Green Plains decommissions Virginia plant, closes on Valero sale

By Erin Voegele | November 15, 2018

On Nov. 15, Green Plains Inc. announced it is permanently closing its 60 MMgy ethanol plant in Hopewell, Virginia. The company also announced it has closed on the previously announced sale of three ethanol plants to Valero Renewable Fuels Company LLC.

Both announcements seem related to the portfolio optimization program Green Plains announced earlier this year, which the company said aims to drive improved margins and returns for its shareholders. “This effort will include divestments of assets that do not support the long-term objectives of the company,” said Green Plains in press release published in May. “This will result in a more efficient asset base focused on enhanced protein production and export supply chain maximization.”

In addition to the Valero plant sales, Green Plains has also announced an agreement to sell its Fleischmann’s Vinegar Co. to the Kerry Group. That sale is still pending. During a recent third quarter investor call, Todd Becker, president and CEO of Green Plains, said the company is continuing “to work with interested parties on some additional divestures,” but noted the company doesn’t want to comment any further on these activities at this time because they are in different stages of the process. 

Regarding the Valero transaction, Green Plains said it has sold its plants located in Bluffton, Indiana; Lakota, Iowa; and Riga, Michigan, to Valero for $319 million in cash, including net working capital and other adjustments. Together, the three plants represent approximately 20 percent of Green Plains’ reported ethanol production capacity.

In conjunction with the Valero transaction, Green Plains Partners LP has completed the sale of the storage assets and assignment of the rail transportation assets associated with the three ethanol plants to Green Plains Inc.

With regard to the Hopewell plant, Green Plains has announced a significant portion of the 60 MMgy facility will be dismantled during the decommissioning process, with most of the equipment being transferred to other Green Plains facilities. The company said it is also currently determining the best uses for any remaining equipment and the land.

The closure will result in a workforce reduction of approximately 31 employees, who will be provided severance and healthcare support. Green Plains said a handful of staff will remain to oversee the decommissioning of the plant, which is expected to take 12 to 18 months.

The Hopewell plant has a troubled history. Green Plains acquired the facility from Future Fuels LLP in October 2015. At that time, Becker said “we are confident in our ability improve the plant’s production economics by applying our operational and commercial expertise.” The company did make several upgrades to the facility since its purchase. 

Development of the Hopewell facility was first announced in 2008 when Osage BioEnergy announced plans to break ground on the plant, then known as Appomattox Bio Energy. The facility was mechanically complete in August 2010, but experienced an explosion during startup and hadn’t achieved full production more than a year later. The plant was put up for sale in May 2011, and the city of Hopewell moved forward with a court case against Osage Bio Energy in November of that year over the failure of the facility to meet a deadline to post a $5 million letter of credit. 

Future Fuels, an affiliate of Vireol Bio-Energy LLC purchased the Hopewell plant in January 2013. The company originally planned to dismantle and ship the facility to the U.K., but decided to take advantage of the more mature U.S. market for ethanol.  The company completed what it described as “significant renovations” on the plant and began operations in May 2014. Green Plains acquired the facility from Future Fuels in October 2015.

Jim Stark, vice president of investor and media relations at Green Plains, explains that the company knew the value of the equipment at the Hopewell plant was worth more than it paid for it three years ago. “We did make investments in the plant, did improve its efficiency, but the continued low margin environment has not been helpful, and we decided to discontinue the operation of this destination plant,” he said. “We will use the equipment from Hopewell to improve operations at a number of the other plants that Green Plains owns and operates.”

Following the sale of the three Valero plants today, Stark said Green Plains now has 13 ethanol plants with a combined 1.1 billion gallons of capacity.