GPRE becomes major industry player

By Kris Bevill | July 08, 2009
In May, Omaha, Neb.-based Green Plains Renewable Energy Inc. agreed to purchase two former VeraSun Energy Corp. ethanol production plants and, as a result, the relatively new ethanol producer has become the fourth largest ethanol producer in the United States. With the addition of the two facilities, the company has a total expected production capacity of 480 MMgy.

GPRE paid $123.5 million for the 100 MMgy Central City, Neb. production facility and the 50 MMgy Orb, Neb. production facility. The plants were purchased from a lender group led by AgStar Financial Services, which had previously taken control of the facilities through a VeraSun bankruptcy auction. GPRE committed $10 million towards its purchase; the remainder is being financed by the lending group. Jim Stark, vice president of investor relations at GPRE, said ethanol production at the facilities was expected to commence by the end of July and both facilities should be running at full capacity soon after start-up.

According to GPRE President and CEO Todd Becker, the company's long-term plan includes selected expansions. "The acquisition of the plants in Central City and Ord lowers our cost of production and improves our ability to compete in the industry," he said. "This purchase is consistent with our strategy to selectively acquire assets at reasonable valuations that provide long-term benefits to our shareholders."

AgStar President and CEO Paul DeBriyn said GPRE is a committed member of the ethanol industry and the company has demonstrated expertise in successfully operating ethanol plants. "We're pleased to sell these plants to Green Plains Renewable Energy and we are excited to expand our relationship with them," he said.

GPRE also operates four other production facilities - a 50 MMgy facility in Shenandoah, Iowa; a 50 MMgy facility in Superior, Iowa; a 100 MMgy facility in Bluffton, Ind., and a 100 MMgy facility in Obion, Tenn. Stark said all of the plants are operating above nameplate capacity.

The acquisition of the two Nebraska facilities is another major move made by the young company in a short amount of time. The company was formed in 2004 and began operations at the Shenandoah plant in August 2007. The remaining three facilities began production in 2008. GPRE was one of few ethanol producers to report solid financial results for the fourth quarter of 2008 and Becker owed that accomplishment largely to the company's diversified income stream, including an agribusiness segment "which exceeded our expectations," he said. The company operates a grain marketing business under the name "Green Plains Grain" and services the bulk grain, agronomy, livestock feed and petroleum markets. In addition, Green Plains Grain sells diesel, biodiesel, gasoline and propane at a retail level and employs agronomists to consult with producers and provide application services.

In addition to producing ethanol at its facilities, the company also recently became involved in a project to commercialize algae production technology at its ethanol plants for the purpose of producing biodiesel. Through a partnership with BioProcessAlgae LLC, a joint venture between GPRE shareholder Green Plains NTR plc, Clarcor Inc. and BioProcessH2O, the company secured a $2.1 million grant from the Iowa Power Fund to build an algae pilot project at its Shenandoah ethanol plant.

"Algae has the potential to become an important carbon sequestration solution, biofuel feedstock and feed product," Becker said. "If the pilot project is successful, BioProcessAlgae will move to expand the photobioreactor system to full commercial scale. The Shenandoah algae project is an opportunity to help the environment, the ethanol industry and the Iowa economy.

GPRE also markets an additional 350 MMgy of ethanol. In total, the company controls 785 MMgy of U.S.-produced ethanol.