Lake Area Corn Processors, LLC is a South Dakota limited liability company
that owns and manages an ethanol plant that has a nameplate production capacity
of 40 million gallons of ethanol per year through its wholly-owned subsidiary
Dakota Ethanol, L.L.C. The ethanol plant is located near Wentworth, South Dakota.
Lake Area Corn Processors, LLC is referred to in this report as "LACP,"
the "Company," "we," or "us." Dakota Ethanol,
L.L.C. is referred to in this report as "Dakota Ethanol" or the "ethanol
plant."
LACP was formed as a South Dakota cooperative on May 25, 1999. On August 20,
2002, our members approved a plan to reorganize into a South Dakota limited
liability company. The reorganization became effective on August 31, 2002, and
the assets and liabilities of the cooperative were transferred to the newly
formed limited liability company. Following the reorganization, our legal name
was changed to Lake Area Corn Processors, LLC.
Our ownership of Dakota Ethanol represents our primary asset and source of
revenue. Since we operate Dakota Ethanol as a wholly-owned subsidiary, all net
income generated by Dakota Ethanol is passed to LACP. We make distributions
of the income received from Dakota Ethanol to our unit holders in proportion
to the number of units held by each member compared to the units held by our
members generally.
Ethanol
Ethanol is ethyl alcohol, a fuel component made primarily from corn and various
other grains. Ethanol is primarily used as: (i) an octane enhancer in fuels;
(ii) an oxygenated fuel additive for the purpose of reducing ozone and carbon
monoxide vehicle emissions; and (iii) a non-petroleum-based gasoline substitute.
Ethanol produced in the United States is primarily used for blending with unleaded
gasoline and other fuel products. Ethanol blended fuel is typically designated
in the marketplace according to the percentage of the fuel that is ethanol,
with the most common fuel blend being E10, which includes 10% ethanol. The United
States Environmental Protection Agency ("EPA") has approved the use
of gasoline blends that contain 15% ethanol, or E15, for use in all vehicles
manufactured in model year 2001 and later. In addition, flexible fuel vehicles
can use gasoline blends that contain up to 85% ethanol called E85.
An ethanol plant is essentially a fermentation plant. Ground corn and water
are mixed with enzymes and yeast to produce a substance called "beer,"
which contains approximately 15% alcohol, 11% solids and 74% water. The "beer"
is boiled to separate the water, resulting in ethyl alcohol, which is then dehydrated
to increase the alcohol content. This product is then mixed with a certified
denaturant, such as gasoline, to make the product unfit for human consumption
which allows it to be sold commercially.
Distillers Grains
A principal co-product of the ethanol production process is distillers grains,
a high protein, high-energy animal feed supplement primarily marketed to the
dairy and beef industry. We primarily produce distillers grains in two forms,
modified/wet distillers grains and dried distillers grains. Modified/wet distillers
grains have a higher moisture content than dried distillers grains. Our modified/wet
distillers grains are sold primarily in our local market because they have a
shorter shelf life and are more expensive to transport than dried distillers
grains.
Corn Oil
We separate a portion of the corn oil contained in our distillers grains which
we market separately from our distillers grains. The corn oil that we produce
is not food grade corn oil and therefore cannot be used for human consumption.
The primary uses for the corn oil that we produce are animal feed, industrial
uses and biodiesel production.
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