wet cake that comes directly from the centrifuge. It has
approximately 65% moisture. The syrup that is centrifuged out is evaporated and returned back
into the wet cake. This product remains at about 65% moisture after the evaporated syrup is
returned to the cake.

The primary market for DWG is local cattle. Cattle perceive DWG as sweet and readily eat it
without any added sweeteners. Dairy cattle perform well on DWG. Beef cattle gain weight on
DDGS similar to grain, but without the problems caused by the high starch content of grain.

Although wet distillers grain is nutritionally superior compared to dry distillers grain (drying
reduces digestibility), least cost ration formulations may dictate the use of the dry form as the
distance between the ethanol plant and the livestock operation increases. This is because
transportation costs on a dry matter basis are generally less for dry product. Thus, inclusion of
wet or dry distillers grain in cattle diets must be evaluated on an individual operation basis.

Selling DWG usually reduces ethanol plant operating costs by reducing natural gas use.
However, in the wet form, the distiller grain has a shelf life of about a week, so it needs to be
distributed quickly. The plant must insure that it maximizes the price of its byproducts and
should not sell DWG for less than the equivalent price at which it can sell DDGS plus drying
costs.

For the proposed ethanol project, there are sufficient numbers of livestock in the local market to
support selling some DWG, but this market would have to be developed. Therefore, the financial
analysis for the plant is based on selling all of the distillers grain dry.

CO2 Markets

Dry ice and liquid carbon dioxide are principally used as expendable refrigerants in the food
industry. Carbon dioxide, whether solid, liquid, or gaseous, is recognized as safe for use in foods.
Food applications include:

   •   Beef, pork, and poultry slaughter operations
   •   Frozen food storage and transportation
   •   Supplemental cooling for refrigerated products
   •   Meat, sausage and bakery processing


BBI INTERNATIONAL                           6-5
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                      DRAFT REPORT JULY, 2006


   •   Airline catering
   •   Gift food packaging
   •   Carbonation of beverages

Non-food applications include:

   •   Various chemical processes
   •   Oil extraction via CO2 injection
   •   Pharmaceutical manufacturing
   •   Shrink fitting
   •   pH control

Currently in the U.S., about 25% of fermentation carbon dioxide (CO2) produced from ethanol
plants is captured, and balance is vented to the atmosphere. The carbon dioxide captured is in
most cases from very large ethanol plants. Capture of CO2 from medium sized and smaller plants
is usually not justified unless special market conditions are present. If justified, the ethanol plant
can easily capture raw carbon dioxide. However, it must be processed further if it is to be used
for commercial purposes. At most, the revenue potential from the sale of CO2 is on the order of
3% of total plant revenues.

A CO2 processing company would prefer to use high pressure CO2 rather than liquid CO2 since it
reduces the capital costs for equipment and processing costs. Typically, a CO2 processing
company will construct a processing facility next to the ethanol plant. The raw CO2 is then piped
to the processing facility for finishing. In order for the processing facility to be economically
viable, there must be a close market for the finished CO2. Packing plants, soft drink bottlers, food
processors, are just a few of the numerous users of fermentation CO2.

CO2 manufacturing and marketing companies occasionally acquire a plant’s CO2; this is usually
pursued in the project development stage of the project. For the purpose of the feasibility study,
CO2 sales will not be included in the financial analysis. Should an opportunity develop that could
utilize the plant’s CO2, the plant could make a small incremental improvement in the bottom line
by considering the capture and marketing of the CO2 at the appropriate time.

Conclusion for Co-Products

Total cattle inventory in Arkansas averaged 1.8 million head of cattle in from 2001 to 2006, with
approximately 944,000 head of beef cows and 35,000 head in the dairy industry. In the 70-mile
radius around Stuttgart, there are 234,000 head of cattle (6 year average).

For the proposed ethanol project, some of the distiller’s grains could be sold wet to local
livestock, but the market would have to be developed. Furthermore, the majority of the distiller’s
grains would have to be dried and sold as DDGSs. Therefore, the financial analysis for the plant
is based on selling all of the distillers grain dry. Although the potential local market is
substantial, regional markets for DDGS are significant and should be developed with the aid of a
DDGS marketing company.



BBI INTERNATIONAL                            6-6
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                 DRAFT REPORT JULY, 2006


For the financial projections, the DDGS price was set equal to the price of corn on a dry weight
basis and the DWG price was set at 96% of the corn price on a dry weight basis. With corn at
$2.61 per bushel, the resulting DDGS price is $98.70 per ton and the DWG price is $36.85 per
ton.

Revenue from CO2 sales typically has only a minor impact on an ethanol plant’s revenue (2 or
3%). Although CO2 sales can be pursued in the project development stage, it will not be included
in the feasibility study financial forecast.




BBI INTERNATIONAL                          6-7
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                   DRAFT REPORT JULY, 2006


               VII. OVERVIEW OF ETHANOL TECHNOLOGIES
The production of ethanol or ethyl alcohol from starch or sugar-based feedstocks has been
practiced for thousands of years. While the basic process steps remain the same, the process has
been considerably refined in recent years, leading to a highly efficient process that now yields
more energy in the ethanol and coproducts than is required to make the products.

In the dry milling process, corn, wheat or other high-starch grains are first ground into meal and
then slurried with water to form a mash. Enzymes are added to the mash to convert the starch to
the simple sugar, dextrose. Ammonia is also added for pH control and as a nutrient to the yeast.
The mash is processed through a high temperature cook step, which reduces bacteria levels prior
to fermentation. The mash is cooled and transferred to the fermenters where yeast is added and
the conversion of sugar to ethanol and carbon dioxide (CO2) begins.

After fermentation, the resulting "beer" is transferred to distillation where the ethanol is
separated from the residual "stillage”. The ethanol is concentrated to 190 proof using
conventional distillation and then is dehydrated to approximately 200 proof in a molecular sieve
system. The resulting anhydrous ethanol is blended with about 5% denaturant (usually gasoline)
and is then ready for shipment to markets throughout the country.

The stillage is separated into a coarse grain fraction and a "soluble" fraction by centrifugation.
The soluble fraction is concentrated to about 30% solids by evaporation. This intermediate is
called Condensed Distillers Solubles (CDS) or "syrup." The coarse grain and syrup fractions are
then mixed and dried to produce distillers dried grain and solubles (DDGS), a high protein
animal feed product.

A simplified block diagram of a typical dry milling ethanol plant follows in Figure 7-1.




BBI INTERNATIONAL                          7-1
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                             DRAFT REPORT JULY, 2006


                    Figure 7-1 – Flow Diagram for Dry Mill Ethanol Plant




BBI INTERNATIONAL                          7-2
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006




Technology Supply and Construction Services

The project sponsor should ensure that reputable design and construction firms are engaged
throughout the development, design, and construction of the project. The construction firm
should guarantee the completion of the project within a fixed budget and time schedule and must
warrant all workmanship for a period of not less than a year following startup. The firm should
be capable of posting performance, materials, and labor bonds and should be willing and
financially able to accept liquidated damages provisions in their contract, if it is required by the
sources of debt financing for the project.

The supplier of the ethanol process technology and the designer of the process should be
experienced and well regarded, to guarantee the performance of the plant so long as the
construction firm builds it to the designer’s specifications. This guarantee should include a
minimum yield requirement, and specific quality requirements of products. The guarantee should
also include quality and quantity requirements of feedstock (usually a bushel of #2 yellow corn).
Requirements for energy and utility consumption for the use of chemicals and enzymes, and for
the process water, with respect to consumption, should be stated in the process guarantee. The
volume and characteristics of wastewater should also be addressed in this guarantee, and all
requirements should be presented on a per bushel basis. The guarantee is normally considered
satisfied if a successful performances test of several days duration is completed after plant
startup.

In some cases, the same firm may be both the designer and the constructor. In such cases, the
General Constructor (GC) will provide the performance guarantees and the process designer will
act as a subcontractor to the GC. In cases where separate contracts are held for both the designer
and the construction contractor, the process and construction guarantees would be in separate
documents. BBI recommends that there be a single “turnkey” contract providing the strongest
possible financial resources to back the design and construction scope of work.

What follows is a list and short description of firms that BBI knows to be successful and reliable
in the ethanol industry. Other firms are also entering this increasingly competitive industry.

Fagen, Inc. (Granite Falls, MN)

Fagen Inc. has been the design-build contractor, E.P.C. contractor, general contractor, or
subcontractor for at least 48 ethanol plant projects, both new construction and expansion jobs,
and claims more ethanol industry experience than any other U.S. firm during the past decade.
With the addition of Fagen Engineering LLC and Fagen Management LLC, Fagen now performs
the civil, structural, mechanical, and electrical engineering aspects for ethanol projects and
provides management services after construction and startup. They typically utilize the ethanol
process design of ICM, Inc.

Fagen, Inc. is located at 501 West Highway 212, Granite Falls, MN 56241
Telephone (320) 564-3324. Web address: http://www.fageninc.com/




BBI INTERNATIONAL                           7-3
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                   DRAFT REPORT JULY, 2006


Delta-T Corporation (Williamsburg, VA)

Headquartered in Williamsburg, VA, Delta-T is a design-build firm that provides alcohol plants,
systems and services to the fuel, beverage, industrial and pharmaceutical markets. Delta-T is
known for pioneering many of the innovations currently in use by the newest generation of
ethanol plants, including the commercialization of molecular sieve dehydration, zero discharge
of process wastewater, and more efficient refining and purification systems to produce high
quality alcohols. Delta-T has provided alcohol production, dehydration and purification solutions
to more than 60 clients worldwide, including projects in Russia, India, Western and Eastern
Europe, Africa, the Caribbean and South America.

Delta-T Corporation is located at 323 Alexander Lee Parkway, Williamsburg, VA 23185
Telephone (757) 220-2955. Web address: http://www.deltatcorp.com/.

ICM, Inc. (Colwich, KS)

ICM, Inc. of Colwich, KS, serves the agricultural industry by developing and implementing
innovative and practical processing solutions. ICM, Inc. employs about 100 people in all aspects
of ethanol project development and operation including cash and commodity trading of corn,
marketing of ethanol and distillers grain, process consulting, engineering, equipment fabrication,
field installation, and plant start-up. The former technology leader of High Plains Corporation
formed ICM. High Plains operates plants in Nebraska, Kansas, and New Mexico. ICM does own
and operate a facility in Russell, Kansas, which acts as both a training and research facility for
their technology. Six of the latest ethanol plants in the United States have utilized ICM
technology.

ICM Inc. is located at 310 N. First Street, Colwich, KS 67030
Telephone (316) 796-0900. Web address: http://www.icminc.com/.

Katzen International, Inc. (Cincinnati, OH)

Katzen is one of the most experienced ethanol plant process designers and technology suppliers
in the world, having operated worldwide for over forty years. Katzen International, Inc. was
formed in 1955 by Dr. Raphael Katzen. Katzen International provides innovative and advanced
design concepts in a wide variety of industries, such as agriculture, chemicals, sugar, cryogenic
and pulp and paper. Although based in the United States, Katzen has completed projects in over
25 countries.

Katzen International Inc. is located at 2300 Wall Street, Suite K, Cincinnati, Ohio 45212
Telephone (513) 351-7500. Web address: http://www.katzen.com/

Lurgi/PSI, Inc. (Memphis, TN)

This firm was created approximately three years ago with the purchase of Process Systems, Inc.
(“PSI”) of Memphis by Lurgi AG of Germany. The company is part of the GEA Group, the
largest food technology company in the world. PSI is best known as a process engineer and as a



BBI INTERNATIONAL                          7-4
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006


turnkey contractor in the corn wet milling and the sugar beet processing industries. The
company’s ethanol work in the United States has been in association with its wet milling
activities and in the expansion of large dry milling facilities with respect to corn as a feedstock.

Lurgi PSI Inc. is located at 1790 Kirby Parkway, Suite 300, Memphis, TN 38138
Telephone (901) 756-8250. Web address: http://www.lurgipsi.com/

Vogelbusch USA, Inc. (Houston, TX)

Vogelbusch USA, Inc. is a subsidiary of Vogelbusch GMBH, a large process engineering
company, headquartered in Vienna, Austria. The worldwide company claims to have more
ethanol capacity in place, utilizing its technology, than any other designer. Vogelbusch provides
technologies for fermentation, separation, distillation and evaporation with a focus on
contracting of tailor-made plants based on Vogelbusch proprietary technology or client
technology for the sugar, starch, pharmaceutical, chemical and food industries. The U.S.
operation offers its license and design services in tandem with other firms and does not
undertake any construction activity.

Vogelbusch USA, Inc. is located at 10810 Old Katy Road, #107, Houston, Texas 77043
Telephone (713) 461-7374. Web Address: http://www.vogelbusch.com/




BBI INTERNATIONAL                           7-5
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006


                               VIII. PROJECT STATISTICS
Ethanol Plant Statistics

The project statistics for a 100 mmgy dry mill ethanol plant are shown in the following table.
The project statistics shown in the table are general guidelines only and may change with the
specific plant design and other project variables.

                               Table 8-1 – Ethanol Plant Statistics

                                                   Per Million        100 mmgy
                                                   Gallons of           plant
                                                    Ethanol
                Plant Inputs
                Corn (Bu/yr)                         356,697          35,669,700
                Water (1,000 Gal/yr)                  4,320            432,000
                Electricity (kWh/yr)                 750,000          75,000,000
                Thermal Energy (MMBTU/yr)             34,000           3,400,000
                Plant Outputs
                Denatured Ethanol (GPY)             1,000,000         100,000,000

                DDGS (Tons/yr)                        3,210            321,000

                CO2 (Tons/yr)                         3,143            314,300

                Wastewater (Gal/yr)                    846              84,600

                Transportation Statistics
                 Incoming
                   Grain
                  (Truckloads) or                      396              39,200
                  (Railcars, 3500 bu/car) or           102              10,200
                  (Barges, 52,500 bu/barge)            6.8               680
                 Outgoing
                   Ethanol
                  (Truckloads) or                      125              12,700
                  (Railcars) or                         33               3,300
                  (Barges; 453,600 gal/barge)          2.2                220
                  DDGS
                  (Truckloads) or                      128              12,350
                  (Railcars) or                         32               3,210
                  (Barges; 1500 tons/barge)            2.14               215




BBI INTERNATIONAL                           8-1
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                DRAFT REPORT JULY, 2006


Personnel Requirements

The personnel requirements used in the feasibility study are listed in Table 8-2. The positions
and salaries shown are typical of the industry.

