Case Study

City of South Sioux City, Nebraska
Waste to Energy/Biomass Project

Mesirow Financial structured and arranged CTL construction-permanent financing in the amount of approximately $35,000,000 for the development of a new biomass digester/renewable natural gas production and sanitary sewer pretreatment plant (the “Facility”). The project supplanted the city’s existing waste service process in which the city paid a large fee to pipe all of its waste water and feedstock waste under the Missouri River to a waste water treatment plant in Sioux City, Iowa. This financial obligation has now been replaced with a Tipping Fee obligation to the operator/developer of the new Facility. The obligation itself was deemed “cost-neutral” to South Sioux City, Nebraska (the “City”), but will stabilize and promote local economic development.

Overview
The City replaced its costly waste water and feedstock waste processing arrangement with a Tipping Fee that securitized to finance the design and construction of the new Facility. The Project is expected to be cost-neutral to South Sioux City and is intended to stabilize and promote economic development in the City and address organic waste challenges in the region.

The decision by South Sioux City to construct the Facility is the result of growing waste disposal demands of industrial facilities and food processing plants in the area and the threat of losing those companies in the City due to rising costs for processing waste. The Sioux City, Iowa waste water treatment plant is nearing capacity, raising rates and reducing nutrient limits, making it more difficult for industrial facilities and food processing plants in the area to operate.

The Facility consists of more than 80,000 square feet and is located on a 29.05+ acre parcel of land in the Roth Industrial Park of South Sioux City, Nebraska. The region (known as Siouxland) is a center for the food processing industry. Located in South Sioux City are companies including Tyson Foods (whose largest slaughterhouse plant in America is based in South Sioux City) and Beef Products Inc.

The transaction is secured by a Tipping Agreement (the "Agreement") under which the City is required to pay the Facility’s operator a guaranteed minimum payment to provide waste that will be treated at the Facility and turned into natural gas. The Agreement is a 20-year non-terminable, absolute and unconditional obligation of the City with a guaranteed minimum payment that escalates over the contract term.

The security package for the financing included a direct assignment of the Agreement, a first mortgage on the property and a first security interest in the Agreement’s guaranteed minimum payments allocable to the note.