Opinion ID: 1612232
Heading Depth: 1
Heading Rank: 22

Heading: Michael Raasch

Text: Michael Raasch is a certified general real estate appraiser licensed by the State of Nebraska since 1986. He has a degree in finance from the University of Nebraska. Raasch is certified to appraise commercial and residential properties. Raasch testified that he had experience in the valuation of ethanol plants in Iowa and Nebraska, including the Chief Ethanol Plant, a dry mill ethanol plant in Hastings, Nebraska. Raasch performed an appraisal of the Sutherland plant as of December 18, 1997. He was asked on behalf of Shepherd and Corbet to value the plant on that date and to develop an annual net income for the years 1993 to 1997, based upon the assumptions that the plant was producing 15 million gallons of ethanol each of those years and that there was no debt on the plant. Raasch stated that ethanol plants typically operate at 110 to 115 percent of rated maximum capacity. Raasch testified that he used the income approach in valuing the plant. In doing so, he used historical data for the price of corn, gluten, germ, and ethanol for the years 1993 through 1997 and used the pro forma numbers to determine the price of brewers' and torula yeast during that time period. He testified that he used the pro forma price numbers because they were very close to the verbal information he was able to gather regarding the prices of the yeast products. Due to the fact that the plant never became operational, he did not have information about the plant's actual operating expenses. To determine expenses, he relied upon the 10 years of appraisal experience he had with the Chief Ethanol Plant and his discussions with other plant owners to arrive at an average, which he testified was a worse case scenario. Based on such information, he determined that the operating expenses for a dry mill were approximately 76 to 82 percent of gross sales. He further testified that although he did not receive information from any wet mill operators regarding expenses, trade publications indicated that wet mills are more expensive to run but have higher profit margins. He therefore determined that the Sutherland plant would have expenses between 80 and 85 percent of gross sales, based upon the fact that it was a wet mill and utilized some used equipment. Raasch opined that based upon these numbers and the income approach to valuation, the plant's value on December 18, 1997, had it been operating since 1993, would have been $30 million. Figures from the summary page of his report, which was admitted into evidence and submitted to the jury, revealed net income produced by the plant during the years 1993 to 1997 would have been at least $4 million per year. On cross-examination, Raasch admitted that he was not permitted by the Chief Ethanol Plant to reveal the specifics of his appraisals done for that company, particularly its operating expenses. He stated that similar restrictions applied to any appraisal he did for ethanol plants. He further stated that because of such limitations, he was unable to divulge specific information that would allow a comparison of the Chief Ethanol Plant expenses with those anticipated by the Sutherland plant. He also stated that the plant, as it existed at the time of trial, was not worth $30 million because it was not finished. Raasch admitted that he relied upon the yields for each byproduct as listed on the pro forma projections prepared by Shepherd and that if any of those yield numbers were wrong, his final numbers would be affected.