Milk protein plant plans hit a snag

Ingredient Solutions Ltd, which announced plans 15 months ago for a specialist milk protein plant in South Taranaki, has hit a bump in the road.

Director Brent Ogilvie says the company "requires a cornerstone investor, which it is yet to secure".

The company asked for and received a council economic development fund grant of $25,000 for feasibility studies in 2008.

South Taranaki District Council said the company still plans to build a $30 million micella casein factory producing protein for use in sports drinks, supplements and other foods, such as energy bars.

Council communications manager Gerard Langford says the grant was to fund a site feasibility study for the factory. At the time, the company was looking at several locations across the North Island.

The factory would initially employ 20 full-time equivalent staff with potential for considerable growth.

"Ingredient Solutions conducted the site feasibility study and decided to locate the factory in South Taranaki. It then went to equity investors to raise the additional capital required, but was stymied by the global economic crisis. Ingredient Solutions felt that it was not wise to proceed until the economic environment improved," Mr Langford said.

"We are still in communication with Ingredient Solutions and the company still plans to proceed with the project as economic conditions improve."

From the council's point of view, the grant secured the decision of the company to locate in South Taranaki. The council is always looking at ways to encourage major new industry, investment and subsequently new jobs to South Taranaki and stands fully behind its decision to make the grant.

When the announcement was made in November 2008, chief executive Neil Domigan said Ingredient Solutions was looking at sites between Hawera and Kapuni for a facility to turn raw milk into protein powders for sports and health supplements.

"We have been speaking to farmers with the intent to supply milk and have expressions of interest for 26.8 million litres. Because we are a new entrant in the market, we are entitled to 50 million litres of milk from Fonterra," Dr Domigan said.

Fifty million litres would produce 4500-5000 tonnes of product, including undenatured micellar casein, whey protein isolate and protein hydrolysates.

Dr Domigan said the company, which advertised for suppliers in the Taranaki Daily News, had secured about the supply of 26 million litres of milk from farmers.

"Milk suppliers will be reimbursed on the same basis as the Fonterra payment system during the first year. An alternative payment system will be developed after that to the benefit of dairy farmers," he said.

"Ingredient Solutions does not require them to invest in the company, which is currently seeking to raise the $30 million needed to build the milk- processing plant. In other words, there is no link between Ingredient Solutions' share capital and milk supply."

Dr Domigan said all milk produced on contracted farms must be supplied to the company. He said a letter of intent had been signed by a North Asian corporate to buy all available product for the first three years.

"New Zealand, North Asian and European corporate investors have expressed an interest in buying shares in Ingredient Solutions."

The share offer is conditional on Ingredient Solutions' receiving applications for at least 17.5 million shares. The offer is composed of 27.5 million shares with a face value of $1 per share.

The directors, of which Dr Domigan is one, reserve the right to accept applications for up to 30 million new shares if the share offer is oversubscribed. The minimum investment is 500,000 shares. The company's registered shareholders are Michael Bevan Smith, Ian Braddock and Peter and Megan Walker.

- © Fairfax NZ News