              Table 8-2 – Personnel Requirements for Dry Mill Ethanol Plant

                                                  100 mmgy
              Position                                           Annual Salary
                                                 Ethanol Plant
                                                    Number
              Administration/Management            Employed
               General Manager                        1              128,700
               Plant Manager                           1              94,100
               Environmental & Safety Mgr.             1              59,400
               Controller                              1              79,200
               Commodity Manager                       1              54,500
               Administrative Assistant                3              29,700
              Production Labor
               Microbiologist                          1              44,600
               Lab Technician                          3              29,700
               Shift Team Leader                       4              43,600
               Shift Operator                         12              36,600
               Yard/Commodities Labor                 10              26,700
              Maintenance
               Maintenance Manager                     1              54,500
               Boiler Operator                         0              49,500
               Maintenance Worker                      4              36,600
               Welder                                  2              41,600
               Electrician                             2              39,600
               Instrument Technician                   3              39,600
              Total Number of Employees               50




BBI INTERNATIONAL                          8-2
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006


                               IX. FINANCIAL ANALYSIS
BBI’s financial model for dry mill ethanol production was used to project the financial
performance of the proposed ethanol plant in the Stuttgart and Helena areas of Arkansas. Dry
mill ethanol plants with a nameplate capacity of 100 mmgy were evaluated, with natural gas as
the main heating source.

The key model inputs include product and co-product yields, product and raw material pricing,
shipping costs, labor costs, energy consumption and pricing, capital costs including engineering,
procurement and construction of the ethanol plant and all supporting facilities and systems,
project development costs, financing costs, start-up costs, working capital and inventory costs.

The BBI model produces a ten-year operating forecast for the project including a balance sheet,
income statement and cash flow statement. The complete 10-year proforma for the 100 mmgy
dry mill ethanol plants are included at the end of this report. The impact of critical project
variables will be determined and the viability of the project with regard to each will be evaluated.

Assumptions Used in the Financial Forecast

The major variables for the financial analysis are ethanol price, feedstock price, distillers grain
drying and price, and energy costs. In addition to these issues, various financial model input
sensitivities were analyzed and are described below. The assumptions used in the financial
forecasts that have the greatest impact on the project risk and return are:

   •   Ethanol Price. The net ethanol price used in the financial forecast is $1.37 per gallon of
       denatured ethanol. The net price includes denatured ethanol product sold at a price of
       $1.46 per gallon less 8.0¢ per gallon shipping and 1.0¢ per gallon sales commission. Spot
       market ethanol prices in the projected target markets have ranged from $1.46 to $1.48 per
       gallon over the past 5 years. The impacts of higher and lower ethanol prices will be
       determined.

   •   Ethanol Yield. The ethanol yield is an important variable for profitable ethanol
       production. Reputable ethanol process design companies will guarantee a yield of 2.8
       gallon of denatured ethanol for each 56 pound bushel of #2 yellow corn (at 15% moisture
       or less) processed. We have used a yield of 2.8 gallons of denatured ethanol per 56 pound
       bushel of corn in the financial analysis.

   •   Feedstock Price. The feedstock price for corn used in the analysis will be $2.52 per
       bushel for the Helena site, and $2.60 per bushel for the Stuttgart site. This is based on the
       historical average cash price for corn in the local feedstock area, supplemented by corn
       brought in by rail or barge, plus an anticipated increase in the local basis of 17 to 29¢ per
       bushel.

   •   Distillers Grain Price. BBI has used a price of $98.70 per ton for DDGS in the financial
       projections, which is based on DDGS priced at 100% of the price of corn on a dry weight
       basis.


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STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006




   •   Distillers Grain Yield. A state-of-the-art dry mill ethanol plant should yield about 18
       pounds of high quality DDGS at 10% moisture per bushel of corn processed. The
       equivalent yield of wet distillers grain at 65% moisture is 46 pounds per bushel.

   •   Wet Distillers Grain. The local market for wet distillers grain appears to be substantial,
       but this market would have to be developed. We have therefore assumed that all of the
       distillers grains will be dried. In the sensitivity analysis for DWG, we assumed a DWG
       price of $36.85 per ton, which is based on DWG priced at 96% of the price of corn on a
       dry weight basis.

   •   Incentive Payments. The financial forecast does not include any state incentives or tax
       credits. State ethanol incentives can be reduced or eliminated at any time, with
       Minnesota’s reduction in payments to ethanol producers a few years ago as an example.

   •   Financing. 40% equity has been assumed for financing the project. 60% debt at 8.0%
       interest amortized over 10 years provides the balance of project funding. Actual financing
       may be different than this.

   •   Electricity Price. The estimated electric rate for the project is $0.0844 per kWh based on
       rate information from Entergy Arkansas.

   •   Water Price. Makeup water is assumed to be purchased from the local utility at a rate of
       $1.23 per 1,000 gallons. The estimated makeup water rate is 12 gallons per bushel of corn
       processed or about 400 gallons per minute.

       Natural Gas Price. Natural gas pricing for industrial users in Arkansas from 2001
       through 2006 is shown in Figure 9-1, below (source: U.S. DOE Energy Information
       Administration). The average industrial natural gas price in Arkansas for the period from
       2001-2006 was $7.43 per MCF. Recent prices have been much higher than this, so the
       financial analysis will carefully explore the sensitivity of the plant’s profitability to the
       price of natural gas.

The key project assumptions discussed above plus additional assumptions used in the financial
projections are presented in Table 9-1. A breakdown of the ethanol plant capital costs and the
owner’s costs is presented in Table 9-2. The sale of the plant’s carbon dioxide is not included in
the financial projections.




BBI INTERNATIONAL                               9-2
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                       DRAFT REPORT JULY, 2006


                               Figure 9-1 – Industrial Natural Gas Prices in Arkansas
                                              Source: http://www.eia.doe.gov
                                               Average Annual Natural Gas Prices
                       12.00


                       10.00


                        8.00
             $/MMBTU




                        6.00


                        4.00


                        2.00


                        0.00
                                   2001       2002          2003          2004         2005       2006



                           Table 9-1 – Assumptions Used In the Financial Forecast
                                                                             100mmgy          100mmgy
                                Stuttgart Ethanol Project
                                                                             Stuttgart          Helena
            Nameplate Ethanol Production (gal/year)                          100,000,000      100,000,000
            Anhydrous Ethanol Production (gal/year)                           95,238,095       95,238,095
            Product Values
            Conversion Rate (anhydrous gal/bushel)                                    2.67           2.67
            Grain ($/Bu)                                                              2.60           2.52
            Grain Elevator Fee ($/bu)                                                 0.03           0.03
            Ethanol ($/gal)                                                           1.46           1.46
            Ethanol Sales Commission (%)                                           0.685%         0.685%
            Ethanol Shipping Cost ($/gal)                                            0.080          0.080
            DDGS (% of corn price, dry weight basis)                                 100%           100%
            DDGS Commission                                                            2%             2%
            DWG (% of corn price, dry weight basis)                                   95%            95%
            DWG Commission ($/ton)                                                     4%             4%
            % DWG Sold in Year 1                                                      10%            10%
            % DWG Sold in Year 2                                                      20%            20%
            % DWG Sold in Years 3 through 10                                          30%            30%
            Denaturant ($/gal)                                                        1.20           1.20
            Natural Gas ($/MMBTU)                                                     7.43           7.43
            Electricity ($/kWh)                                                     0.0844         0.0844
            Makeup Water ($/1000 gal)                                                 2.95           2.95
            Wastewater ($/1000 gal)                                                   1.23           1.23



BBI INTERNATIONAL                                            9-3
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                   DRAFT REPORT JULY, 2006


             Table 9-2 – Stuttgart Ethanol, LLC Project Capital Cost Estimate
                                                            100 mmgy         100 mmgy
                    Stuttgart Ethanol Project
                                                             Stuttgart        Helena
       Nameplate Ethanol Production (gal/year)             100,000,000      100,000,000
       Anhydrous Ethanol Production (gal/year)             95,238,095       95,238,095

       Project Engineering & Construction Costs
         EPC Contract                                     $105,000,000     $105,000,000
         Site Development                                  $5,100,000       $5,100,000
         Rail                                              $2,850,000       $2,850,000
         Additional Grain Storage                              $0               $0
       Total NG Engineering and Construction Cost         $114,950,000     $114,950,000

       Owners Costs
         Inventory - Feedstock                              $2,100,000       $2,100,000
         Inventory - Chemicals/Yeast/Denaturant              $490,000         $490,000
         Inventory - Spare Parts                             $600,000         $600,000
         Startup Costs                                      $3,500,000       $3,500,000
         Land                                               $1,600,000       $1,600,000
         Fire Protection & Potable Water                    $2,050,000       $2,050,000
         Administration Building & Office Equipment          $500,000         $500,000
         Insurance & Performance Bond                        $925,000         $925,000
         Rolling Stock and Shop Equipment                    $675,000         $675,000
         Organizational Costs and Permits                    $915,000         $915,000
         Capitalized Interest & Financing Costs             $3,650,000       $3,650,000
         Working Capital/Risk Management                    $6,000,000       $6,000,000
       Total Owners Costs                                  $23,005,000      $23,005,000

       Total Project Capital Cost                         $137,955,000     $137,955,000

As noted in Section IV – Feedstock – there is significant seasonal variability in grain prices,
particularly for grain brought in by rail or barge. Although additional grain storage has not been
included in the project financials, this option should be seriously evaluated during the Project
Development stage, and/or when sustained positive cash flow is generated from operations. An
additional investment of $1.5 to $2.0 million for grain bins would permit storage of an additional
1 million bushels of corn.

Economic Modeling Results
Pre-tax average annual Return on Investment (ROI) and Internal Rate of Return (IRR) were used
to measure the projected profitability of the Stuttgart Ethanol, LLC ethanol project. The results
are summarized in Table 9-3. The ROI is the average of the return for the 11 years of the


BBI INTERNATIONAL                               9-4
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                      DRAFT REPORT JULY, 2006


financial forecast including the construction year. More detailed results are shown on the
following pages and the complete 10-year economic forecasts for the project are included in
Appendix B. The projected average annual ROIs for the plant in Stuttgart is 32.4%, increasing to
35.9% for the Helena site, primarily due to lower feedstock costs. The corresponding IRRs are
also shown in Table 9-3.
                             Table 9-3 – Financial Modeling Results
               Stuttgart Ethanol Project      100 mmgy Stuttgart    100 mmgy Helena
             11-year Average Annual ROI             32.4%                 35.9%
             Internal Rate of Return                33.2%                 35.8%
             Average Annual Income                $17,877,000           $19,829,000
             Installed Capital Cost ($/gal)          $1.15                 $1.15
             Plant Capital Cost                  $114,950,000          $114,950,000
             Owner's Costs                        $23,005,000           $23,005,000
             Total Project Investment            $137,955,000          $137,955,000
             40% Equity                           $55,182,000          $55,182,000

The IRR is based on the cash flows consisting of the equity investment at the start of
construction followed by the net increase in cash at the end of years 1 through 11. In year 11, we
have assumed that the plant is sold for 4 times the previous year’s EBITDA. The equity
investment is assumed to be 40% of the total project cost. The cash flows are shown on the
Proforma Statements of Cash Flows in Appendix B.

Another method BBI uses to measure projected profitability is the average annual pre-tax Return
on Investment (ROI) for the 11-year financial forecast. In general, BBI use a hurdle rate of 25%
average annual pre-tax ROI for ethanol project go/no go recommendations. BBI uses the
following guidelines for determining the feasibility of a project and as a guideline for
determining if a project will be able to compete in today’s competitive ethanol industry.

       Average Annual ROI (40% equity)         Competitive Status of the Project
              Less than 20%                    project is typically not worth pursuing
              20% to 24%                       less than average project – needs improvement
              25% to 29%                       a good project – should be able to compete
              30% and higher                   an excellent project

The above scale is based on BBI’s methods and history of evaluating over 75 ethanol projects.
This scale should not be used for financial projections done by others. Also, as projects progress,
the assumptions used in the financial analysis may change and the resulting projected returns
may change significantly.

Based on the results in Table 9-3, a 100 mmgy ethanol plant located in either Stuttgart or Helena
would be viable; each is ranked as an “excellent” project.

The proforma income statement for year two of operations for each site is shown in Table 9-4.



