Industry on the Move

Reviewing a year of restarts and acquisitions
By Holly Jessen | June 13, 2011

Mergers. Acquisitions. Increasing capacities. Start ups. Layoffs. Bankruptcies. Examine the headlines about ethanol producers from May 2010 to May 2011 and these words jump off the page.

The spring 2011 ethanol plant map, distributed with the May issue of Ethanol Producer Magazine, shows the U.S. industry has 211 ethanol plants, both producing and idled, with a combined capacity of 14.31 billion gallons yearly and an average plant size of 67 MMgy. Canada has 15 plants contributing another 480 MMgy of capacity. Compare that to the spring 2005 EPM map, which listed 92 ethanol plants with a combined capacity of only 3.85 billion gallons. The average plant size back then was just 42 MMgy.

A look back to the spring 2007 map illustrates how dramatically the climate has changed in just four years. That map listed 57 plants under construction. Today, for traditional grain-to-ethanol production facilities, acquisitions and retrofits are more common than building greenfield ethanol plants. Of the three ethanol plants listed as under construction on the spring 2011 ethanol plant map, two—Hereford Renewable Energy LLC in Texas and the Aventine Renewable Energy Inc. plant in Mount Vernon, Ind.—are now producing ethanol. In May, Aventine’s plant in Aurora, Neb., had completed construction but had yet to begin commissioning while some final technical details were ironed out, says Jennifer Borgen, Aventine’s director of communications. All three of these projects saw construction put on hold during the recession, to be completed in the past year. The Aurora plant is the last on our once lengthy list of plants under construction. Moving forward, the action will be in the arena of cellulosic ethanol development. (See the accompanying sidebar for a rundown of cellulosic ethanol plants under construction or likely to break ground in 2011.)

Moving Up
Out of all the North American ethanol producers, it can be easily argued that Green Plains Renewable Energy Inc. is the company that has made the most news in the past year. Indeed, the company has been quite busy since 2007, when its first green field ethanol plant came online in Shenandoah, Iowa.  In 2008 and 2009, GPRE moved steadily forward while others struggled mightily, or even went bankrupt. In that two-year period, the company completed construction at three plants and acquired two former VeraSun Corp. plants and majority interest in Blendstar, a biofuel terminal operator.

That strategy continued in late 2010 and early 2011 as the company acquired three distressed ethanol plants in Lakota, Iowa; Riga, Mich.; and Fergus Falls, Minn. The most recent purchase pushed the company into new territory. GPRE now owns and operates five acquired ethanol plants, in addition to the four plants it built from the ground up. That puts GPRE at nine ethanol plants with a total capacity of 740 MMgy. Todd Becker, president and CEO, sums up the company’s history this way. “We went from zero revenue and zero profits way back in ’07 to right around $3 billion of revenues in 2011, and in 2010 we made $50 million on the bottom line,” he tells EPM. “And that was while some of the industry was going through uncertainty and turbulent times.”

It isn’t just through acquisitions that the company is increasing its capacity numbers. The company regularly provides capacity updates to EPM, which include increases of 3 MMgy to 10 MMgy at most of its plants in the past year and more than once in 2010 at several locations. In fact, debottlenecking in newly acquired ethanol plants is an important part of the company’s strategy. “We took the low-hanging fruit out of the equation, that’s what we went after first,” Becker tells EPM. “We don’t think we’re done but it’s not going to be the leaps and bounds like we have had over the last couple years.”

Besides increasing capacities, GPRE announced last summer that it would install corn oil extraction at all its plants. The eighth installation was due to be completed in June and the ninth and final corn oil installation is scheduled to be complete in the third quarter of 2011. That project will add an estimated $25 to $30 million in operating income to GPRE, based on prices in May, Becker says.

The company’s activities have resulted in some impressive capacity numbers. GPRE first broke onto the top producers list on the fall 2009 EPM plant map, at No. 5 with a total capacity of 345 MMgy. By the spring of 2010 that number had increased to 480 MMgy and put the company in the No. 4 spot, a place it occupies to this day.

Its current total capacity of 740 MMgy positions the company behind Valero Renewable Fuels, which has a capacity of 1,110 MMgy. Asked if the company hoped it could take over the No. 3 spot someday, Becker made it clear GPRE isn’t too concerned about that. “We don’t really worry about numbers,” he says. “We like to buy good assets, good location, good technology. We don’t get too concerned about whether we are third or fourth—we just want to make sure we are profitable and successful. If that means that we buy more plants and get ahead of somebody, that’s fine. If it means we continue to have what we consider one of the best platforms in the industry and move behind somebody, we’re OK with that.”

