US REG acquires three biodiesel plants

12 May 2009 18:32  [Source: ICIS news]

HOUSTON (ICIS news)--Renewalbe Energy Group (REG) has agreed to buy three biodiesel plants with a combined capacity by 105m gal/year (397 litres/year), the largest US biodiesel supplier said on Tuesday.

The move would bring the Ames, Iowa-based company’s total owned capacity to 152m gal/year, showing confidence in a market that has seen massive sales drops in the past six months.

REG would buy Western Iowa Energy and Central Iowa Energy, both in Iowa, and Blackhawk Biofuels in Illinois in an all-stock deal, company CEO Jeff Stroburg said. All three of the refineries use multiple feedstocks.

Stroburg declined to say how much REG paid for the refineries, only saying they were valued at $175m (€130m) in original investments. The deal could be completed by September, depending on government approval, he said.

With the latest federal renewable fuel standard (RFS) calling for 1bn gal of biodiesel by 2012, petroleum blenders will want to work with larger biofuels players instead of scattered, smaller suppliers, Stroburg said.

“As the RFS takes effect and our nation moves toward energy reform, the distillate market is demanding technical expertise, dependable supply and more efficient distribution,” he said.

This latest acquisition continues the consolidation trend in the US biofuels industry, which has been beset by closings and bankruptcies in recent months.

As biodiesel producers have difficulty selling in a domestic market accustomed to cheap petroleum diesel and an export market marked by tariffs, most are either idling their plants or closing shop. The National Biodiesel Board (NBB) estimated that two-thirds of the country’s nearly 180 biodiesel refineries were idle in March.

“Given current industry consolidation and production economics, it is difficult for stand-alone facilities like our plant to succeed on thier own,” Central Iowa Energy’s Board chairman Jim Johnston said of REG’s purchase of his company.

REG also distributes, markets and manages 150m/gal year for other companies. It was in the process of building 60m gal/year refineries in New Orleans and Emporia, Kansas, before putting the projects on hold amid the downturn in credit markets.

($1 = €0.74 )

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By: Ben Lefebvre
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