BBI INTERNATIONAL                             9-5
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                          DRAFT REPORT JULY, 2006


                              Table 9-4 – Income Statement for Year 2
   Proforma Income Statement                  100mmgy Stuttgart                  100mmgy Helena
                                             $/Year             $/gal          $/Year           $/gal
Revenue
 Ethanol                                $   146,727,000     $       1.47   $ 146,727,000    $       1.47
 DDGS                                   $    26,247,946     $       0.26   $ 25,440,317     $       0.25
 DWG                                    $     6,107,950     $       0.06   $   5,920,013    $       0.06
 Carbon Dioxide                         $           -       $        -     $         -      $        -
 State Producer Payment                 $           -       $        -     $         -      $        -
 Federal Small Producer Tax Credit      $           -       $        -     $         -      $        -
 USDA CCC Bioenergy Program             $           -       $        -     $         -      $        -
Total Revenue                           $   179,082,897     $       1.79   $ 178,087,330    $       1.78

Production & Operating Expenses
  Feedstocks                            $    99,475,655     $       0.99   $ 96,449,438     $       0.96
  Chemicals, Enzymes & Yeast            $     7,070,000     $       0.07   $   7,070,000    $       0.07
  Coal                                  $           -       $        -     $         -      $        -
  Natural Gas                           $    25,251,895     $       0.25   $ 25,251,895     $       0.25
  Electricity                           $     6,456,600     $       0.06   $   6,456,600    $       0.06
  Denaturants                           $     6,120,000     $       0.06   $   6,120,000    $       0.06
  Makeup Water                          $     1,339,101     $       0.01   $   1,339,101    $       0.01
  Wastewater Disposal                   $       111,667     $       0.00   $     111,667    $       0.00
  Direct Labor & Benefits               $     1,403,538     $       0.01   $   1,403,538    $       0.01
Total Production Costs                  $   147,228,457     $       1.47   $ 144,202,240    $       1.44

Gross Profit                            $    31,854,440     $       0.32   $   33,885,091   $       0.34

Administrative & Operating Expenses
 Maintenance Materials & Services $           1,294,125     $       0.01   $    1,294,125   $       0.01
 Repairs & Maintenance - Wages & B $            382,053     $       0.00   $      382,053   $       0.00
 Consulting, Management and Bank $              153,000     $       0.00   $      153,000   $       0.00
 Property Taxes & Insurance           $       1,325,534     $       0.01   $    1,325,534   $       0.01
 Admin. Salaries, Wages & Benefits $            730,620     $       0.01   $      730,620   $       0.01
 Legal & Accounting/Community Affa $             97,920     $       0.00   $       97,920   $       0.00
 Office/Lab Supplies & Expenses       $         122,400     $       0.00   $      122,400   $       0.00
 Travel, Training & Miscellaneous     $          51,000     $       0.00   $       51,000   $       0.00
Total Administrative & Operating Expe $       4,156,653     $       0.04   $    4,156,653   $       0.04

EBITDA                                  $    25,120,332     $       0.25   $   27,150,983   $       0.27
Less:
  Interest - Operating Line of Credit   $           -       $        -     $          -     $        -
  Interest - Senior Debt                $     6,380,021     $       0.06   $    6,380,021   $       0.06
  Interest - Working Capital            $           -       $        -     $          -     $        -
  Depreciation & Amortization           $     8,030,436     $       0.08   $    8,030,436   $       0.08

Pre-Tax Income                          $    10,709,875     $       0.11   $   12,740,526   $       0.13
Current Income Taxes                    $           -       $        -     $          -     $        -

Net Earnings (Loss) for the Year        $    10,709,875     $       0.11   $   12,740,526   $       0.13

Pre-Tax Internal Rate of Return                   32.4%                            35.9%
11-Year Average Annual Pre-Tax ROI                33.2%                            35.8%



BBI INTERNATIONAL                                     9-6
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                   DRAFT REPORT JULY, 2006


State Incentives

There are currently no state producer incentives in Arkansas. It is BBI’s view that a project
should be viable without state incentives, in case the payment program is reduced or suspended,
which recently occurred in Minnesota.

Sensitivity and Breakeven Analysis

The variables that have the greatest impact on the project’s profitability are the delivered price
for corn and the ethanol selling price. This is the case for all fuel ethanol plants, not just the
proposed Stuttgart Ethanol, LLC ethanol project. A sensitivity analysis was run to determine the
“breakeven” prices for corn and ethanol. Breakeven here is defined as the point where the year
two Earnings Before Interest, Taxes Depreciation and Amortization (EBITDA) is zero. The
breakeven sensitivity analysis for the 100 mmgy plant in Stuttgart is shown in Table 9-5.

The breakeven analysis shows that the project would continue to be cash-flow positive over a
range of corn and ethanol prices. The breakeven price for corn is about $3.05 per bushel with
ethanol at $1.46 per gallon. For ethanol, the breakeven price is $1.30 per gallon with corn at
$2.60 per bushel. For comparison, the breakeven analysis for the Helena plant gives a slightly
wider operating range where the operation is cash-flow positive: the breakeven price for corn is
about $3.07 per bushel with ethanol at $1.46 per gallon, and for ethanol, the breakeven price is
$1.29 per gallon with corn at $2.52 per bushel. Thus, comparing the two sites, it is apparent that
the Helena site would have a slight advantage, but is not materially different from the Stuttgart
site in terms of sensitivity to feedstock and product price fluctuations.

A series of sensitivity analyses were run to examine the effect of critical parameters on the 11-
year average ROI. The parameters analyzed include:
           • Corn price
           • Ethanol selling price
           • DDGS selling price
           • Natural gas price
           • Electricity price
           • Percent of Distillers Grain sold wet
           • Capital cost of the project

The results of these parameter studies are shown in the graphs that follow. As expected, the
projected profitability as measured by the ROI is very sensitive to the corn and ethanol price;
moderately sensitive to the DDGS and natural gas price and relatively insensitive to the
electricity price, and % distillers grain sold wet.

The sensitivity to corn price shows that for both plants, the ROI remains positive for corn prices
up to ~ $3.05/bu, an increase of 32% over the historical average price in the area. Similarly, the
plants have a positive ROI with ethanol prices as low as ~$1.28/gal, which is only 14% lower
than the historical price. The high baseline feedstock costs imply that the Stuttgart project is
much more sensitive to the ethanol selling price than other projects with a large local supply of
ethanol.


BBI INTERNATIONAL                              9-7
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                     DRAFT REPORT JULY, 2006


The price of DDGSs has a low to moderate effect on the profitability of the facility (Figure 9-4).
As mentioned previously, the price obtained for DDGSs is generally correlated to the cost of
corn, the feed it would nominally replace. However, as the market is developed, and the unique
benefits of DDGSs are realized in the marketplace, it is possible to sell DDGSs at a slight
premium relative to the price of corn. On the other side of the equation, as more biofuels plants
come on line, there will be a significant increase in the quantity of protein meal in the
marketplace, which could drive down prices. The sensitivity profile thus helps to illustrate the
impact of such a price premium, and the possibility of a price reduction. A 10% premium, to
$$107/ton, would increase the ROI by about 3 to 4%, while a 10% price reduction would reduce
the plant’s ROI by 3 to 4%.

The sensitivity to natural gas price is shown in Figure 9-5. Compared to the baseline historical
average of $7.43/MMBTU, an increase in natural gas price to $11.00/MMBTU would reduce the
ROI significantly, to about 11 to 15%, but the plant would still be cash-flow positive if all other
parameters (ethanol price, corn price, etc.) remained the same. Although recent natural gas
futures approached (and even exceeded) this threshold, longer-term futures are much closer to
the historical average. Nonetheless, the price of natural gas is quite volatile, and a dramatic
increase in natural gas costs will have a significant adverse effect on the overall profitability of
the facility.

The ROI is comparatively tolerant to increases in the cost of electricity (Figure 9-6); doubling
the cost of electricity is projected to reduce the ROI from ~33% to ~22%.

Although the current plan is to market distillers grains dry, developing the market for wet grains
is especially advantageous for a natural-gas fired plant. One of the key benefits of selling wet
grains is the energy savings accrued in the drying process. If all of the distiller’s grains are sold
dry, the ROI would range from 29 to 32% (Figure 9-7), while selling 40% of the distillers grains
wet can increase the ROI by about 5%, based on natural gas at $7.43/MMBTU. The impact on
ROI increases at higher natural gas prices.

Capital Cost Sensitivity

A sensitivity analysis was conducted to account for uncertainties in capital cost (Figure 9-8). The
baseline capital cost is estimated at $105MM, excluding site development, land, and other
owner’s costs. Increasing the capital cost by $45MM would reduce the ROI from ~ 17 to 20%,
but the plant would still clearly be profitable. Furthermore, as previously discussed, adding more
grain storage should seriously be considered. Again, increasing the capital cost by $5 million
(enough to add ~ 2 to 2.5 million bushels of grain storage) would reduce the ROI by only 2%
(assuming no change in corn purchase price). However, such an option is very likely to reduced
the net price for corn, and as shown in Figure 9-2, every 5 cent/bu reduction in corn price
increases the ROI by about 3%. Given that the seasonal variation in corn price is on the order of
30 cents per bushel, additional investment in grain storage could be highly profitable, and
provide the plant with an additional hedge against an increase in corn prices or a drop in ethanol
prices.




BBI INTERNATIONAL                                9-8
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                     DRAFT REPORT JULY 2006




                                  Table 9-5 – Sensitivity and Breakeven Analysis for the Stuttgart Ethanol, LLC Ethanol Project

                                                              Feedstock and Ethanol Price Sensitivity
                                                           10-Year Average Annual Return on Investment
                                                           Stuttgart Ethanol Project - 100mmgy Stuttgart
         100 MMGPY Plant

                                                                              Ethanol ($/gallon)
                                          0.96     1.06      1.16    1.26     1.36     1.46     1.56     1.66     1.76     1.86      1.96
                                  1.80   -17.1%    8.4%     27.7%   46.9%    66.1%    85.3%    104.5%   123.7%   142.9%   162.1%   181.3%
                                  1.90   -26.5%    0.5%     21.1%   40.3%    59.5%    78.7%    97.9%    117.0%   136.2%   155.4%   174.6%
                                  2.00   -36.1%    -8.8%    14.5%   33.7%    52.9%    72.1%    91.3%    110.5%   129.6%   148.8%   168.0%
                                  2.10   -45.4%   -18.2%     7.7%   27.1%    46.3%    65.4%    84.6%    103.8%   123.0%   142.1%   161.3%
                                  2.20   -54.8%   -27.8%    -0.6%   20.5%    39.6%    58.8%    78.0%    97.1%    116.3%   135.4%   154.6%
           Feedstock ($/bushel)




                                  2.30   -64.1%   -37.1%    -9.9%   13.9%    33.0%    52.2%    71.3%    90.5%    109.6%   128.8%   147.9%
                                  2.40   -73.4%   -46.4%   -19.3%    6.9%    26.4%    45.6%    64.7%    83.8%    103.0%   122.1%   141.2%
                                  2.50   -82.7%   -55.8%   -28.8%    -1.7%   19.9%    39.0%    58.1%    77.3%    96.4%    115.5%   134.7%
                                  2.60   -92.0%   -65.1%   -38.2%   -11.0%   13.2%    32.4%    51.5%    70.6%    89.8%    108.9%   128.0%
                                  2.70 -101.3%    -74.4%   -47.5%   -20.4%    6.1%    25.8%    44.9%    64.0%    83.1%    102.2%   121.3%
                                  2.80 -110.6%    -83.7%   -56.8%   -29.9%    -2.8%   19.2%    38.3%    57.4%    76.5%    95.6%    114.7%
                                  2.90 -119.8%    -92.9%   -66.1%   -39.2%   -12.1%   12.5%    31.7%    50.8%    69.9%    89.0%    108.1%
                                  3.00 -129.1% -102.3%     -75.4%   -48.5%   -21.4%    5.2%    25.2%    44.3%    63.3%    82.4%    101.5%
                                  3.10 -138.4% -111.5%     -84.7%   -57.8%   -30.9%    -3.9%   18.6%    37.7%    56.7%    75.8%    94.9%
                                  3.20 -147.6% -120.7%     -93.9%   -67.1%   -40.2%   -13.2%   11.8%    31.1%    50.2%    69.2%    88.3%
                                  3.30 -156.8% -130.0% -103.1%      -76.3%   -49.5%   -22.5%    4.2%    24.5%    43.6%    62.6%    81.7%
                                  3.40 -166.0% -139.2% -112.4%      -85.6%   -58.8%   -32.0%    -5.0%   17.9%    37.0%    56.0%    75.1%




BBI INTERNATIONAL                                                               9-9
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                    DRAFT REPORT JULY, 2006


                                             Figure 9-2 – Effect of Corn Price on ROI

                                                      Feedstock Price Sensitivity
           Average Annunal ROI     50%
                                   40%
                                   30%
                                   20%
                                   10%
                                    0%
                                  -10%
                                  -20%
                                      2.25 2.35 2.45 2.55 2.65 2.75 2.85 2.95 3.05 3.15 3.25
                                                        Feedstock Price ($/bu)
                                             100mmgy Stuttgart      100mmgy Helena




                                            Figure 9-3 – Effect of Ethanol Price on ROI

                                                        Ethanol Price Sensitivity
                                 80%
                                 60%
          Average Annunal ROI




                                 40%
                                 20%
                                  0%
                                 -20%
                                 -40%
                                 -60%
                                     1.05      1.15    1.25    1.35     1.45     1.55     1.65   1.75
                                                           Ethanol Price ($/gal)
                                               100mmgy Stuttgart        100mmgy Helena




BBI INTERNATIONAL                                                9-10
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                    DRAFT REPORT JULY, 2006




                                           Figure 9-4 – Effect of DDGS Price on ROI

                                                      DDGS Price Sensitivity
                                45%
                                40%
          Average Annunal ROI



                                35%
                                30%
                                25%
                                20%
                                15%
                                10%
                                 5%
                                 0%
                                      50       60      70      80      90      100        110     120
                                                            DDGS Price ($/ton)
                                             100mmgy Stuttgart          100mmgy Helena


                                      Figure 9-5 – Effect of Natural Gas Price on ROI

                                                    Natural Gas Price Sensitivity
                                50%
                                45%
          Average Annunal ROI




                                40%
                                35%
                                30%
                                25%
                                20%
                                15%
                                10%
                                 5%
                                 0%
                                   5.00      6.00    7.00    8.00     9.00 10.00         11.00   12.00
                                                    Natural Gas Price ($/MMBTU)
                                             100mmgy Stuttgart          100mmgy Helena




BBI INTERNATIONAL                                                9-11
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                      DRAFT REPORT JULY, 2006




                                           Figure 9-6 – Effect of Electricity Price on ROI

                                                        Electricity Price Sensitivity
                                45%
                                40%
          Average Annunal ROI



                                35%
                                30%
                                25%
                                20%
                                15%
                                10%
                                5%
                                0%
                                  0.040       0.060     0.080 0.100 0.120 0.140            0.160   0.180
                                                           Electricity Price ($/kWh)
                                                 100mmgy Stuttgart        100mmgy Helena


                                Figure 9-7 – Effect of % of Distillers Grains sold Wet on ROI

                                                         %DWG Sold Sensitivity
                                50%
                                45%
          Average Annunal ROI




                                40%
                                35%
                                30%
                                25%
                                20%
                                15%
                                10%
                                 5%
                                 0%
                                      0%          20%          40%     60%              80%        100%
                                                                % DWG Sold
                                                 100mmgy Stuttgart        100mmgy Helena




BBI INTERNATIONAL                                                9-12
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                  DRAFT REPORT JULY, 2006


                                 Figure 9-8 – Effect of Ethanol Plant Capital Cost on ROI
                                                          Capital Sensitivity
                                45%
          Average Annunal ROI   40%
                                35%
                                30%
                                25%
                                20%
                                15%
                                10%
                                5%
                                0%
                                      90   100      110     120      130      140   150   160   170
                                                                  Capital ($)
                                                 100mmgy Stuttgart       100mmgy Helena




BBI INTERNATIONAL                                              9-13
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                     DRAFT REPORT JULY, 2006


                                X. PROJECT FINANCING
Project financing for ethanol plants has always been difficult in the absence of a corporate credit
or government loan guarantee program because of a lack of a pricing relationship between the
feedstock and the ethanol product. Many facilities have been built with the support of grain
producers who have agreed to adjust the pricing of feedstock in the event that conditions warrant
it to support a project’s cash flow.