Still, the company isn’t shy about its intent to grow the business. “We are actively looking across the whole platform,” Becker says, “not just in the ethanol segment but also in our agribusiness segment and our distribution segment. We’re looking to grow all of those segments.” Its marketing and distribution segment handles more than a billion gallons of ethanol yearly. On the agribusiness side, GPRE operates grain storage facilities as well as agronomy and petroleum businesses in Iowa, Minnesota and Tennessee. Earning revenue through those other businesses has been a key part of making GPRE a successful, well-balanced company, he adds. “Instead of just being a single stream of revenue and income, based on a single industry, we are growing a multi-facetted, conglomerated company. We use that platform to outperform in more cyclical downturns. That formula has been the right formula.”

Movers and Shakers
AE Biofuels Inc. spent the past year working to restart an idled 55 MMgy ethanol plant in Keyes, Calif., and in mid-May announced it had reached that goal. AE Advanced Fuels Keyes Inc. is operating the plant under a lease with Cilion Inc., the company that started up the plant in November 2008. AE Keyes spent $8 million to retrofit and restart the plant. The company is also working to build a 1 MMgy pilot plant for its cellulosic conversion technology at the same location. “We’re very pleased that the AE Keyes plant is now fully operational and delivering product to our California biofuels and animal feed customers,” says Eric McAfee, chairman and CEO of AE Biofuels Inc. 

In Hereford, Texas, the 105 MMgy ethanol plant purchased by Murphy Oil USA is finally producing ethanol. The former Panda Hereford Ethanol LP plant was 90 percent completed before construction was halted when that company filed for bankruptcy in 2009. Hereford Renewable Energy LLC started up in March, on schedule and on budget, Tom McKinlay, executive vice president of worldwide downstream operations, said in a May 10 shareholder presentation. The company purchased the plant for $40 million and spent another $25 million to upgrade it to equal the company’s other ethanol plant in Hankinson, N.D., McKinlay said. Every single area of the plant was improved—grain handling, mash and liquefaction, fermentation and distillation, evaporation, centrifuges and wet cake. The destination plant has the advantage of being close to the markets for ethanol and wet distillers grains (WDGs). Ethanol is railed to California and the Gulf Coast, while WDGs have found a ready market with the 3.5 million head of cattle in feedlots around the ethanol plant. The disadvantage, of course, is corn supplies are railed in. On the other hand, with 4.8 million bushels of corn storage at the plant the company may be able to develop trading opportunities with the corn it brings in from the Midwest.

Another idled plant currently in the process of being restarted is the former Cascade Grain Products plant in Clatskanie, Ore. The 108 MMgy ethanol plant operated for about six months in 2008 before shutting down. It is now owned and being restarted by JH Kelly, one of the contractors who built the plant, and a creditor when the company entered bankruptcy. Renamed Columbia Pacific Bio-Refinery, the ethanol plant is currently undergoing a retrofit with the hope of restarting the Delta-T designed plant this fall, says Mark Fisler, partner and managing director of Ocean Park Advisors, the company retained to develop strategic alternatives for the facility. One important step in the process of restarting the plant is hiring a general manager. The company recently brought on Dan Luckett, who worked previously for Delta-T, now Applied Process Technology International LLC, and also served as a project engineer at a Michigan ethanol plant, Fisler says.

Marquis Energy LLC is a nother company with big plans. Just before the end of 2010 the company acquired a 50 MMgy ethanol plant in Wisconsin. The former Castle Rock Renewable Fuels plant, now renamed Marquis Energy–Wisconsin LLC, is the company’s second ethanol plant, joining the 140 MMgy Marquis Energy plant in Hennepin, Ill. But that plant won’t remain that size much longer. This spring the company announced it would begin construction in the fall to double the capacity to 280 MMgy, bringing the production facility in line with Archer Daniels Midland Co.’s monster ethanol plants. The company has had expansion in mind since construction began on the plant, says Mark Marquis, president of Marquis Energy. It is well situated to produce large amounts of ethanol, with sufficient local corn supplies. The plant is located near the Illinois River where the company operates a barge terminal, plus it has rail access with the Norfolk Southern Railroad. Marquis complimented the plant’s staff for its work to increase the capacity in the existing plant, even before the full-scale expansion begins.  “Between the production team, and the logistic advantages here, it’s really a unique site that justifies the size of plant,” he says.

