High Plains Transition

The financial difficulties of Abengoa Bioenergy’s parent company in Spain trigger the sale of its ethanol production facilities in the U.S. In-depth reporting in the November EPM.
By Susanne Retka Schill | October 13, 2016

With the closings at September’s end, five Abengoa first-generation ethanol plants turned the page to a new chapter. Green Plains Inc. acquired three of the plants sold in bankruptcy proceedings, ICM Inc. bought the plant next to its headquarters and KAAPA Ethanol bought the plant 40 miles up the road. Abengoa Bioenergy Biomass LLC, the cellulosic ethanol plant in Hugoton, Kansas, is being sold in a separate process handled by Ocean Park Advisers and expected to close later this year.

Carl Marks Advisors handled the auction process for the first-gen plants that took place Aug. 22. Chris Wu, partner, was pleased with the process that brought in $357 million. “We contacted well over 250 buyers and we had well-over 80 people participating in the process. There was significant strategic interest in all the assets,” Wu says. “We had a wholesome stalking horse process, which means effectively we’re running an auction for the right to be the stalking horse bidder.”

Green Plains placed successful stalking horse bids on the Madison, Illinois, and Mount Vernon, Indiana, plants of $100 million each; KE Holdings LLC, a subsidiary of KAAPA Ethanol, bid $115 million on the Ravenna, Nebraska, plant. A third, $35 million stalking horse bid by BioUrja Trading LLC on the York, Nebraska, facility was outbid at the auction by Green Plains at $37.375 million. ICM successfully outbid two other parties on the older, idled Colwich, Kansas, plant for $3.15 million. The three 90 MMgy, Vogelbusch-design plants in Ravenna, Madison and Mount Vernon sold for an average price of $1.17 per gallon.

The strategic bidders represented a variety of companies interested in the industry, Wu says, as evidenced by the stalking horse bid offered by BioUrja, a midstream ethanol distributor, seeing an opportunity to integrate into the production side. “BioUrja wasn’t the only one interested,” he adds. The successful sale confirms the viability of the corn ethanol industry in the U.S., he says, showing both the confidence from strategic investors and lenders willing to extend credit. “It’s an important watershed.”

Green Plains
Consolidation is a big part of the Green Plains platform. The Abengoa acquisitions bring the company’s ethanol footprint to 17 dry mill plants with a combined capacity of 1.5 billion gallons per year. “We continue to focus on making strategic investments in high quality assets as we expand our production footprint,” says Todd Becker, Green Plains president and CEO. “The Madison and Mount Vernon plants will give us access to the Mississippi River, supporting our new export terminal planned in Beaumont, Texas. In addition, we will broaden our product offering globally with industrial alcohol production at the York plant.” 

Diversification is emerging as a new theme for Green Plains. While the York plant is an older plant, the acquisition will mark Green Plains entry into the industrial alcohol market. Two years ago, it acquired a 70,000-head feedlot in southwest Kansas and in October, it announced the acquisition of Fleischmann’s Vinegar Co. In addition to supplying all-natural food and beverage ingredients, Fleischmann’s portfolio extends into antimicrobials, animal feeds, herbicides and disinfectants. “The Fleischmann’s Vinegar acquisition will lead to further supply chain opportunities within Green Plains, as its largest production cost is food-grade ethanol,” Becker says. The acquisition will expand the company’s opportunities into consumer and industrial-based ethanol products. 

KAAPA Ethanol
Logistics are a big part KAAPA Ethanol’s interest in the Ravenna facility. A locally owned LLC with just under 500 stockholders in central Nebraska, the acquisition will more than double its ethanol footprint, from 60 MMgy at its home base in Minden to a combined 150 MMgy, giving it access to unit train shipping. KAAPA created KE Holdings LLC to make the acquisition, with the plant becoming KAPPA Ethanol Ravenna LLC, a wholly owned subsidiary.

For Ravenna, the acquisition brings a new business model, says KAAPA CEO Chuck Woodside, particularly for grain origination. “We typically buy direct from the farmer for our corn. That’s a philosophy we’ve had since the beginning.” And, where Abengoa handled marketing through the central office in St. Louis, KAAPA’s acquisition will bring scale to its business partners. “RPMG is going be marketing all the ethanol and distillers corn oil, like they do for Minden,” Woodside says. “And they’ll be marketing dried distillers, which we don’t make in Minden.”  Besides benefits from increased scale, Woodside expects that WDGS customers will be pleased to have a backup source when Minden shuts down for maintenance.

Woodside expects other synergies as employees at the two facilities begin working together. For one, the ICM-design at Minden has some significant differences from the Vogelbusch-design at Ravenna. “Clearly they’re continuous fermentation at Ravenna and we are batch.  They’re pressure distillation and we’re vacuum in Minden.  There’s probably pluses and minuses to both sides.” He anticipates making improvements at Ravenna that will be focused on production efficiencies and lowering its carbon intensity. With none of Minden’s distillers grains being dried, almost all of its ethanol product goes to California. 

ICM
ICM’s acquisition of the Colwich plant is also based on adjacency, in this case, the sharing of a property line on the north end of the small town not far from Wichita, Kansas. “The proximity of the location to our headquarters in Colwich was obviously an appeal to us, getting control of that property and the assets there,” says Chris Mitchell, ICM president. “As we continue to explore different technology options in the renewable fuel space, there are a number of opportunities that we see that could be viable at that location.”  Built in the mid-1980s, the 25 MMgy plant at Colwich has not run consistently for the past several years.

Abengoa owned a sixth first-generation plant in Portales, New Mexico. The Portales plant was not part of final bankruptcy auction, due to a separate lender arrangement with GATX Corp. and the resolution for that asset is still pending.

History
Abengoa’s three older plants at Portales, Colwich and York were the core assets when the Seville, Spain-headquartered company entered the U.S. ethanol industry in 2002. A 2004 article in Ethanol Producer Magazine, “Abengoa Bioenergy’s ‘High Plains’ Success,” chronicled the company’s purchase of three High Plains Corp. facilities. Abengoa’s chief operating officer at the time, Tim Newkirk, was quoted as saying the three plants were performing well in a period of tight margins. “Our plants are high-efficiency, low-cost, high-yield producers of ethanol.”

Coming online between 1982 and 1994, the story said York was the newest of the three, starting at 25 MMgy and expanded to 55 Mggy. The Colwich plant was expanded from its initial 8 MMgy to 25 MMgy and Portales from 10 MMgy to 24 MMgy.

In 2003, High Plains officially changed its name to Abengoa Bioenergy Corp. and the U.S headquarters were established in the St. Louis, Missouri, suburb of Chesterfield, with Chris Standlee in the lead as executive vice president.

When it entered the U.S. ethanol market, Abengoa was already a major corporation with more than 200 companies in 40 countries.  The first fuel ethanol producer in Europe, Abengoa’s third plant was due online in 2005, bringing the combined capacity to 140 MMgy. The EU had just passed a biofuels directive calling for 5.75 percent biofuel content by 2010. Abengoa’s U.S. research arm at the York facility was completing a residual starch conversion pilot plant that was to be utilized by its team researching the conversion of biomass to bioethanol via enzymatic hydrolysis.

Interest is high in who will pick up the torch to carry Abengoa's first commercial-scale cellulosic ethanol plant at Hugoton, Kansas, to fruition.

Author: Susanne Retka Schill
Managing Editor, Ethanol Producer Magazine
sretkaschill@bbiinternational.com
701-738-4922