Project lenders in most cases will require a “turnkey” contract from a creditable contractor
utilizing proven ethanol process technology. The contract should include guarantees as to
schedule, cost and process performance as well as surety bonding and substantial (25% to 30%)
liquidated damages provisions. Lenders typically require 40% minimum equity as well as a solid
feedstock supply plan and product purchase or marketing agreements; again from creditable
parties. Most project lenders try to maintain a 7 to 10 year amortization schedule with cash
“sweeps” requiring mandatory prepayments of up to 50% of annual “excess” cash flow. It should
be noted that the 40% “equity” may include subordinated debt and some lenders will lend more
then 60% of the project cost (up to 70% in some cases).

Commodity Credit Corporation Program

Since 2003, the USDA Commodity Credit Corporation (CCC) Bioenergy Program has made
incentive cash payments to bioenergy producers who increase their purchases of agricultural
commodities over the previous fiscal year’s (FY) purchases and convert that commodity into
increased ethanol production over previous FY ethanol production. The Program is set to expire
September 30, 2006, and BBI does not expect the Program to be extended beyond this date. The
feasibility study, therefore, does not include any CCC Program payments.

Comments on Profitability and Economic Forecasts

The word profitability is a general term for the measure of the amount of profit that can be
obtained from a given situation. Total profit alone cannot be used as the deciding factor in
determining if an investment should be made, however. Many factors must be considered when
deciding if a return is acceptable, and it is not possible to give one figure that will apply for all
investment situations.

There are many methods for measuring or estimating profitability: return on investment, internal
rate of return, net present value and payback period are just a few. In this report we have used
return on investment, ROI, as the primary measure of the estimated project profitability. Return
on investment does not take into account the time value of money. The “time value of money” is
the concept that a dollar today is worth more than a dollar a year from now due to inflation.

When dealing with common industrial operations, profits cannot be predicted with absolute
accuracy. Risk factors must be given careful consideration and the degree of uncertainty in
estimated returns on investments plays an important role in determining what returns are
acceptable (higher risk should equal higher returns). Because of the inherent risk, a 15% return
before income taxes is usually the minimum acceptable return for any type of business


BBI INTERNATIONAL                           10-1
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006


proposition, even if the economics appear to be completely sound and reliable. Some companies
required a 25% pretax return before they will consider investing capital in a project. A 20% rate
of return is considered the minimal acceptable return for an ethanol project by many investors.

The economic forecasts and projected profitability presented in the remainder of this report are
estimates only. When dealing with commodities such as grain and gasoline (the two main divers
in the project’s profitability), one can only make an educated guess as to what the future may
hold. Additional project risk factors are discussed in the Summary and Recommendations section
of this report. That said, BBI has used its experience and expertise to provide our best estimate as
to the project’s future profitability. The sensitivity study provided later in this report shows the
possible wide swings in the project’s profitability when the economic forecast model input
assumptions change. The impact of changes in grain, gasoline, energy costs and other project
variables should be well understood by the project sponsor and investors.

Risk Factors

The project and its investors will be subject to a number of risks to start-up ventures in general
and to the major risks involved in the development and operation of the project and ethanol
production facilities specifically. The failure to prevent or mitigate any of the following risks
could jeopardize the project and/or the financial returns projected.

New Venture

The project sponsor may be a start-up company created specifically for the purpose of
developing and operating the project. The sponsor likely will not have, nor contemplate having,
significant financial resources other than its ownership of the project.

Completion Risk

The financial success of the project is dependent upon the timely completion of the plant
construction within budget. This risk should be mitigated by extensive preliminary engineering
and equipment selection activities prior to the start of construction together with the financial
resources and outstanding record of success of the contractor, backed by payment and
performance bonding. It is recommended that each of the firms involved in the project should
have a proven record of success in similar undertakings.

Performance Risk

A major success factor of the project is dependent upon the process design parameters regarding
feedstock throughput and product yields and quality being matched or exceeded during
commercial operations. A record of successes in this area is the principal reason for choosing a
specific process engineer.




BBI INTERNATIONAL                          10-2
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006


Political Risk

The fuel ethanol industry is dependent upon tax policies and environmental regulations which
favor the use of the product in motor fuel blends in North America. The repeal or substantial
modification of the U.S. Federal Excise Tax exemption on ethanol blends or other federal or
state tax programs encouraging the use of ethanol could have a detrimental effect on the industry
and the project. Changes in gasoline specification or the development of other cost-effective
additives competitive with ethanol could adversely affect the product. BBI believes that the
ethanol industry and the product will continue to enjoy favorable support from national
politicians and environmental regulators.

Market Risk

The major risk associated with the ongoing operation of an ethanol plant relates to the fact that
grain feedstocks comprising the major portion of operating expenses do not have any price
relationship to fuel ethanol. In a conventional corn dry milling plant serving only fuel grade
markets, falling gasoline prices coupled with a rise in corn cost can result in severe constraints
on cash flow which could jeopardize the project and/or the projected financial returns.

Technological Risk

There is the risk that alternative products to ethanol could be developed for use as a fuel additive
or in industrial applications or that improved ethanol production processes could be introduced.
BBI believes that the prospect of an occurrence of either of these developments is unlikely.
Ethanol does compete with several other products in the gasoline marketplace, all of which are
based on the use of hydrocarbons as raw materials. Industrial demand often is based on the
product’s unique properties in specific applications where there is no currently viable alternative.
There is no substitute in the manufacture of certain beverages. Most process improvements in the
near term are expected to be in the areas of development of new feedstocks and improved yields
for existing major feedstocks, any of which probably could be introduced into the project without
considerable cost to the owner while maintaining the project’s competitive advantages.

Risk Summary

Finally, the risks for this project are no worse than those any other plant, planned or operating,
faces today. With the new energy policy in place, the shortage of refining capacity, and the need
for ethanol as an oxygenate, the demand for ethanol will remain well into the future. The risk of
utility costs rising can be managed through good energy management and forward contracting
programs particularly with natural gas.




BBI INTERNATIONAL                          10-3
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                      DRAFT REPORT JULY, 2006


                XI. CONCLUSIONS AND RECOMMENDATIONS

Project Site
Based on the results of the site evaluation and the BBI Site Evaluation Matrix scores, any of the
three proposed sites would be suitable for a commercial fuel ethanol plant. Based on the
following discussion, BBI recommends the Stuttgart Industrial Park and the Phillips County Port
Authority sites for further consideration.

The site in the Harbor Industrial District at the Port of Pine Bluff scored the highest site
evaluation. Unfortunately, the acreage available at the site in the Port of Pine Bluff (39 acres) is
too small to accommodate the unit trains that would be necessary to service a 100 mmgy fuel
ethanol plant, so the site is not recommended.

The site in the Phillips County Port Authority Industrial Park near Helena-West Helena is the
next-highest rated site, again due primarily to the availability of barge access, plus this site has
the space required to accommodate a unit train for delivery of feedstock and shipment of
products. Were it not for the previously-announced intention of a competing project to site on the
same acreage, the site in the Phillips County Port Authority Industrial Park would be highly
recommended as an excellent site for the SELLC ethanol project.

The site in the Stuttgart Industrial Park is another excellent site for consideration by SELLC. The
Stuttgart site has all the requirements for a 100 mmgy fuel ethanol plant; the reasons the Stuttgart
site scored lower than the other two sites is the lack of barge access and the lack of an existing
rail siding. Were these two attributes present, the Stuttgart site would be essentially equivalent to
the Phillips County site, and superior to the Pine Bluff site.

Using the matrix’s results, BBI recommends the Pine Bluff, Stuttgart, and Phillip County Port
Authority sites. The Pine Bluff site is only large enough to accommodate a 50-mmgy plant.
Therefore, BBI recommends the Stuttgart Industrial Park site and the Phillips County Port
Authority site as the best options for the siting the proposed plant. Advantages of the sites
include access to natural gas transmission lines, rail system, road networks, community support
services, and a skilled local labor pool. The Phillips County Port Authority site has the added
advantages of the slackwater harbor and the existing rail spur.

Therefore, the Stuttgart Industrial Park site is the best option, assuming the Phillips County Port
Authority site is unavailable. Nearly all operating ethanol plants rely solely on unit trains for
feedstock delivery and product shipment, and thus, even without barge access, the Stuttgart is an
excellent site for a fuel ethanol plant. It is also sufficiently distant from Helena-West Helena (50-
miles) to support a second 100 mmgy fuel ethanol plant within the same region.

Therefore, BBI recommends that SELLC pursue both the Stuttgart Industrial Park site and the
Phillips County Port Authority site in parallel, focusing on the Stuttgart site, until one site or the
other distinguishes itself in price, availability, or proximity to the natural gas and electrical
transmission lines, as well as the water and sewer infrastructure. If the competing project fails to
secure the Phillips County Port Authority site, SELLC should move to acquire it.



BBI INTERNATIONAL                            11-1
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                     DRAFT REPORT JULY, 2006


The distinguishing criteria for site selection should therefore take other factors into account, such
as:

       1)   Negotiated natural gas fees
       2)   Community and local government acceptance and support
       3)   Rail rates and markets served
       4)   Incentive packages (property tax abatement, tax increment financing, etc.).

Feedstock Supply

This region of Arkansas has insufficient supplies of grain to support a 100 MMGY Plant at any
of the 3 locations. After feed use, 2.6 to 9.2 million bushels of grain within 50 driving miles of
the three sites, much less than the 39 million bushels per year required for a 100 MMGY plant.
Pine Bluff and Stuttgart will need to rely on rail to source the majority of their corn supplies,
while Helena will source corn by barge to meet feed stock requirements.

Key findings are as follows:

   •   The ten-year average grain price is $2.32 at Pine Bluff, $2.31 at Stuttgart and $2.35 at
       Helena.
   •   The basis impact of building a 100 MG ethanol facility would be 29 cents for both Pine
       Bluff and Stuttgart indicating a ten-year average corn price of $2.61 for Pine Bluff and
       $2.60 for Stuttgart. The price impact at Helena would be 17 cents resulting in a predicted
       ten-year average price of $2.52.
   •   At a price of $2.61 Pine Bluff would source 16% of its corn locally with the remainder
       being sourced by rail. Stuttgart, at a price of $2.60 would obtain 20% locally and the
       remainder by rail. Helena can source 10% locally and 90% by barge at a price of $2.52.

In future years the basis impact may be muted by a supply side response. A 17 to 29 cent basis
impact in the short run will encourage producers to plant more corn acres. This increase in corn
acreage is likely to dampen the basis impact in the long run. However, given the limited corn
supplies in the area currently, it would be surprising if the basis impact were to decrease
substantially. Sourcing corn by rail and barge from low cost markets will continue to be a key
driver of these plants success.

Prices vary significantly over the season, with the lowest prices occurring at harvest and the
highest prices occurring in the spring. Storage strategies that allow for more grain to be
purchased at harvest and less during the spring can help to reduce total grain costs.


Ethanol Market
Historically, there has been very little ethanol consumption in Arkansas. However, in the
regional market, which includes Missouri, Indiana, Illinois, and Texas, among others, historical
ethanol consumption has averaged 575 million gallons annually from 2000 to 2004, reaching 735
million gallons in 2004. The market potential based on an E10 blend is nearly 4 billion gallons
per year in the states comprising the regional market.

BBI INTERNATIONAL                           11-2
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                    DRAFT REPORT JULY, 2006


There are currently four ethanol plants in Missouri and Tennessee with a combined annual
production capacity of 162 million gallons; several other plants in the extended regional market,
including Illinois and Kansas, have production capacities totaling nearly 1 billion gallons
annually, with additional plants under construction or in the planning stages.

The proposed ethanol plant is well-positioned to serve the local Arkansas, and northwestern
Mississippi markets, as well as ethanol markets in Tennessee, Missouri, Texas and on the gulf
coast. Ethanol use in Louisiana is about 50 million gallons per year, and there are significant
opportunities for growth in Alabama, Louisiana, Mississippi, Texas, and Tennessee. The best
scenario for the Stuttgart Ethanol plant would be to supply ethanol locally within Arkansas and
to develop nearby local and regional markets. The Tennessee market, which includes Memphis
and Nashville, needs to be developed, but has significant potential. For a 100 mmgy plant, BBI
estimates that 20 to 30% of the plant’s ethanol could be sold to local markets, 40% regionally,
and the balance to national and East Coast markets. The average shipping cost for this scenario is
estimated to be $0.08 per gallon of ethanol, dropping to $0.06 per gallon if shipping by barge.

