Corporate structure of a beet-ethanol industry

Abstract

This report outlines the alternative corporate structures which could be applicable to a beet ethanol industry in New Zealand. It is apparent that both the Rural Banking and Finance Corporation and the Development Finance Corporation will play major roles in the development of this industry, both in provision of debt capital and in assisting farmers build up their own equity shareholding in the processing company. With careful preparation it should be possible for farmers, if they so wish, to become closely involved with the development of this new industry, not only as feedstock suppliers but also by participating in the capital structure and management of the processing and product distribution operations. Section 4 of this report clearly identifies the tax advantages that can accrue from any farmer involvement being organised on a cooperative basis. Since the actual activities of a beet ethanol plant may be outside the scope of the current definitions contained in the relevant Acts, un approach to the Commissioner of Inland Revenue for clarification on these matters will be necessary. In addition, legal interpretation of the tax situation relating to a farmer cooperative which owns only part of the total equity in the processing company is necessary. There is no doubt, however, that with careful management farmers will be able to participate in and benefit from all aspects of any agro industrial system which emerges to produce ethanol from beet in New Zealand.