What a bargain: Valero acquires 3 ethanol plants for $272 million

By Kris Bevill | December 09, 2009
Report posted Dec. 16, 2009, at 12:37 p.m. CST

Already the third largest ethanol producer in the U.S., Valero Renewable Fuels Co. LLC, a subsidiary of oil refining giant Valero Energy Corp., has acquired three more financially troubled ethanol facilities, increasing the company's total production capacity to 1.1 billion gallons per year.

The company announced Dec. 15 that it has signed an agreement with ASA Ethanol Holdings LLC to purchase two 110 MMgy facilities which were acquired by ASA through VeraSun Energy Corp.'s bankruptcy in early 2009. Valero will pay $200 million, less than $1 per gallon of production capacity, for the facilities located in Linden, Ind., and Bloomingburg, Ohio.

In addition, Valero purchased the 110 MMgy Renew Energy LLC production plant in Jefferson, Wis., for $72 million following a bankruptcy auction held Dec. 11.

According to Valero, the three plants were acquired for roughly 41 percent of their estimated replacement cost. While still a bargain, the price paid per plant for the three facilities is significantly higher than the amount Valero paid for the seven bankrupt VeraSun plants it purchased earlier this year. Valero acquired all seven of those facilities, with a total production capacity of 760 MMgy, for $477 million. Bill Day, executive director of media relations, told EPM the relatively higher price paid for Valero's most recently acquired facilities can be attributed to improved market conditions as well as conditions surrounding the sale. The production facilities in Linden and Bloomingburg had already been purchased by ASA through VeraSun's bankruptcy process which increased their selling price. By comparison, the seven plants purchased in early 2009 were acquired directly through a bankruptcy auction.

The plants in Linden and Bloomingburg are currently idle, but the Renew Energy facility is operating at partial capacity. Valero expects to bring all three facilities back to full production within three to six months of closing the purchase transactions in early 2010, similar to the actions it took following its initial plant acquisition. The company quickly ramped up production at those sites and has been operating successfully at all of its locations. "All of the ethanol plants that we bought earlier this year are running at full capacity and are doing very well for us," Day said.

Valero made its entry into the ethanol industry less than one year ago, but has quickly taken its place as one of the Top 3 U.S. producers. Valero's total ethanol production capacity is now only 300 million gallons less than Poet LLC and 600 million gallons less than the country's largest ethanol producer, Archer Daniels Midland Co.