Ethanol prices are normally equal to the rack or wholesale price of unleaded gasoline, plus the
51¢ per gallon Federal Excise Tax Exemption for ethanol blends. The 5-year average spot
ethanol prices in the local, regional and national/East Coast markets were used to establish a
weighted average price for ethanol sold by the plant, based on the anticipated distribution of
ethanol into these markets. For a 100 mmgy plant, the weighted average price is $1.468 per
gallon.

Based on historical pricing trends in the projected target markets, the price of ethanol used in the
financial analysis is $1.468 per gallon with a weighted transportation cost of $0.06 to $0.08 per
gallon and a marketing fee of 1¢/gallon.

Co-Products
Total cattle inventory in Arkansas averaged 1.8 million head of cattle in from 2001 to 2006, with
approximately 944,000 head of beef cows and 35,000 head in the dairy industry. In the 70-mile
radius around Stuttgart, there are 234,000 head of cattle (6 year average).

For the proposed ethanol project, some of the distiller’s grains could be sold wet to local
livestock, but the market would have to be developed. Furthermore, the majority of the distiller’s
grains would have to be dried and sold as DDGSs. Therefore, the financial analysis for the plant
is based on selling all of the distillers grain dry.

For the financial projections, the DDGS price was set equal to the price of corn on a dry weight
basis and the DWG price was set at 96% of the corn price on a dry weight basis. With corn at
$2.61 per bushel, the resulting DDGS price is $98.70 per ton and the DWG price is $36.85 per
ton.

Revenue from CO2 sales typically has only a minor impact on an ethanol plant’s revenue (2 or
3%). Although CO2 sales can be pursued in the project development stage, CO2 sales have not
been included in the feasibility study financial forecast.



BBI INTERNATIONAL                           11-3
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                       DRAFT REPORT JULY, 2006


Financial Forecast
Various scenarios were evaluated using the financial model, comparing the Stuttgart and Helena
sites for a 100 mmgy ethanol plant. Financial forecasts were based on historical average prices
for ethanol and corn, which, correspond to $1.46/gallon, and, including a basis adjustment and
shipping, $2.52/bu for the Helena site, and $2.60/bu for the Stuttgart site, respectively. Financial
analyses do not include any state incentives.

Pre-tax average annual Return on Investment (ROI) and Internal Rate of Return (IRR) were used
to measure the projected profitability of the Stuttgart Ethanol, LLC project. The ROI and IRR for
a 100 mmgy plant at both the Stuttgart and Helena locations exceeds 30%, and each can thus be
classified as an excellent project. Returns are slightly higher at the Helana site, due to the slightly
lower projected feedstock cost at this site ($2.52/bu vs. %2.60/bu). The equity investment, $55.2
million, is based on 40% of the total project investment cost, including capital costs, site-
development costs, and owner’s costs incurred during start-up.

Sensitivity analyses also demonstrated that the plant would be cash-flow positive if ethanol
prices dropped as low as $1.28/gallon with corn at $2.60/bu, and corn prices as high as $3.05/bu
with ethanol at $1.46/gallon. The relatively narrow window for positive cash-flow is due to the
comparatively higher feedstock prices in the region.




BBI INTERNATIONAL                            11-4
STUTTGART ETHANOL, LLC FEASIBILITY STUDY               DRAFT REPORT JULY 2006




               Appendix A – Site Evaluation Matrices




BBI INTERNATIONAL                          A-1
  STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                        DRAFT REPORT JULY 2006


  BBI SITE EVALUATION MATRIX

  SITE #1: The Port of Pine Bluff Industrial Harbor District Site, Pine Bluff, AR

             Plant                 Available    20        40       60      80       100       Potential
           Criteria                 Yes/No     Miles     Miles    Miles   Miles    Miles      Plant Site
Feedstock Proximity                  -----      10         8        5       3         2            2
Proximity of Communities               6       -----     -----    -----   -----     -----          6
                                               0.25      0.50     0.75     1.0    More than
Rail                                On Site
                                               mile      mile     mile    mile     1 mile
Existing Rail Siding                   7       -----     -----    -----   -----     -----          7
Mainline Rail                         10         9         8        7       6         5           10
Short line Rail                       6          5         4        3       2         1           0
Access to two Railroads or Barge       8       -----     -----    -----   -----     -----          8
Roads/Highways
Class A Road Access                   8         -----     -----   -----   -----     -----          8
Class B Road Access                   6         -----     -----   -----   -----     -----          0
Electricity
Non-Interruptible Service             8         -----     -----   -----   -----     -----          8
Interruptible Service                 4         -----     -----   -----   -----     -----          0
Natural Gas
On site                               9         -----     -----   -----   -----     -----          0
Within 2 miles of the site            6         -----     -----   -----   -----     -----          6
2-4 miles from the site               3         -----     -----   -----   -----     -----          0
Non-Interruptible Service             8         -----     -----   -----   -----     -----          8
Interruptible Service                 4         -----     -----   -----   -----     -----          0
Water
City Water                            7         -----     -----   -----   -----     -----          7
Well Water                            5         -----     -----   -----   -----     -----          0
Waste Water Treatment
To POTW (city treatment system)        7        -----     -----   -----   -----     -----          7
To Surface Waters                      5        -----     -----   -----   -----     -----          0
Ability to land apply                  3        -----     -----   -----   -----     -----          0
Coproduct Market Proximity           -----       10         8       3       2         1            1
Labor Availability                   -----        7         5       3       2         0            7
Ethanol Market Proximity             -----        4         3       2       2         2            2
                                               Within    Within
                                   Within 10
Community Services                               15        20
                                    Miles
                                               Miles     Miles
Electrical Maintenance                5           3         1     -----   -----     -----          5
Machine Shop/Welding                  5           3         1     -----   -----     -----          5
Pipe Fitting/Plumbing                 5           3         1     -----   -----     -----          5
Hospital                              6           4         2     -----   -----     -----          6
Airport                               4           2         1     -----   -----     -----          4
Schools                               4           2         1     -----   -----     -----          4
Fire Protection                       6           4         2     -----   -----     -----          6
                                                                                   Total
                                     -----      -----     -----   -----   -----                  122
                                                                                   Points




  BBI INTERNATIONAL                                A-2
  STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                        DRAFT REPORT JULY 2006


  BBI SITE EVALUATION MATRIX

  SITE #2: Stuttgart Industrial Park Site, Stuttgart, AR

             Plant                 Available    20        40       60      80       100       Potential
           Criteria                 Yes/No     Miles     Miles    Miles   Miles    Miles      Plant Site
Feedstock Proximity                  -----      10         8        5       3         2            2
Proximity of Communities               6       -----     -----    -----   -----     -----          6
                                               0.25      0.50     0.75     1.0    More than
Rail                                On Site
                                               mile      mile     mile    mile     1 mile
Existing Rail Siding                   7       -----     -----    -----   -----     -----          0
Mainline Rail                         10         9         8        7       6         5           10
Short line Rail                       6          5         4        3       2         1           0
Access to two Railroads or Barge       8       -----     -----    -----   -----     -----          0
Roads/Highways
Class A Road Access                   8         -----     -----   -----   -----     -----          0
Class B Road Access                   6         -----     -----   -----   -----     -----          6
Electricity
Non-Interruptible Service             8         -----     -----   -----   -----     -----          8
Interruptible Service                 4         -----     -----   -----   -----     -----          0
Natural Gas
On site                               9         -----     -----   -----   -----     -----          0
Within 2 miles of the site            6         -----     -----   -----   -----     -----          6
2-4 miles from the site               3         -----     -----   -----   -----     -----          0
Non-Interruptible Service             8         -----     -----   -----   -----     -----          8
Interruptible Service                 4         -----     -----   -----   -----     -----          0
Water
City Water                            7         -----     -----   -----   -----     -----          7
Well Water                            5         -----     -----   -----   -----     -----          0
Waste Water Treatment
To POTW (city treatment system)        7        -----     -----   -----   -----     -----          7
To Surface Waters                      5        -----     -----   -----   -----     -----          0
Ability to land apply                  3        -----     -----   -----   -----     -----          0
Coproduct Market Proximity           -----       10         8       3       2         1            1
Labor Availability                   -----        7         5       3       2         0            7
Ethanol Market Proximity             -----        4         3       2       2         2            2
                                               Within    Within
                                   Within 10
Community Services                               15        20
                                    Miles
                                               Miles     Miles
Electrical Maintenance                5           3         1     -----   -----     -----          5
Machine Shop/Welding                  5           3         1     -----   -----     -----          5
Pipe Fitting/Plumbing                 5           3         1     -----   -----     -----          5
Hospital                              6           4         2     -----   -----     -----          6
Airport                               4           2         1     -----   -----     -----          4
Schools                               4           2         1     -----   -----     -----          4
Fire Protection                       6           4         2     -----   -----     -----          6
                                                                                   Total
                                     -----      -----     -----   -----   -----                  105
                                                                                   Points




  BBI INTERNATIONAL                                A-3
       STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                       DRAFT REPORT JULY 2006


       BBI SITE EVALUATION MATRIX

       SITE #3: Phillips County Port Authority Industrial Park, Helena-West Helena, AR

             Plant                 Available    20         40      60      80       100       Potential
           Criteria                 Yes/No     Miles      Miles   Miles   Miles    Miles      Plant Site
Feedstock Proximity                  -----      10          8       5       3         2            2
Proximity of Communities               6       -----      -----   -----   -----     -----          6
                                               0.25       0.50    0.75     1.0    More than
Rail                                On Site
                                               mile       mile    mile    mile     1 mile
Existing Rail Siding                   7       -----      -----   -----   -----     -----          0
Mainline Rail                         10         9          8       7       6         5           10
Short line Rail                       6          5          4       3       2         1           0
Access to two Railroads or Barge       8       -----      -----   -----   -----     -----          8
Roads/Highways
Class A Road Access                   8         -----     -----   -----   -----     -----          0
Class B Road Access                   6         -----     -----   -----   -----     -----          6
Electricity
Non-Interruptible Service             8         -----     -----   -----   -----     -----          8
Interruptible Service                 4         -----     -----   -----   -----     -----          0
Natural Gas
On site                               9         -----     -----   -----   -----     -----          9
Within 2 miles of the site            6         -----     -----   -----   -----     -----          0
2-4 miles from the site               3         -----     -----   -----   -----     -----          0
Non-Interruptible Service             8         -----     -----   -----   -----     -----          8
Interruptible Service                 4         -----     -----   -----   -----     -----          0
Water
City Water                            7         -----     -----   -----   -----     -----          7
Well Water                            5         -----     -----   -----   -----     -----          0
Waste Water Treatment
To POTW (city treatment system)        7        -----     -----   -----   -----     -----          0
To Surface Waters                      5        -----     -----   -----   -----     -----          5
Ability to land apply                  3        -----     -----   -----   -----     -----          0
Coproduct Market Proximity           -----       10         8       3       2         1            1
Labor Availability                   -----        7         5       3       2         0            7
Ethanol Market Proximity             -----        4         3       2       2         2            2
                                               Within    Within
                                   Within 10
Community Services                               15        20
                                    Miles
                                               Miles     Miles
Electrical Maintenance                5           3         1     -----   -----     -----          5
Machine Shop/Welding                  5           3         1     -----   -----     -----          5
Pipe Fitting/Plumbing                 5           3         1     -----   -----     -----          5
Hospital                              6           4         2     -----   -----     -----          6
Airport                               4           2         1     -----   -----     -----          4
Schools                               4           2         1     -----   -----     -----          4
Fire Protection                       6           4         2     -----   -----     -----          6
                                                                                   Total
                                     -----      -----     -----   -----   -----                  114
                                                                                   Points




       BBI INTERNATIONAL                                A-4
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                  DRAFT REPORT JULY, 2006




                      APPENDIX B: Financial Forecast:
               100 MMGY Gas-Fired Ethanol Plant in Stuttgart, AR




BBI INTERNATIONAL                          B-1
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                                                                          DRAFT REPORT JULY, 2006


Stuttgart Ethanol Project - 100mmgy Stuttgart
Production Assumptions

Nameplate Denatured Fuel Ethanol (gal/year)      100,000,000                    11-Year Average Annual Pre-Tax ROI                    32.4%
Anhydrous Ethanol Production (gal/year)           95,238,095
Operating Days Per Year                              350

                                                  1st Year         2nd Year      3rd Year      4th Year        5th Year           6th Year      7th Year      8th Year      9th Year     10th Year      Annual
Product Yields & Energy Consumption              Operations       Operations    Operations    Operations      Operations         Operations    Operations    Operations    Operations    Operations    Escalation

Ethanol Production Increase Over Previous Year              0%            5%            5%            0%                0%               0%            0%            0%            0%            0%
Anhydrous Ethanol Yield (gal/bushel)                     2.6700        2.6700        2.6700        2.6700            2.6700           2.6700        2.6700        2.6700        2.6700        2.6700
Denatured Ethanol Sold (gal/year)                    76,880,952   105,000,000   110,250,000   110,250,000       110,250,000      110,250,000   110,250,000   110,250,000   110,250,000   110,250,000
Ethanol Price ($/gal)                                   $1.4600       $1.4892       $1.5190       $1.5494           $1.5804          $1.6120       $1.6442       $1.6771       $1.7106       $1.7448        2.00%
Ethanol Sales Commission (% of Ethanol Price)           0.685%        0.685%        0.685%        0.685%            0.685%           0.685%        0.685%        0.685%        0.685%        0.685%         0.00%
Ethanol Transportation ($/gal)                          $0.0800       $0.0816       $0.0832       $0.0849           $0.0866          $0.0883       $0.0901       $0.0919       $0.0937       $0.0956        2.00%

Delivered Feedstock Price ($/bu)                        $2.6000       $2.6260       $2.6523       $2.6788           $2.7056          $2.7326       $2.7600       $2.7876       $2.8154       $2.8436        1.00%
Feedstock Procurement Fees ($/bu)                       $0.0300       $0.0300       $0.0300       $0.0300           $0.0300          $0.0300       $0.0300       $0.0300       $0.0300       $0.0300        0.00%
Feedstock Usage (bu/year)                            28,238,511    37,453,184    39,325,843    39,325,843        39,325,843       39,325,843    39,325,843    39,325,843    39,325,843    39,325,843
Grain Test Weight (lb/bu)                                56.000        56.000        56.000        56.000            56.000           56.000        56.000        56.000        56.000        56.000

