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VeraSun sells Fort Dodge, other plants

By Staff | Mar 23, 2009

The Verasun Energy plant, west of Fort Dodge, is shown Wednesday afternoon. A bankrupcy court in Delaware approved the sale of this plant and six other VeraSun sites, including Albert City.

SIOUX FALLS, S.D. – Valero Renewable Energy will buy seven ethanol plants from VeraSun Energy for $477 million, the largest ever biofuel buyout in terms of production capacity.

The sale was approved Wednesday in a Delaware bankruptcy court, a day after VeraSun announced that it had accepted Valero’s bid.

VeraSun, the country’s second largest ethanol producer, filed for Chapter 11 bankruptcy protection in October. The sale includes the Fort Dodge and Albert City facilities.

Valero won an auction for the assets that are tied up in court, VeraSun announced late Tuesday. Now that the bankruptcy court judge approved the sale, Valero is expected to close the deal in April.

Also involved in the bidding was agribusiness giant Archer Daniels Midland Co.

Valero become the first traditional refiner to cross over into ethanol production.

The sale involves between 350 to 420 employees, said Mike Lockrem, director of VeraSun communications. At the time of VeraSun’s bankruptcy, the Fort Dodge facility had 53 employees.

Lockrem said local plant managers were not cleared to discuss the sale with media.

The sale could give other major energy companies a benchmark price for the assets of ethanol producers now under tremendous financial strain.

Valero Energy Corp., the nation’s largest independent oil refiner, will acquire Iowa plants in Fort Dodge, Albert City, Charles City and Hartley; plus facilities in Welcome, Minn.; Albion, Neb., Aurora, S.D.; and a development site in Reynolds, Ind.

With tighter national renewable fuel standards on the way, industry analysts believed it was just a matter of time before traditional refiners like Valero stepped into ethanol production.

Valero will continue to operate the plants with existing staff, said Bill Day, director of media relations for Valero Energy Corp.

“Once the transaction has closed, we plan to sit down with the plant employees and talk about what sort of structure we’ll be implementing,” Day said.

Local officials reacted favorably to the purchase.

“Valero has a history of being heavily involved with the communities they’re in,” said John Kramer, president of the Development Corporation of Fort Dodge and Webster County.

The company is consistently rated at the top of its industry in terms of employee compensation, Kramer said.

The network of more than 1,000 Valero-owned retail fuel stations throughout North America will provide a ready-made market for ethanol, Kramer said.

The nation’s renewable fuel standard ensures demand for ethanol by calling for 11.1 billion gallons of renewable fuel to be blended into gasoline this year, with that number climbing to 36 billion gallons by 2022.

The current financial state of the ethanol industry allowed Valero to pick up VeraSun’s assets for pennies on the dollar.

Overproduction, tight credit markets and the recession have pummelled the biofuel industry and helped put Sioux Falls, S.D.-based VeraSun under bankruptcy protection.

Other ethanol companies are also feeling the pinch.

Cambridge, Mass.-based Verenium Corp., which is teaming up with oil giant BP PLC to build a $300 million cellulosic ethanol plant in Highlands County, Fla., said in a filing this week it may have to ”curtail or cease operations” if it cannot raise additional capital.

The Florida biorefinery would produce 36 million gallons a year from sugarcane and other plant waste.

And ethanol producer Aventine Renewable Energy Holdings Inc. said late Monday it may need to seek Chapter 11 bankruptcy protection if it cannot raise sufficient cash in the very near-term.

The Pekin, Ill.-based company said it does not expect to have enough cash to satisfy a $15 million interest payment due April 1 or to pay $24.4 million due to its engineering and construction contractor.

VeraSun Energy Corp. owns 16 biorefineries with the total capacity to produce 1.4 billion gallons of ethanol annually, or about 13 percent of the country’s total capacity.

Secured lenders submitted successful credit bids for the remaining VeraSun facilities.

A group of lenders led by AgStar Financial Services submitted a credit bid of $324 million for VeraSun plants that were part of its buyout of US BioEnergy Corp. They include biorefineries in Central City, Neb.; Ord, Neb.; Dyersville; Hankinson, N.D.; Janesville, Minn.; and Woodbury, Mich.

Dougherty Funding LLC submitted a credit bid of $93 million for a plant in Marion, S.D., and a group of lenders led by West LB AG successfully bid $99 million for plants in Bloomingburg, Ohio, and Linden, Ind., obtained in its purchase of Dallas-based ASAlliances Biofuels.

Valero shares rose a penny to $18.50 in premarket trading.

Valero has said previously that it would group the plants under a subsidiary, Valero Renewable Fuels, and use the VeraSun staff already in place. It also acquired a VeraSun development site.

Contact Jesse Helling or Larry Kershner at (515) 573-2141 or editor@messengernews.com

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