Bankrupt Ethanol Plants for Sale
Shopping Has Begun for Bargain Priced Ethanol Plants by Oil Companies. The pressure is on to get the refiners to reduce emissions so they are exploring new ways to meet these environmental standards ban. Finding bargain prices while doing so is a plus. A bankrupt ethanol plant was purchased by Sunoco this week for a deeply discounted price. Sunoco became the most recent refiner of oil to get involved in the alternative fuels industry.
This bid was made by Sunoco only a couple of weeks after Valero Energy Corp., the largest oil refiner that is independent, bought an ethanol plant in the same manner.
Daniel Flynn, a renewable fuels follower of industry for Alaron Trading based in Chicago, says with the green energy being promoted by the government that this will become a way of doing things. He says many ethanol plants are barely making it so the time is right for big companies to make their move.
VeraSun Energy, Corp. who went bankrupt, sold seven ethanol plants located in the Midwest to Valero in April. They were the second-largest ethanol producer in the nation. They paid $477 million for the seven plants. Sunoco paid $8.5 million for the Northeast Biofuels plant worth $200 million in upstate New York.
Marathon Oil Corp. has obtained interests on a large scale in Ohio and Illinois based ethanol plants. Acquired over the last couple of years, the plants have over a million gallon capacity annually.
Sunoco, based in Philadelphia has plans to spend about $20 million to revitalize the plant and raise the production to its full capacity of 100 million gallons per year. They plan for this to take effect by the early part of next year.
Sunoco is responsible for blending approximately 460 gallons of ethanol and gasoline every year. The plant in Fulton will be the supplier of almost 25% of the ethanol needed by Sunoco to meet the standards of renewable fuels, said Thomas Golembeski, spokesman for Sunoco.
The plant is located near the main operations of Sunoco in the Northeast. This is where the main concentration of the 4,700 gas stations are located but the motivation was the U.S. energy policy shift. Mr. Golembeski said this was being viewed as the beginning of possible growth for Sunoco.
This financial crisis has delivered a big blow to ethanol. The prices of ethanol have plummeted and the swings in future markets of corn have taken swings that have stunned producers. Credit is not an option.
A conference held in Colorado this week concerning biofuels included workshops for businesses in trouble.
The Renewable Fuels Association, an industry group, based in Washington, D.C. estimates there are approximately 200 plants that produce ethanol in the U.S. About 175 of these are responsible for producing 10.5 billion gallons a year, spokesman Matt Hartwig reports.
He also says there are about 24 plants that have a 2 billion gallon capacity combined per year that are not producing. About 12 are in bankruptcy.
The oil refiners with larger revenues will step in here.
Hartwig says their entry is just part of the natural evolution of industry. The ones we are familiar with such as the farmer-owned type will continue to be seen but the industry has enough diversification to handle different ownership structure and business models.
The demand will increase for the fuel in spite of the growing problems of the ethanol industry. Standards set by the U.S. Environmental Protection Agency predict an ethanol production jump from 9 billion that was produced last year to 36 billion in 2022.
Using those standards 21 billion gallons will be from sources of biofuel such as sugar cane or willows and 15 billion gallons will be based on corn.
Sander Cohan, an Energy Security Analysis Inc. analyst of alternative fuels for motors in Boston, says this will freeze the quantity of corn based ethanol plants being built and used for the application of the federal blending standard. Existing plants such as Northeast Biofuels will be grandfathered in and they will receive a share of the current limited market and when demand for ethanol increases so will the value of the plants.
Omaha, Nebraska’s DTN spokesperson, Rick Kment proposed that the oil companies for the most part were not inclined to build ethanol plants for their own use due to the financial risk.
Kment also said he did not think the acquisition of the plants as they became available due to financial troubles was not intentional. The change in the market provided an opportunity which was not available before with the difference being they are discounted now and can be turned into a profitable plant.
Kment said there should be no surprise if some of the top oil companies in the U.S. such as Conoco Phillips, Chevron Corp. and Exxon Mobile Corp. do not decide to make this acquisition.
The 50 to 100 million gallons the plants are capable of producing is a mere pittance for the needs of these giant corporations according to Kment.
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