DDGS Yield (lb/bu)                                       18.000        18.000        18.000        18.000              18.000         18.000        18.000        18.000        18.000        18.000
DDGS Sold (ton/year)                                    217,840       269,663       247,753       247,753             247,753        247,753       247,753       247,753       247,753       247,753
DDGS Price, FOB ($/ton)                                 $98.319       $99.303      $100.296      $101.299            $102.311       $103.335      $104.368      $105.412      $106.466      $107.530        1.00%
DDGS Transportation ($/ton)                              $0.000        $0.000        $0.000        $0.000              $0.000         $0.000        $0.000        $0.000        $0.000        $0.000        1.00%
DDGS Sales Commission ($/ton)                            $1.966        $1.966        $1.966        $1.966              $1.966         $1.966        $1.966        $1.966        $1.966        $1.966        0.00%

% DWG Sold                                                 10%           20%           30%           30%                 30%            30%           30%           30%           30%           30%
DWG Yield (lb/bu)                                        46.286        46.286        46.286        46.286              46.286         46.286        46.286        46.286        46.286        46.286
DWG Sold (ton/year)                                      65,352       173,355       273,034       273,034             273,034        273,034       273,034       273,034       273,034       273,034
DWG Price, FOB ($/ton)                                  $36.324       $36.687       $37.054       $37.424             $37.798        $38.176       $38.558       $38.944       $39.333       $39.727        1.00%
DWG Transportation ($/ton)                               $0.000        $0.000        $0.000        $0.000              $0.000         $0.000        $0.000        $0.000        $0.000        $0.000        1.00%
DWG Sales Commission ($/ton)                             $1.453        $1.453        $1.453        $1.453              $1.453         $1.453        $1.453        $1.453        $1.453        $1.453        0.00%

CO2 Yield (lb/gal)                                        6.600         6.600         6.600         6.600               6.600          6.600         6.600         6.600         6.600         6.600
Percernt of CO2 Produced that is Sold                       0%            0%            0%            0%                  0%             0%            0%            0%            0%            0%
CO2 Sold (ton/year)                                           0             0             0             0                   0              0             0             0             0             0
CO2 Price ($/ton)                                        $8.000        $8.080        $8.161        $8.242              $8.325         $8.408        $8.492        $8.577        $8.663        $8.749        1.00%

Electricity Use (kWh/bu)                                  2.003         2.003         2.003         2.003               2.003          2.003         2.003         2.003         2.003         2.003
Annual Electricity Use (million kWh/year)                56.548        75.000        78.750        78.750              78.750         78.750        78.750        78.750        78.750        78.750
Electricity Price ($/kWh)                               $0.0844       $0.0861       $0.0878       $0.0896             $0.0914        $0.0932       $0.0950       $0.0969       $0.0989       $0.1009        2.00%

Waste Heat Fuel Use (% of total energy use)                 0%            0%            0%            0%                  0%             0%            0%            0%            0%            0%
Waste Heat BTU per Pound (BTU/lb)                             0             0             0             0                   0              0             0             0             0             0
Waste Heat Use (BTU/gal)                                      0             0             0             0                   0              0             0             0             0             0
Annual Waste Heat Use (MMBTU/year)                            0             0             0             0                   0              0             0             0             0             0
Delivered Waste Heat Price ($/MMBTU)                    $3.0000       $3.0600       $3.1212       $3.1836             $3.2473        $3.3122       $3.3785       $3.4461       $3.5150       $3.5853        2.00%
Delivered Waste Heat Price ($/MMBTU)                    $3.0000       $3.0600       $3.1212       $3.1836             $3.2473        $3.3122       $3.3785       $3.4461       $3.5150       $3.5853

Natural Gas Use (BTU/gal)                                32,867        31,733        30,600         30,600              30,600        30,600        30,600        30,600        30,600        30,600
Annual Natural Gas Use (MMBTU/year)                   2,526,821     3,332,000     3,373,650      3,373,650           3,373,650     3,373,650     3,373,650     3,373,650     3,373,650     3,373,650
Natural Gas Price ($/MMBTU)                             $7.4300       $7.5786       $7.7302        $7.8848             $8.0425       $8.2033       $8.3674       $8.5347       $8.7054       $8.8795        2.00%

Fresh Water Use (1000 gal/bu)                             0.012         0.012         0.012         0.012               0.012          0.012         0.012         0.012         0.012         0.012
Annual Fresh Water Use (1000 gal/year)                  338,862       449,438       471,910       471,910             471,910        471,910       471,910       471,910       471,910       471,910
Fresh Water Price ($/1000 gal)                          $2.9500       $2.9795       $3.0093       $3.0394             $3.0698        $3.1005       $3.1315       $3.1628       $3.1944       $3.2264        1.00%




BBI INTERNATIONAL                                                                                     B-2
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                                                                                              DRAFT REPORT JULY, 2006


Stuttgart Ethanol Project - 100mmgy Stuttgart
Production Assumptions, continued
                                                             1st Year          2nd Year        3rd Year        4th Year         5th Year        6th Year        7th Year         8th Year        9th Year       10th Year       Annual
                                                            Operations        Operations      Operations      Operations       Operations      Operations      Operations       Operations      Operations      Operations     Escalation
Effluent Water Disposal (1000 gal/bu)                                 0.002          0.002           0.002           0.002             0.002          0.002           0.002            0.002           0.002           0.002
Annual Effluent Water Disposal (1000 gal/year)                      67,772         89,888           94,382          94,382            94,382         94,382          94,382           94,382          94,382         94,382
Effluent Water Disposal Price ($/1000 gal)                         $1.2300        $1.2423          $1.2547         $1.2673           $1.2799        $1.2927         $1.3057          $1.3187         $1.3319        $1.3452         1.00%

Denaturant Use (% of ethanol sold)                                 5.000%         5.000%           5.000%         5.000%             5.000%        5.000%          5.000%            5.000%          5.000%         5.000%
Annual Denaturant Use (gal/year)                                 3,769,841      5,000,000        5,250,000      5,250,000          5,250,000     5,250,000       5,250,000         5,250,000       5,250,000      5,250,000
Denaturant Price ($/gal)                                           $1.2000        $1.2240          $1.2485        $1.2734            $1.2989       $1.3249         $1.3514           $1.3784         $1.4060        $1.4341         2.00%

Chemicals & Enzymes Cost ($/gal ethanol)                           $0.0700        $0.0707          $0.0714           $0.0721        $0.0728        $0.0736         $0.0743          $0.0750          $0.0758        $0.0766         1.00%

Number of Employees                                                     50             50               50             50                 50            50              50                50               50            50
Average Salary Including Benefits                                 $54,038        $55,389          $56,773        $58,193            $59,648       $61,139         $62,667           $64,234          $65,840       $67,486          2.50%

Maintenance Materials & Services (% of Capital Equ                 2.500%         2.538%            2.576%           2.614%          2.653%        2.693%          2.734%            2.775%           2.816%        2.858%          1.50%
Property Tax & Insurance (% of Depreciated Proper                  2.000%         2.060%            2.060%           2.060%          2.060%        2.060%          2.060%            2.060%           2.060%        2.060%          3.00%
Inflation for all other Administrative Expense Categories                                                                                                                                                                           2.00%
Financial Assumptions
USE OF FUNDS:                                                                                SOURCE OF FUNDS:                                                                 Investment Activities
Project Engineering & Construction Costs                                                     Senior Debt                                                                        Income Tax Rate                       0.00%
  EPC Contract                                               $105,000,000                      Principal                        $82,773,000          60.00%                     Investment Interest                   3.00%
  Site Development                                             $5,100,000                      Interest Rate                         8.50%        fixed                         Operating Line Interest               8.00%
  Rail                                                         $2,850,000                      Lender and Misc. Fees               $827,730          1.000%
  Grain Receiving and Storage                                          $0                      Placement Fees                            $0          0.000%                   State Producer Payment
  Waste Heat Steam Generator                                           $0                      Amortization Period                       10       years                         Producer payment, $/gal              $0.000
  Construction Contingency                                     $2,000,000                      Cash Sweep                           0.000%                                      Estimated annual payment                 $0
Total Engineering and Construction Cost                      $114,950,000                                                                                                       Incentive duration, years                5
                                                                                             Subordinate Debt
Development and Startup Costs                                                                  Principal                                  $0         0.00%                    Other Incentive Payments
 Inventory - Feedstock                                          $2,100,000                     Interest Rate                          8.00%    interest only                   Small Producer Tax Credit                 no
 Inventory - Chemicals/Yeast/Denaturant                           $490,000                     Lender Fees                                $0        0.000%                     % of CCC Payment                         0%
 Inventory - Spare Parts                                          $600,000                     Placement Fees                             $0        1.500%
 Startup Costs                                                  $3,500,000                     Amortization Period                        10      years                       Plant Operating Rate
 Land                                                           $1,600,000                                                                                                                        % of
 Fire Protection & Potable Water                                $2,050,000                   Equity Investment                                                                    Month         Nameplate
 Administration Building & Office Equipment                      $500,000                      Total Equity Amount              $55,182,000        40.00%                          13                 0.0%
 Insurance & Performance Bond                                     $925,000                     Placement Fees                            $0        0.000%                          14                  0.0%
 Rolling Stock and Shop Equipment                                 $675,000                     Common Equity                    $55,182,000      100.000%                          15                50.0%
 Organizational Costs and Permits                                $915,000                      Preferred Equity                          $0        0.000%                          16              100.0%
 Capitalized Interest & Financing Costs                         $3,650,000                                                                                                         17              100.0%
 Working Capital/Risk Management                                $6,000,000                   Grants                                                                                18              100.0%
Total Development Costs                                        $23,005,000                     Amount                                    $0          0.00%                         19              100.0%
                                                                                                                                                                                   20              100.0%
TOTAL USES                                                   $137,955,000                    TOTAL SOURCES                     $137,955,000                                        21              100.0%
                                                                                                                                                                                   22              100.0%
Accounts Payable, Receivable & Inventories                  Receivable         Payable        Inventories                                                                          23              100.0%
                                                             (# Days)          (# Days)         (# Days)                                                                           24              100.0%
 Fuel Ethanol                                                   14                                  8
 Distillers Grain                                               14                                  8
 Denaturants                                                                     10                15
 Chemicals & Enzymes                                                             15                20
 Feedstock                                                                       10                10
 Utilities                                                                       15




BBI INTERNATIONAL                                                                                                      B-3
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                                                                         DRAFT REPORT JULY, 2006


Stuttgart Ethanol Project - 100mmgy Stuttgart
Proforma Balance Sheet

                                                     Construction        1st Year       2nd Year      3rd Year      4th Year       5th Year      6th Year      7th Year      8th Year      9th Year     10th Year
                                                       (Year 0)         Operations     Operations    Operations    Operations     Operations    Operations    Operations    Operations    Operations    Operations
ASSETS
Current Assets:
 Cash & Cash Equivalents                                            0     4,744,135     14,944,051    30,495,145     48,087,674    67,303,141    88,177,264   110,750,220   135,056,531   161,135,513   189,027,480
 Accounts Receivable - Trade                                        0     6,522,339      7,163,316     7,649,045      7,788,747     7,931,103     8,076,165     8,223,985     8,374,618     8,528,118     8,684,541
 Inventories
   Feedstock                                                        0     2,121,922      2,842,162     3,013,775      3,043,576     3,073,675     3,104,074     3,134,778     3,165,789     3,197,109     3,228,743
   Chemicals, Enzymes & Yeast                                       0       250,000        384,762       388,610        392,496       396,421       400,385       404,389       408,433       412,517       416,642
   Denaturant                                                       0       244,898        249,796       254,792        259,888       265,085       270,387       275,795       281,311       286,937       292,676
   Finished Product Inventory                                       0     2,507,558      3,365,222     3,554,411      3,599,218     3,644,667     3,690,767     3,737,529     3,784,964     3,833,082     3,881,895
   Spare Parts                                                      0       600,000        600,000       600,000        600,000       600,000       600,000       600,000       600,000       600,000       600,000
 Total Inventories                                                  0     5,724,378      7,441,941     7,811,587      7,895,177     7,979,847     8,065,613     8,152,490     8,240,496     8,329,645     8,419,957
 Prepaid Expenses                                                   0             0              0             0              0             0             0             0             0             0             0
 Other Current Assets                                               0             0              0             0              0             0             0             0             0             0             0
Total Current Assets                                                0    16,990,852     29,549,308    45,955,778     63,771,599    83,214,091   104,319,042   127,126,696   151,671,644   177,993,277   206,131,978

Land                                                      1,600,000       1,600,000      1,600,000     1,600,000      1,600,000     1,600,000     1,600,000     1,600,000     1,600,000     1,600,000     1,600,000
Property, Plant & Equipment
  Property, Plant & Equipment, at cost                  104,150,000     117,175,000    117,675,000   118,175,000    118,675,000   119,175,000   119,675,000   120,175,000   120,675,000   121,175,000   121,675,000
  Less Accumulated Depreciation & Amortization                    0       8,119,024     15,753,011    23,232,149     30,600,746    37,888,208    45,271,013    52,433,993    59,568,492    66,680,360    73,775,000
Net Property, Plant & Equipment                         104,150,000     109,055,976    101,921,989    94,942,851     88,074,254    81,286,792    74,403,987    67,741,007    61,106,508    54,494,640    47,900,000
Capitalized Fees & Interest                               1,954,418       3,964,495      3,568,045     3,171,596      2,775,146     2,378,697     1,982,247     1,585,798     1,189,348       792,899       396,449
Total Assets                                            107,704,418     131,611,323    136,639,342   145,670,224    156,220,999   168,479,580   182,305,276   198,053,501   215,567,501   234,880,815   256,028,427

