CHS takes ownership of Provista

By Anduin Kirkbride McElroy | May 09, 2008
A series of mergers and acquisitions this spring affected the ethanol marketing world. CHS Inc. announced in early April that it had acquired full ownership of Provista Renewable Fuels Marketing LLC, a company it formed as a joint venture with U.S. BioEnergy Corp. in April 2006. CHS purchased the remaining 50 percent interest in Provista as U.S. BioEnergy officially merged with VeraSun Energy Corp.

The merger between VeraSun and U.S. BioEnergy was first announced in November 2007, becoming effective April 1. The move converted each outstanding share of U.S. BioEnergy common stock into 0.810 shares of VeraSun common stock. It also combined under the VeraSun name 17 biorefineries in production, under construction or in development. Nine of the facilities were originally VeraSun facilities, while the other eight were previously U.S. BioEnergy facilities.

VeraSun markets its own ethanol, as well as a trademarked brand of E85, called VE85. Fuel produced at the eight U.S. BioEnergy facilities brought to VeraSun as a result of the merger will also be marketed by VeraSun, rather than Provista. This amounts to 310 MMgy in production and 440 MMgy in construction that was moved into the VeraSun marketing portfolio. VeraSun's annual production capacity is greater than 1 billion gallons. VeraSun said it expects to start up five more facilities in 2008, which would increase its overall production capacity to 1.64 billion gallons.

Provista still has its fair share of the marketing pie, with more than 500 MMgy under contract, according to CHS Director of Corporate Communications Lani Jordan. She wouldn't divulge which plants are using Provista.

Provista continues to operate under its present name and leadership, but it's already making some changes. In late April, Provista announced it had signed a letter of intent to partner with Trans Load Ltd. Inc. and Blendstar LLC to construct and operate an ethanol distribution center in Birmingham, Ala. Provista will be the exclusive supplier of renewable fuel products to the terminal, which is expected to be operational by July. "This project is the latest evidence of our strong commitment to strategically invest in infrastructure that helps to ensure the long-term success of the renewable fuels industry," said John Litterio, director of renewable fuels wholesale marketing for Provista. "Provista's vision is to continue to develop partnering relationships and seek opportunities to work together in other markets. It is these types of collaborative efforts that we believe will differentiate biofuels marketers in the future."

In addition to ethanol marketing, CHS also does wholesale and biodiesel marketing, spot sales, logistics, risk management, and related storage and railcar transportation. For nearly 30 years, CHS has been a logistical facilitator for farmers and other small-scale ethanol producers looking to blend their product into gasoline. Last year, CHS acquired Minneapolis-based distillers grains marketer Commodity Specialists Co. CHS is now positioned as a commodity service company focused on servicing the renewable fuels industry—both domestically and internationally.

Though CHS will no longer market U.S. BioEnergy's fuel, it will likely continue to be involved with its former partner. Prior to U.S. BioEnergy and VeraSun's merger agreement, CHS "owned approximately 20 percent of U.S. BioEnergy Corp., with a carrying value of its investment of $145.6 million," according to an April 1 filing from CHS with the U.S. Securities and Exchange Commission. The SEC filing also indicated that "post merger, CHS Inc. owns approximately 8 percent of the combined entity (VeraSun and U.S. BioEnergy)."