O2Diesel Corporation, a developer of ethanol-diesel fuel blends, has entered into a definitive purchase agreement to acquire 80% of ProEco Energy Company, Inc., a privately held company that is developing an ethanol production facility in South Dakota with planned capacity of 100 million gallons per year. O2Diesel expects the acquisition to close during the second quarter of 2007.
Completion date for the first of two 50 million gallon production trains will be twelve months following project commencement. The second 50 million gallon train is scheduled for development and completion in 2008.
The acquisition will expand O2Diesel’s strategy of developing new markets for its ethanol-diesel blended fuel in the US. O2Diesel says that the consolidated company will expand and diversify its revenues, while providing stable and competitive pricing for ethanol supply for the production of O2Diesel for centrally fueled fleets.
By controlling ethanol supply at a competitive price, O2Diesel can offer its proprietary fuel blend at a price lower than regular diesel fuel, leveraging this advantage to gain further market share.
The definitive agreement requires ProEco Energy to complete a number of steps toward completion of the ethanol plant project in order for the closing of the share exchange to occur. At the time of the closing, ProEco Energy must have entered into a definitive engineering, procurement and construction contract with a reputable firm with extensive experience in implementing and completing projects similar to the ethanol plant project and executed marketing agreements for the sale of the production of the ethanol plant.
As a condition to the closing of the ProEco share exchange, O2Diesel is obligated to secure the financing necessary to complete the construction costs to build the ethanol plant. Accordingly, O2Diesel anticipates raising between $120 to $140 million in debt and between $60 to $80 million in equity in two tranches in 2007.
O2Diesel is also developing fuel blends with ethanol and biodiesel components as well as its ethanol-diesel mainstay. (Earlier post.)