LIABILITIES & EQUITIES
Current Liabilities:
  Accounts Payable                                                  0     3,350,568      3,658,906     3,884,674      3,928,020     3,971,896     4,016,310     4,061,268     4,106,779     4,152,849     4,199,487
  Notes Payable                                                     0             0              0             0              0             0             0             0             0             0             0
  Current Maturities of Senior Debt (incl. sweeps)                  0     5,990,193      6,515,820     7,087,570      7,709,490     8,385,982     9,121,835     9,922,257    10,792,915    11,739,971             0
  Current Maturities of Working Capital                             0             0              0             0              0             0             0             0             0             0             0
Total Current Liabilities                                           0     9,340,761     10,174,726    10,972,244     11,637,510    12,357,878    13,138,144    13,983,525    14,899,694    15,892,820     4,199,487

Senior Debt (excluding current maturities)               54,675,348      71,275,839     64,760,019    57,672,449     49,962,960    41,576,978    32,455,143    22,532,886    11,739,971             0             0
Working Capital (excluding current maturities)                    0               0              0             0              0             0             0             0             0             0             0
Deferred Income Taxes                                             0               0              0             0              0             0             0             0             0             0             0
Total Liabilities                                        54,675,348      80,616,601     74,934,745    68,644,694     61,600,470    53,934,856    45,593,288    36,516,411    26,639,665    15,892,820     4,199,487

Capital Units & Equities
  Common Equity                                          55,182,000      55,182,000     55,182,000    55,182,000     55,182,000    55,182,000    55,182,000    55,182,000    55,182,000    55,182,000    55,182,000
  Preferred Equity                                                0               0              0             0              0             0             0             0             0             0             0
 Grants (capital improvements)                                    0               0              0             0              0             0             0             0             0             0             0
 Distribution to Shareholders                                     0               0              0             0              0             0             0             0             0             0             0
 Retained Earnings                                       (2,152,930)     (4,187,278)     6,522,597    21,843,531     39,438,529    59,362,724    81,529,989   106,355,089   133,745,837   163,805,995   196,646,940
Total Capital Shares & Equities                          53,029,070      50,994,722     61,704,597    77,025,531     94,620,529   114,544,724   136,711,989   161,537,089   188,927,837   218,987,995   251,828,940

Total Liabilities & Equities                            107,704,418     131,611,323    136,639,342   145,670,224    156,220,999   168,479,580   182,305,276   198,053,501   215,567,501   234,880,815   256,028,427




BBI INTERNATIONAL                                                                                           B-4
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                                                                    DRAFT REPORT JULY, 2006


Stuttgart Ethanol Project - 100mmgy Stuttgart
Proforma Income Statement
                                                Construction        1st Year       2nd Year      3rd Year      4th Year       5th Year      6th Year      7th Year      8th Year      9th Year     10th Year
                                                  (Year 0)         Operations     Operations    Operations    Operations     Operations    Operations    Operations    Operations    Operations    Operations

Revenue
 Ethanol                                                       0   105,326,905    146,727,000   157,144,617    160,287,509   163,493,260   166,763,125   170,098,387   173,500,355   176,970,362   180,509,769
 DDGS                                                          0    20,989,519     26,247,946    24,361,326     24,609,811    24,860,780    25,114,260    25,370,274    25,628,849    25,890,009    26,153,781
 DWG                                                           0     2,278,862      6,107,950     9,720,189      9,821,358     9,923,538    10,026,741    10,130,975    10,236,252    10,342,581    10,449,974
 Carbon Dioxide                                                0             0              0             0              0             0             0             0             0             0             0
 State Producer Payment                                        0             0              0             0              0             0             0             0             0             0             0
 Federal Small Producer Tax Credit                             0             0              0             0              0             0             0             0             0             0             0
 USDA CCC Bioenergy Program                                    0             0              0             0              0             0             0             0             0             0             0
Total Revenue                                                  0   128,595,286    179,082,897   191,226,131    194,718,678   198,277,578   201,904,125   205,599,637   209,365,456   213,202,953   217,113,525

Production & Operating Expenses
  Feedstocks                                                 0      74,267,285     99,475,655   105,482,135    106,525,158   107,578,612   108,642,601   109,717,229   110,802,603   111,898,832   113,006,022
  Chemicals, Enzymes & Yeast                                 0       5,277,778      7,070,000     7,497,735      7,572,712     7,648,439     7,724,924     7,802,173     7,880,195     7,958,997     8,038,587
  Waste Heat                                                 0               0              0             0              0             0             0             0             0             0             0
  Natural Gas                                                0      18,411,854     25,251,895    26,078,895     26,600,473    27,132,482    27,675,132    28,228,634    28,793,207    29,369,071    29,956,453
  Electricity                                                0       4,772,619      6,456,600     6,915,019      7,053,319     7,194,385     7,338,273     7,485,039     7,634,739     7,787,434     7,943,183
  Denaturants                                                0       4,523,810      6,120,000     6,554,520      6,685,610     6,819,323     6,955,709     7,094,823     7,236,720     7,381,454     7,529,083
  Makeup Water                                               0         999,643      1,339,101     1,420,117      1,434,318     1,448,661     1,463,148     1,477,779     1,492,557     1,507,483     1,522,557
  Wastewater Disposal                                        0          83,360        111,667       118,423        119,608       120,804       122,012       123,232       124,464       125,709       126,966
  Direct Labor & Benefits                              228,218       1,369,305      1,403,538     1,438,626      1,474,592     1,511,457     1,549,243     1,587,974     1,627,673     1,668,365     1,710,074
Total Production Costs                                 228,218     109,705,654    147,228,457   155,505,469    157,465,790   159,454,163   161,471,041   163,516,883   165,592,159   167,697,344   169,832,925

Gross Profit                                          (228,218)     18,889,632     31,854,440    35,720,662     37,252,888    38,823,415    40,433,085    42,082,754    43,773,297    45,505,608    47,280,599

Administrative & Operating Expenses
 Maintenance Materials & Services                            0       2,078,125      2,664,375     2,704,341      2,744,906     2,786,079     2,827,871     2,870,289     2,913,343     2,957,043     3,001,399
 Repairs & Maintenance - Wages & Benefits              108,473         650,835        667,106       683,784        700,878       718,400       736,360       754,769       773,638       792,979       812,804
 Consulting, Management and Bank Fees                        0         150,000        153,000       156,060        159,181       162,365       165,612       168,924       172,303       175,749       179,264
 Property Taxes & Insurance                            423,000       2,115,000      2,279,513     2,132,553      1,988,783     1,847,290     1,707,468     1,565,682     1,428,425     1,291,754     1,155,550
 Admin. Salaries, Wages & Benefits                     354,240         681,750        698,794       716,264        734,170       752,524       771,338       790,621       810,387       830,646       851,412
 Legal & Accounting/Community Affairs                  755,000          96,000         97,920        99,878        101,876       103,913       105,992       108,112       110,274       112,479       114,729
 Office/Lab Supplies & Expenses                         84,000         120,000        122,400       124,848        127,345       129,892       132,490       135,139       137,842       140,599       143,411
 Travel, Training & Miscellaneous                      200,000          50,000         51,000        52,020         53,060        54,122        55,204        56,308        57,434        58,583        59,755
Total Administrative & Operating Expenses            1,924,713       5,941,710      6,734,108     6,669,747      6,610,199     6,554,585     6,502,334     6,449,844     6,403,646     6,359,833     6,318,323

EBITDA                                              (2,152,930)     12,947,922     25,120,332    29,050,915     30,642,688    32,268,830    33,930,751    35,632,909    37,369,651    39,145,775    40,962,277
Less:
  Interest - Operating Line of Credit                          0             0              0             0              0             0             0             0             0             0             0
  Interest - Senior Debt                                       0     6,863,246      6,380,021     5,854,393      5,282,644     4,660,724     3,984,232     3,248,379     2,447,956     1,577,299       630,242
  Interest - Working Capital                                   0             0              0             0              0             0             0             0             0             0             0
  Depreciation & Amortization                                  0     8,119,024      8,030,436     7,875,588      7,765,046     7,683,912     7,779,255     7,559,429     7,530,948     7,508,318     7,491,089

Pre-Tax Income                                      (2,152,930)     (2,034,348)    10,709,875    15,320,934     17,594,999    19,924,195    22,167,264    24,825,101    27,390,747    30,060,158    32,840,945
Current Income Taxes                                         0               0              0             0              0             0             0             0             0             0             0

Net Earnings (Loss) for the Year                    (2,152,930)     (2,034,348)    10,709,875    15,320,934     17,594,999    19,924,195    22,167,264    24,825,101    27,390,747    30,060,158    32,840,945

Pre-Tax Return on Investment                             -3.9%           -3.7%          19.4%         27.8%          31.9%         36.1%         40.2%         45.0%         49.6%         54.5%         59.5%
11-Year Average Annual Pre-Tax ROI                       32.4%




BBI INTERNATIONAL                                                                                      B-5
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                                                                          DRAFT REPORT JULY, 2006


Stuttgart Ethanol Project - 100mmgy Stuttgart
Proforma Statements of Cash Flows

                                                Construction        1st Year       2nd Year       3rd Year       4th Year        5th Year       6th Year       7th Year       8th Year       9th Year      10th Year
                                                  (Year 0)         Operations     Operations     Operations     Operations      Operations     Operations     Operations     Operations     Operations     Operations
Cash provided by (used in)
 Operating Activities
   Net Earnings (loss)                              (2,152,930)     (2,034,348)   10,709,875     15,320,934       17,594,999    19,924,195     22,167,264      24,825,101     27,390,747     30,060,158     32,840,945
   Non cash charges to operations
     Depreciation & Amortization                             0      8,119,024      8,030,436      7,875,588        7,765,046     7,683,912      7,779,255       7,559,429      7,530,948      7,508,318      7,491,089
                                                    (2,152,930)     6,084,676     18,740,311     23,196,521       25,360,045    27,608,106     29,946,519      32,384,530     34,921,695     37,568,477     40,332,034

Changes in non-cash working capital balances
  Accounts Receivable                                          0     6,522,339       640,977         485,729         139,702       142,356        145,062        147,820        150,633        153,500        156,423
  Inventories                                                  0     5,724,378     1,717,563         369,646          83,590        84,670         85,766         86,877         88,005         89,150         90,311
  Prepaid Expenses                                             0             0             0               0               0             0              0              0              0              0              0
  Accounts Payable                                             0    (3,350,568)     (308,338)       (225,768)        (43,346)      (43,876)       (44,414)       (44,958)       (45,511)       (46,070)       (46,638)
                                                               0     8,896,149     2,050,202         629,607         179,946       183,150        186,414        189,739        193,128        196,579        200,096

Investing Activities
  Land Purchase                                      1,600,000              0              0              0                0             0              0              0              0              0              0
  Fixed Asset Purchases                            104,150,000     13,025,000        500,000        500,000          500,000       500,000        500,000        500,000        500,000        500,000        500,000
  Capitalized Fees & Interest                        1,954,418      2,010,076              0              0                0             0              0              0              0              0              0
                                                   107,704,418     15,035,076        500,000        500,000          500,000       500,000        500,000        500,000        500,000        500,000        500,000

Financing Activities
  Senior Debt Advances                              54,675,348     28,097,652               0              0               0              0              0              0              0              0              0
  Repayment of Senior Debt                                   0     (5,506,968)     (5,990,193)    (6,515,820)     (7,087,570)    (7,709,490)    (8,385,982)    (9,121,835)    (9,922,257)   (10,792,915)   (11,739,971)
  Working Capital Advances                                   0              0               0              0               0              0              0              0              0              0              0
  Repayment of Subordinate Debt                              0              0               0              0               0              0              0              0              0              0              0
  Equity Investment                                 55,182,000              0               0              0               0              0              0              0              0              0              0
  Grants                                                     0              0               0              0               0              0              0              0              0              0              0
  Cash Sweep for Debt Service                                0              0               0              0               0              0              0              0              0              0              0
  Distributions to Shareholders                              0              0               0              0               0              0              0              0              0              0              0

Net Increase (Decrease) in Cash                                0    4,744,135     10,199,916     15,551,094       17,592,529    19,215,467     20,874,124      22,572,956     24,306,310     26,078,983     27,891,967
Cash (Indebtedness), Beginning of Year                         0            0      4,744,135     14,944,051       30,495,145    48,087,674     67,303,141      88,177,264    110,750,220    135,056,531    161,135,513

Cash (Bank Indebtedness), End of Year                        0      4,744,135     14,944,051     30,495,145       48,087,674    67,303,141     88,177,264     110,750,220    135,056,531    161,135,513    189,027,480
IRR                                                      33.2%




BBI INTERNATIONAL                                                                                       B-6
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                                                                                      DRAFT REPORT JULY, 2006


Stuttgart Ethanol Project - 100mmgy Stuttgart

Debt Coverage Ratio
                                                                           1st Year        2nd Year        3rd Year         4th Year         5th Year       6th Year       7th Year       8th Year       9th Year      10th Year
                                                                          Operations      Operations      Operations       Operations       Operations     Operations     Operations     Operations     Operations     Operations
EBITDA                                                                     12,947,922      25,120,332      29,050,915        30,642,688      32,268,830     33,930,751     35,632,909     37,369,651     39,145,775     40,962,277
Taxes Paid                                                                          0               0               0                  0              0              0              0              0              0              0
Distributions to Shareholders                                                       0               0               0                  0              0              0              0              0              0              0
Changes in non-cash working capital balances                               (8,896,149)     (2,050,202)       (629,607)          (179,946)      (183,150)      (186,414)      (189,739)      (193,128)      (196,579)      (200,096)
Investing Activities (Capital Expenditures)                               (15,035,076)       (500,000)       (500,000)          (500,000)      (500,000)      (500,000)      (500,000)      (500,000)      (500,000)      (500,000)
Senior Debt Advances                                                       28,097,652               0               0                  0              0              0              0              0              0              0
Working Capital Advances                                                            0               0               0                  0              0              0              0              0              0              0
Cash Available for Debt Service                                            17,114,348      22,570,130      27,921,308        29,962,742      31,585,680     33,244,337     34,943,170     36,676,524     38,449,196     40,262,180

