Green Plains announces agreement to sell Texas ethanol plant

By Erin Voegele | December 15, 2020

Green Plains Inc. announced on Dec. 15 that its subsidiary, Green Plains Hereford LLC, has entered into an asset purchase agreement to sell its 100 MMgy ethanol plant in Hereford, Texas, to Hereford Ethanol Partners L.P. for $39 million, plus working capital, and an earnout provision of up to $75 million related to certain value enhancement opportunities, including future earnings from Low Carbon Fuel Standard credits.

The Hereford plant has changed ownership several times since it was constructed more than a decade ago. Panda Ethanol Inc. began construction on the facility in 2006. Panda Ethanol’s Hereford Biofuels subsidiary filed for bankruptcy in early 2009, and the then unfinished plant was acquired by a French financial services company a few months later.  A subsidiary of Murphy Oil Corp. purchased the shuttered plant in the fall of 2010 and signed a contract with ICM Inc. later that year to retrofit the facility. Green Plains announced plans to acquire the facility from Murphy in late 2015. Now, five years later the facility is once again being sold. The sale, however, was not unexpected. Green Plains has previously said it would consider selling some of its assets as part of its optimization plan.

“The sale of the Hereford ethanol facility allows us to reallocate capital to support the accelerated buildout of our Ultra-High Protein technology and continue our total transformation to an ag-tech focused company,” said Todd Becker, president and CEO. “We determined that this location was not optimal for our growing focus on sustainable proteins and novel ingredients and were pleased to find a partner interested in pursuing several identified carbon capture opportunities. In addition, this location can be further optimized to lower carbon intensity scores which will benefit our shareholders in the future, if and when realized.”

In consideration for the assets, Green Plains said its Hereford subsidiary has entered into an earnout agreement with Hereford Ethanol Partners L.P. to accelerate the consummation of known carbon sequestration opportunities. Green Plains will receive a share of any future earnings related to carbon capture and sequestration and other considerations estimated to be $7.5 million annually for a period of 10 years as determined by the earnout agreement. The sharing agreement will begin with the first full quarter following completion of upgrades to the biorefinery that are expected to take approximately 24 months from close.

Green Plains Hereford LLC has also entered into an asset purchase agreement with Green Plains Partners LP and affiliates to acquire the storage and transportation assets and the assignment of railcar leases associated with the Hereford ethanol plant for $10 million. Both transactions are expected to close within the next 30 days. Ocean Park has acted as the exclusive financial advisor to Green Plains in connection with the transaction.

Information released by Green Plains indicates that Hereford Ethanol Partners L.P. is a newly formed, wholly owned subsidiary of a privately held Texas investment group. The facility is expected to resume production in the second quarter of 2021.

A previous verson of this article incorrectly identified Oak Park as the exclusive financial advisor to Green Plains. The article has been corrected to reflect that Ocean Park acted as the exclusive financial advsior to Green Plains in connection to the above transactions.