Author: Holly Jessen
Associate Editor, Ethanol Producer Magazine
(701) 738-4946


Cellulosic Ethanol Projects

The following commercial-scale cellulosic ethanol projects have begun construction or expect to break ground in 2011:

•  Abengoa Bioenergy Biomass of Kansas, Hugoton, Kan., 25 MMgy, corn stover/wheat straw Groundbreaking Summer 2011

•  BlueFire Renewables, Fulton LLC, Fulton, Miss., 19 MMgy, wood waste
Site work underway

•  Dupont Danisco Cellulosic Ethanol LLC, Iowa, 25 MMgy, corn stover
Groundbreaking Summer 2011

•  Enerkem Alberta Biofuels LP, Edmonton, AB, 36 MMly, MSW
Under construction, in production in 2012

•  Enerkem Mississippi Biofuels LLC, Pontotoc, Miss., 10 MMgy, MSW
Groundbreaking 2011

•  Frontier Renewable
    Resources LLC, Kinross, Mich., 40 MMgy, wood biomass
Groundbreaking Summer 2011

•  Fulcrum BioEnergy Inc., McCarran, Nev., 10.5 MMgy, MSW
Groundbreaking Summer 2011

•  Ineos New Planet BioEnergy LLC, Vero Beach, Fla., 8 MMgy, vegetative waste, MSW
Under construction

•  Poet LLC Project Liberty, Emmetsburg, Iowa, 25 MMgy, corn residue
Groundbreaking fall 2011

—Kris Bevill


More Landmarks
Following is a list of other notable transactions in the ethanol industry during the past year:

• Poet LLC purchased a 90 MMgy ethanol plant in Cloverdale, Ind., and celebrated its reopening in March.

• Pacific Ethanol Inc. restarted its 60 MMgy plant in Stockton, Calif., in December 2010.

• The Scoular Company acquired Gateway Plant LLC in February, planning to extensively renovate the 55 MMgy ethanol in Pratt, Kan., and get it fully operational by fourth quarter 2011.

• Kawartha Ethanol Inc. completed its first ethanol plant in Havelock, Ontario. The 80 MMly (21 MMgy) ethanol plant was fully operational in January.

• In April, Suncor Energy St. Clair, an ethanol plant in Sarnia, Ontario, announced it had completed an expansion from 200 MMly to 400 MMly.

• After nearly two years of sitting idle, the 30 MMgy Abengoa Bioenergy Corp. plant in Portales, N.M., restarted in early 2011.

• Cargill Inc. announced in March that it was purchasing the completed, but never fully operational, Tate & Lyle corn wet mill ethanol plant in Fort Dodge, Iowa, with plans to create a biorefinery campus to produce ethanol and other biobased products, similar to its Blair, Neb., campus.

• Flint Hills Resources Renewables LLC acquired plants in Shell Rock and Menlo, Iowa, in September 2010 and plants in Iowa Falls and Fairbanks, Iowa, in February. All four plants were previously owned by Hawkeye Renewables LLC, which filed for Chapter 11 bankruptcy in December 2009.

• AltEn LLC is working to restart the former E3 Biofuels plant in Mead, Neb., a closed-loop ethanol plant colocated with a feedlot and anaerobic digesters.

• The 85 MMgy ethanol plant in Fulton, N.Y., began producing again in July after being purchased at bankruptcy auction by oil refiner Sunoco Inc.

• ADM held a ribbon-cutting ceremony in July 2010 to commemorate startup of its 300 MMgy dry mill ethanol plant in Columbus, Neb.

• Tharaldson Ethanol Inc. in Casselton, N.D., increased its capacity from 120 MMgy to 150 MMgy in early 2011.

• Guardian Energy Holdings LLC acquired a majority share in a 54 MMgy ethanol plant in Lima, Ohio. A retrofit is under way with the facility expected to be operational by the second quarter of 2011.

• DENCO II, a 34 MMgy idled Morris, Minn., ethanol plant was restarted in October.

• Renova Energy Idaho LLC, a 20 MMgy Heyburn, Idaho, ethanol plant was sold off, piece by piece at auction. Natural Chem Holdings LLC, purchased the on-site anaerobic digester and plans to produce biogas from thick stillage or syrup from area ethanol plants.

• Clean Burn Fuels LLC, a 60 MMgy ethanol plant at Raeford, N.C., filed for bankruptcy in April. The plant is idle but the company hopes to restart this year.

• First United Ethanol LLC, a 100 MMgy plant at Camilla, Ga., filed for bankruptcy in February and is still operating.

• Levelland Hockley County Ethanol LLC filed for bankruptcy in April. The 40 MMgy Levelland, Texas, plant shut down in December.