Senior Debt P&I Payment                                                    12,370,214      12,370,214      12,370,214        12,370,214     12,370,214     12,370,214     12,370,214     12,370,214     12,370,214     12,370,214
Suboridinate Debt P&I Payment                                                       0               0               0                 0              0              0              0              0              0              0

Debt Coverage Ratio (senior + subdebt)                                            1.38            1.82            2.26              2.42           2.55           2.69           2.82           2.96           3.11           3.25
10-year Average Debt Coverage Ratio                               2.53

Note: the '1st Year Operations' consists of 0 months of construction and startup, plus 12 months of commercial operation




Depreciation Schedules
                                                       Depreciation        1st Year        2nd Year        3rd Year         4th Year         5th Year       6th Year       7th Year       8th Year       9th Year      10th Year
                                                        Method (note1)    Operations      Operations      Operations       Operations       Operations     Operations     Operations     Operations     Operations     Operations
   Major process equipment                                15 year SLN       5,100,170       5,100,170       5,100,170          5,100,170      5,100,170      5,100,170      5,100,170      5,100,170      5,100,170     5,100,170
   Minor process equipment                                15 year SLN       1,125,038       1,125,038       1,125,038          1,125,038      1,125,038      1,125,038      1,125,038      1,125,038      1,125,038     1,125,038
   Process buildings                                      30 year DDB       1,342,150       1,252,673       1,169,162          1,091,218      1,018,470        950,572        887,200        828,054        772,850       721,327
   Vehicles                                                5 year DDB         135,000         162,000          97,200             58,320         34,992        135,000              0              0              0              0
   Office building                                        30 year DDB          16,667          15,556          14,519             13,551         12,647         11,804         11,017         10,283          9,597          8,957
   Office equipment                                        5 year DDB          50,000          60,000          36,000             21,600         12,960         50,000              0              0              0              0
   Start-up cost                                          20 year DDB         350,000         315,000         283,500            255,150        229,635        206,672        186,004        167,404        150,664       135,597
   Annual capital expenditures                            10 year SLN               0               0          50,000            100,000        150,000        200,000        250,000        300,000        350,000       400,000
Total Depreciation                                                          8,119,024       8,030,436       7,875,588          7,765,046      7,683,912      7,779,255      7,559,429      7,530,948      7,508,318     7,491,089

Note 1: Depreciation Method = DDB (Double Declining Balance) or SLN (Straight Line)
Note 2: Only 50% of the "1st Year Operations" depreciation shown in the above table is claimed




BBI INTERNATIONAL                                                                                                 B-7
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                                                                                                   DRAFT REPORT JULY, 2006


Stuttgart Ethanol Project - 100mmgy Stuttgart
Interim Funding Schedule                                                                        Interim Period      Interim Period      Current                                      Sub-Debt        Senior Debt     Senior Debt
                                                                                  Engineering &     Fees &            Labor and          Month     Equity/Grant     Subordinate       Interest         Interest     Loan (Equity)
                    Month                                                         Construction Startup Costs         Op. Expense     Disbursements Investment          Debt         (Earnings)       (Earnings)       Balance
                                                                                    (page 7)       (page 10)         (page 11-12)

                      1                         Construction          Sep-06         8,225,000        4,467,730                  0     12,692,730    (55,182,000)              0                 0      (106,223)    (42,595,493)
                      2                                               Oct-06         7,050,000                0                  0      7,050,000              0               0                 0       (88,864)    (35,634,357)
                      3                                               Nov-06         8,225,000                0             30,077      8,255,077              0               0                 0       (68,448)    (27,447,728)
                      4                                               Dec-06         8,225,000                0             30,077      8,255,077              0               0                 0       (47,982)    (19,240,633)
                      5                                               Jan-07         9,400,000                0             30,077      9,430,077              0               0                 0       (24,526)     (9,835,083)
                      6                                               Feb-07         9,400,000                0             30,077      9,430,077              0               0                 0        (2,869)       (407,874)
                      7                                               Mar-07        10,575,000                0             30,077     10,605,077              0               0                 0        72,230      10,269,433
                      8                                               Apr-07        10,575,000                0             30,077     10,605,077              0               0                 0       147,861      21,022,371
                      9                                               May-07         9,400,000                0             30,077      9,430,077              0               0                 0       215,705      30,668,152
                      10                                              Jun-07         9,400,000                0             30,077      9,430,077              0               0                 0       284,029      40,382,258
                      11                                              Jul-07         8,225,000                0            225,158      8,450,158              0               0                 0       345,896      49,178,312
                      12                                              Aug-07         7,050,000                0            225,158      7,275,158              0               0                 0       399,879      56,853,348
                      13                                              Sep-07         6,475,000                0            235,158      6,710,158              0               0                 0       450,241      64,013,747
                      14                        Startup               Oct-07         6,550,000                0            235,158      6,785,158              0               0                 0       501,492      71,300,397
                      15                        Full Operation        Nov-07                 0                0          2,488,839      2,488,839              0               0                 0       522,674      74,311,910
                      16                                              Dec-07                 0                0          1,311,906      1,311,906              0               0                 0       535,669      76,159,485
                      17                                              Jan-08                 0                0                  0              0              0               0                 0             0               0
                      18                                              Feb-08                 0                0                  0              0              0               0                 0             0               0
                      19                                              Mar-08                 0                0                  0              0              0               0                 0             0               0
                      20                                              Apr-08                 0                0                  0              0              0               0                 0             0               0
                      21                                              May-08                 0                0                  0              0              0               0                 0             0               0
                      22                                              Jun-08                 0                0                  0              0              0               0                 0             0               0
                      23                                              Jul-08                 0                0                  0              0              0               0                 0             0               0
                      24                        Coal Online           Aug-08                 0                0                  0              0              0               0                 0             0               0
                     Total                                                         118,775,000        4,467,730          4,931,913    128,204,720    (55,182,000)              0                 0     3,136,765      76,159,485

Engineering & Construction Cost Summary
                                                                     Building &                   Fire Protection                                                      Grain        Waste Heat
                                                Monthly Draw (% of     Office     Rolling Stock      & Potable                           Site                       Receiving and    Steam           Construction
                    Month                         EPC Contract)      Equipment    & Spare Parts        Water        EPC Contract     Development        Rail          Storage       Generator        Contingency    Monthly Total

                     1                                  7%               35,000              0          143,500          7,350,000        357,000        199,500               0                 0       140,000       8,225,000
                     2                                  6%               30,000              0          123,000          6,300,000        306,000        171,000               0                 0       120,000       7,050,000
                     3                                  7%               35,000              0          143,500          7,350,000        357,000        199,500               0                 0       140,000       8,225,000
                     4                                  7%               35,000              0          143,500          7,350,000        357,000        199,500               0                 0       140,000       8,225,000
                     5                                  8%               40,000              0          164,000          8,400,000        408,000        228,000               0                 0       160,000       9,400,000
                     6                                  8%               40,000              0          164,000          8,400,000        408,000        228,000               0                 0       160,000       9,400,000
                     7                                  9%               45,000              0          184,500          9,450,000        459,000        256,500               0                 0       180,000      10,575,000
                     8                                  9%               45,000              0          184,500          9,450,000        459,000        256,500               0                 0       180,000      10,575,000
                     9                                  8%               40,000              0          164,000          8,400,000        408,000        228,000               0                 0       160,000       9,400,000
                     10                                 8%               40,000              0          164,000          8,400,000        408,000        228,000               0                 0       160,000       9,400,000
                     11                                 7%               35,000              0          143,500          7,350,000        357,000        199,500               0                 0       140,000       8,225,000
                     12                                 6%               30,000              0          123,000          6,300,000        306,000        171,000               0                 0       120,000       7,050,000
                     13                                 5%               25,000        600,000          102,500          5,250,000        255,000        142,500               0                 0       100,000       6,475,000
                     14                                 5%               25,000        675,000          102,500          5,250,000        255,000        142,500               0                 0       100,000       6,550,000
                     15                                 0%                    0              0                0                  0              0              0               0                 0             0               0
                     16                                 0%                    0              0                0                  0              0              0               0                 0             0               0
                     17                                 0%                    0              0                0                  0              0              0               0                 0             0               0
                     18                                 0%                    0              0                0                  0              0              0               0                 0             0               0
                     19                                 0%                    0              0                0                  0              0              0               0                 0             0               0
                     20                                 0%                    0              0                0                  0              0              0               0                 0             0               0
                     21                                 0%                    0              0                0                  0              0              0               0                 0             0               0
                     22                                 0%                    0              0                0                  0              0              0               0                 0             0               0
                     23                                 0%                    0              0                0                  0              0              0               0                 0             0               0
                     24                                 0%                    0              0                0                  0              0              0               0                 0             0               0
                   TOTAL                               100%             500,000      1,275,000        2,050,000        105,000,000      5,100,000      2,850,000               0                 0     2,000,000     118,775,000




BBI INTERNATIONAL                                                                                                   B-8
STUTTGART ETHANOL, LLC FEASIBILITY STUDY                                                                                                      DRAFT REPORT JULY, 2006


Amortization Schedule - Quarterly
Senior Debt

Principal                                  $82,773,000                      $3,092,553.39 quarterly loan payment
Interest                                        8.500%                     $12,370,213.55 annual loan payments
Term                                                 40 Quarters



                   Quarter           Loan Balance         Interest Pmt     Principal Pmt     Cash Sweeps            Loan Balance
                      1                 82,773,000.00      1,758,926.25       1,333,627.14          0.00           81,439,372.86
                      2                 81,439,372.86      1,730,586.67       1,361,966.71          0.00           80,077,406.15
                                                                                                                                    Year 1
                      3                 80,077,406.15      1,701,644.88       1,390,908.51          0.00           78,686,497.64
                      4                 78,686,497.64      1,672,088.07       1,420,465.31          0.00           77,266,032.33
                      5                 77,266,032.33      1,641,903.19       1,450,650.20          0.00           75,815,382.13
                      6                 75,815,382.13      1,611,076.87       1,481,476.52          0.00           74,333,905.62
                                                                                                                                    Year 2
                      7                 74,333,905.62      1,579,595.49       1,512,957.89          0.00           72,820,947.72
                      8                 72,820,947.72      1,547,445.14       1,545,108.25          0.00           71,275,839.48
                      9                 71,275,839.48      1,514,611.59       1,577,941.80          0.00           69,697,897.68
                     10                 69,697,897.68      1,481,080.33       1,611,473.06          0.00           68,086,424.62
                                                                                                                                    Year 3
                     11                 68,086,424.62      1,446,836.52       1,645,716.86          0.00           66,440,707.75
                     12                 66,440,707.75      1,411,865.04       1,680,688.35          0.00           64,760,019.41
                     13                 64,760,019.41      1,376,150.41       1,716,402.97          0.00           63,043,616.43
                     14                 63,043,616.43      1,339,676.85       1,752,876.54          0.00           61,290,739.89
                                                                                                                                    Year 4
                     15                 61,290,739.89      1,302,428.22       1,790,125.16          0.00           59,500,614.73
                     16                 59,500,614.73      1,264,388.06       1,828,165.32          0.00           57,672,449.41
                     17                 57,672,449.41      1,225,539.55       1,867,013.84          0.00           55,805,435.57
                     18                 55,805,435.57      1,185,865.51       1,906,687.88          0.00           53,898,747.69
                                                                                                                                    Year 5
                     19                 53,898,747.69      1,145,348.39       1,947,205.00          0.00           51,951,542.69
                     20                 51,951,542.69      1,103,970.28       1,988,583.10          0.00           49,962,959.59
                     21                 49,962,959.59      1,061,712.89       2,030,840.50          0.00           47,932,119.09
                     22                 47,932,119.09      1,018,557.53       2,073,995.86          0.00           45,858,123.23
                                                                                                                                    Year 6
                     23                 45,858,123.23        974,485.12       2,118,068.27          0.00           43,740,054.97
                     24                 43,740,054.97        929,476.17       2,163,077.22          0.00           41,576,977.75
                     25                 41,576,977.75        883,510.78       2,209,042.61          0.00           39,367,935.14
                     26                 39,367,935.14        836,568.62       2,255,984.77          0.00           37,111,950.37
                                                                                                                                    Year 7
                     27                 37,111,950.37        788,628.95       2,303,924.44          0.00           34,808,025.93
                     28                 34,808,025.93        739,670.55       2,352,882.84          0.00           32,455,143.09
                     29                 32,455,143.09        689,671.79       2,402,881.60          0.00           30,052,261.50
                     30                 30,052,261.50        638,610.56       2,453,942.83          0.00           27,598,318.67
                                                                                                                                    Year 8
                     31                 27,598,318.67        586,464.27       2,506,089.12          0.00           25,092,229.55
                     32                 25,092,229.55        533,209.88       2,559,343.51          0.00           22,532,886.04
                     33                 22,532,886.04        478,823.83       2,613,729.56          0.00           19,919,156.49
                     34                 19,919,156.49        423,282.08       2,669,271.31          0.00           17,249,885.18
                                                                                                                                    Year 9
                     35                 17,249,885.18        366,560.06       2,725,993.33          0.00           14,523,891.85
                     36                 14,523,891.85        308,632.70       2,783,920.68          0.00           11,739,971.16
                     37                 11,739,971.16        249,474.39       2,843,079.00          0.00             8,896,892.16
                     38                  8,896,892.16        189,058.96       2,903,494.43          0.00             5,993,397.74
                                                                                                                                    Year 10
                     39                  5,993,397.74        127,359.70       2,965,193.68          0.00             3,028,204.05
                     40                  3,028,204.05          64,349.34      3,028,204.05          0.00                     0.00




BBI INTERNATIONAL                                                                 B-9

				
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