Valero boosts ethanol volumes following purchase

It is the perfect Christmas present. While some people ask for ties, socks or a fine whisky –
on the alcohol theme – one company has bought three fuel ethanol plants.

Following its eager snap-up of seven VeraSun Energy plants earlier this year, a subsidiary of refining and fuel marketing company Valero Energy has signed agreements to buy the three facilities in the US for $272 million (€186.5 million).

As a result of the purchases, the largest refining and fuel marketing company in the US said its ethanol production capacity will grow to 1.1 billion gallons a year, highlighting it as one of the nation's largest producers of biofuel made from corn.

‘The ethanol plants we bought earlier this year have been very successful for Valero, and we expect these newly purchased plants to build on that success,’ Valero chairman and CEO Bill Klesse comments.

The acquisitions include plants located in Indiana and Ohio, each having an annual production capacity of 110 million gallons.

Valero agreed to pay $200 million to buy the plants from ASA Ethanol Holdings, which had acquired the assets through the VeraSun bankruptcy auction.

The currently dormant plant will be revived within three to six months following the closing of the transaction, which is expected in early 2010. Both plants will also produce dry distillers grains, a co-product of the ethanol production process that is sold as a livestock feed.

Valero also received approval from a bankruptcy court to acquire Renew Energy's 110-million-gallon-a-year ethanol facility near Jefferson, Wisconsin, for $72 million following an auction held 11 December.

Valero said it will buy the plants for roughly 41% of their estimated replacement cost. Valero Renewables, the subsidiary that is acquiring the plants, already owns sites in four states.

This year, Renewable Fuel Standards mandated that 10.5 billion gallons be blended amid depressed demand for refined products, thus cutting into refining margins. This will be raised to 12 billion gallons next year.

In related news, Australia’s Mission NewEnergy has signed a five-year contract with Valero Energy to supply up to 60 million gallons a year of jatropha and palm oil biodiesel to the refining giant, with Valero holding options to double the production requirement to 120 Mgy, and to invest up to $33.5 million in Mission NewEnergy, acquiring a 25% in the company in the process.