Abengoa announces agreements to sell 4 US ethanol plants

By Erin Voegele | June 14, 2016

On June 13, Abengoa Bioenergy U.S. Holding LLC, along with certain of its direct and indirect subsidiaries, announced an agreement to sell four of its first-generation ethanol plants in the U.S. for at least $350 million through a competitive process in the chapter 11 bankruptcy case currently pending before the U.S. Bankruptcy Court for the Eastern District of Missouri.

According to information released by the company, it is seeking approval for minimum stalking horse bid agreements to initiate a sales process for its two maple plants, located in Indiana and Illinois, to an affiliate of Green Plains Inc. for $200 million, its plant in Ravenna, Nebraska, to an affiliate of KAAPA Inc. for $115 million, and its plant in York, Nebraska, to an affiliate of BioUrja Inc. for $35 million. Abengoa said the agreements, which are minimum bids subject to court approval and are subject to a full competitive auction sales process that is expected to occur in July and August, will provide long-term financial stability, allow the company to maintain production at the highest standards for quality, safety and environmental responsibility, and give the plants the ability to continue their go-forward business strategy under the leadership of leading providers of alternative energy.

Documents filed by Green Plains with the U.S. Security and Exchange Commission on June 12 explain the company has entered into an asset purchase agreement with Abengoa Bioenergy of Illinois LLC and Abengoa Bioenergy of Indiana LLC to acquire ethanol plants in Madison, Illinois, and Mount Vernon, Indiana, for approximately $200 million cash, plus certain inventory, and the assumption of certain liabilities. The two plants have a combined production capacity of approximately 180 MMgy. The stalking horse bid will be subject to proposed bidding procedures and receipt of higher or otherwise better bids at the proposed auction for the facilities. If Green Plains is not the successful bidder at that auction, the filing explains that the sellers must pay a break-up fee to Green Plains equal to $2.5 million per plant plus reimbursement expenses of up to $500,000.

Court documents indicate KE Holdings LLC, an affiliate of KAAPA Ethanol Holdings LLC, and BioUrja Trading LLC also signed their respective purchase agreements on June 12. The Ethanol Producer Magazine online plant map currently lists the capacity of the Ravenna plant at 88 MMgy and the capacity of the York plant at 55 MMgy.

Spain-based Abengoa announced it was filing for preliminary creditor protection in late 2015. On Jan. 25, the company announced plans to sell its non-core assets, including its first-generation biofuels plants, as part of a new restructuring plan to avoid bankruptcy. In late February, Abengoa Bioenergy U.S. Holdings LLC and five of its U.S. bioenergy subsidiaries filed for voluntary Chapter 11 bankruptcy. That filing did not include the company’s corn ethanol plants in Mount Vernon, Indiana, and Madison, Illinois, the cellulosic ethanol plant in Hugoton, Kansas, or certain other subsidiaries of Abengoa Bioenergy.

Court documents explain that the February bankruptcy filing included Abengoa Bioenergy U.S. Holding LLC, Abengoa Bioenergy Co. LLC, Abengoa Bioenergy of Nebraska LLC, Abengoa Bioenergy Engineering and Construction LLC, Abengoa Bioenergy Trading U.S. LLC, and Abengoa Bioenergy Outsourcing LLC, which are known as the “original debtors.” On June 12, Abengoa Bioenergy Meramec Renewable LLC, Abengoa Bioenergy Funding LLC, Abengoa Bioenergy Maple LLC, Abengoa Bioenergy of Indiana LLC, Abengoa Bioenergy of Illinois LLC and Abengoa Bioenergy Operations LLC, which are known as the “maple debtors,” filed for Chapter 11 bankruptcy and moved to jointly administer their cases with the cases of the original debtors.

According to court documents, the three sales transactions announced June 13 were achieved after marketing the debtor’s ore assets for nearly 90 days. A filing with the court made on June 12 also notes that as of that date, the Ravenna and York facilities were operating at or near full capacity.

A statement released by Abengoa Bioenergy states the Maple plants' existing secured lenders have agree to provide an additional $10 million in debtor-in-possession financing in order to help facilitate the sale of the maple plants.

“After evaluating a range of options to address the competitive and macroeconomic challenges facing our business and the corresponding impact on our company’s overall financial performance, it became clear that a sale of the Company assets through the Chapter 11 process was the best, most efficient means of creating a sustainable path forward for our plants, customers and employees,” said Antonio Vallespir de Gregorio, CEO. “We believe this is a positive outcome for our business, as well as our employees, customers and suppliers, because we will be placing these assets in the hands of some of the best operators in the alternative fuel industry.”

Abengoa Bioenergy said it intends to continue normal operations in all of its plants and corporate offices throughout the sales process, ensuring its continued ability to fulfill customer orders as usual. In addition, the maple entities have filed motions with the court seeking to continue employee wages, medical benefits, and other programs without interruption and to pay suppliers on a timely basis for all goods and services delivered on or after June 11.

According to the statement issued by Abengoa Bioenergy, it expects to complete the sales process within the next three months and have the plants well positioned to more effectively compete and succeed at the conclusion of the process. The company is advised in this transaction by DLA Piper, Armstrong Teasdale, Carl Marks and Alvarez & Marsal.