ABE considers selling its 2 South Dakota ethanol plants

By Erin Voegele | March 04, 2019

Advanced BioEnergy LLC recently announced it has begun exploring strategic alternatives for its business operations, including the possible sale of one or both of its South Dakota-based ethanol plants. ABE also said it plans to continue to operate the plants if no sale occurs.

The company owns two ethanol plants located in Huron and Aberdeen, South Dakota, with a combined capacity of 86 million gallons per year.

In a statement released Feb. 26, Advanced Bioenergy said after making continued capital improvements and operational changes to capitalize on the strategic advantages of its plants, ABE’s board of directors has determined it is in the best interest of company unitholders to explore strategic alternatives.

The company said it has retained Ascendant Partners Inc. to advise it in this process and help evaluate the opportunities and options available. “As part of this process, the board will explore the potential sale of one or both facilities to generate the best value for unitholders and possibly transition ownership to an operator with the capacity and resources to ensure both plants are best positioned for continued long-term success,” said ABE in a statement.  The company also noted that whether or not a sale of one or both plants is completed, it intends to continue to focus on creating value for its unitholders. “If the process does not identify one or more buyers willing to acquire the assets on acceptable values and terms, Advanced BioEnergy expects to continue to operate these plants as an independent operator and further improve their operations,” the company said.

The press release issued by ABE indicates the company has made $33.8 million in capital investments in the plants to lower costs, improve operations and expand production capacity. This includes adding corn oil extraction to both plants and beginning construction on a grain storage and receiving facility in Aberdeen. ABE said the grain storage and receiving facility will allow the plant to further leverage the low corn basis in the region by developing the site that was originally designed to accommodate doubling the Aberdeen plant’s nameplate capacity from its initial 40 MMgy. Construction on the grain storage and receiving facility began in July 2018 and is expected to be complete in July 2019.

In a Feb. 19 letter to unitholders, Richard Peterson, CEO of ABE, said fiscal year 2018 was a difficult margin year for ABE and the overall ethanol industry. He said net ethanol prices fell to levels not experienced since the early 2000s and cited oversupply as the primary negative driver impacting ethanol margins.

While ethanol production in fiscal 2018 was approximately level with fiscal 2017 levels at approximately 82.6 million gallons, Peterson said the company reported a net loss of $3.1 million in fiscal 2018 compared to a net income of $8.8 million in fiscal 2017.

Cardinal Ethanol made a similar announcement on Feb. 19 when the company issued a statement announcing it is exploring the potential sale of its 135 MMgy corn ethanol plant in Union City, Indiana. Cardinal Ethanol has also retained Ascendant Partners to assist it in exploring its strategic alternatives.