GPRE to acquire two Nebraska VeraSun plants

By Hope Deutscher | May 04, 2009
Web exclusive posted May 21, 2009, at 12:51 p.m. CST

Green Plains Renewable Energy Inc. has signed definitive purchase agreements to purchase two Nebraska ethanol plants that AgStar Financial Services' lending group recently acquired through VeraSun Energy Corp.'s bankruptcy. The $123.5 million sale of the facilities near Central City and Ord, Neb., is expected to close in June. GPRE plans to have the plants fully operational within 60 days of the sale closing.

The Central City plant adds 100 MMgy and the Ord facility will add 50 MMgy to the Omaha, Neb.-based company's total ethanol production capacity. GPRE currently operates four ethanol plants in Iowa, Indiana and Tennessee. With the addition of the Ord and Central City facilities, the company said its total ethanol production capacity will increase by 45 percent - from 330 MMgy to 480 MMgy.

The acquisition of the Central City and Ord plants will lower GPRE's production costs and improve the company's ability to compete in the industry, said Todd Becker, GPRE president and CEO. "These plants are in excellent locations. Within the 14 contiguous counties surrounding Ord and Central City, there are over 300,000 cattle on feed and approximately 300 million bushels of corn grown annually. This close proximity to large feedlot operations and vast corn supplies will reduce our energy and feedstock costs at these facilities," he said. "The Central City and Ord plants share the same process technology deployed at the majority of our plants, which should allow us to integrate them into our business with little disruption."

The company's other plants require a fair amount of money to use natural gas in drying the grains; however with the close proximately of the two Nebraska facilities, GPRE will be able to sell the grain as a wet modified distillers grains.

AgStar Financial Services will continue to lead a group of lenders in financing the two plants. GPRE is acquiring from a lender group all of the membership interests in two limited liability companies that own the ethanol plants. The company will invest $10 million in cash at closing to provide working capital for the facilities. The lenders have agreed to provide debt financing to fund the purchases and upon closing, the lenders will also provide a $16 million seasonal revolving loan for working capital needs of the plants.

"We're pleased to sell these plants to Green Plains Renewable Energy," said Paul DeBriyn, president and CEO of AgStar Financial Services. "Green Plains is committed to this industry and it's great to know these facilities will soon be producing ethanol. This company has demonstrated its expertise in successfully operating ethanol plants, and we are excited to expand our relationship with them."

The corn-based ethanol industry has gone through some distress, said Jim Stark, vice president of GPRE. However, it is seeing some improvements. "We see a better equilibrium in corn and ethanol right now and that's allowing us to do what we do best - managing the margin and being able to lock that in at all of our plants," Stark said. "We feel very optimistic about the industry itself. Certainly adding the assets that we're doing now, that's kind of our vote of confidence that we think that there are still some dollars that can be made."

In addition to ethanol production, GPRE also has a full service agribusiness and eight grain elevators near the company's Iowa facilities, which Stark said provides diversified revenue and income streams.

GPRE's goal is to have all the documentation and financing finalized by June 30 and to have the plant operating by the end of July. GPRE's management team will visit the idled facilities the week of May 25th to begin getting them operational again.

Closing of the transactions is subject to standard conditions, including regulatory approvals and concurrent closing on debt financing. XMS Capital Partners served as financial advisor to GPRE in the transaction. According to DeBriyn, based on nameplate capacity, plant sale prices are within the range of what AgStar Financial Services expected to receive for the facilities.

This is the third ethanol facility that the AgStar group has sold in recent weeks. Through a purchase agreement, Carbon Green BioEnergy bought a facility in Woodbury, Mich. "Ethanol has encountered continued volatility but we still view it as a very viable industry," DeBriyn said. "These recent plant sales just reaffirm that ethanol is open for business. We're excited to hear these plants will soon be running - reinvigorating the industry as a whole. In addition, these sales will create job opportunities in rural areas and allow the plants to start purchasing corn and producing ethanol again."

AgStar's lending group says it continues ongoing discussions with qualified buyers for three other ethanol plants it acquired in April.