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VeraSun Energy to Acquire 330 Million Gallons of Ethanol Capacity; Boosts Production Capacity to One Billion Gallons

23 July 2007

Vsun
VeraSun’s growth in production capacity. Click to enlarge.

VeraSun Energy Corporation plans to acquire three corn ethanol plants with a combined annual production capacity of 330 million gallons per year (MMGY) from ASAlliances Biofuels, LLC for US$725 million.

The acquisition will increase VeraSun’s production capacity to approximately one billion gallons by the end of 2008. Currently, only two producers break the billion-gallon capacity mark in the US: Archer Daniels Midland and POET.

The three acquired facilities are each expected to operate at 110MMGY and are located in Albion, Nebraska, Bloomingburg, Ohio, and Linden, Indiana. The acquisition should become final in 30 to 45 days and is subject to customary closing conditions.

The facilities will provide VeraSun with immediate production capacity and revenue. The Linden facility will begin startup operations this month, followed by Albion in the fourth quarter and Bloomingburg by the end of first quarter 2008.

VeraSun currently has 340MMGY of production capacity through its operating facilities in Aurora, South Dakota and Fort Dodge and Charles City, Iowa. VeraSun has another 330MMGY of production presently under construction and development in Hartley, Iowa, Welcome, Minnesota, and Reynolds, Indiana. The facilities being acquired are sister facilities to VeraSun’s current fleet as they are all designed by ICM and built by Fagen, Inc.

The company is funding the acquisition through $200 million of equity, $250 million of cash and $275 million in project financing. The acquisition is expected to be accretive to earnings and free cash flow within the first 12 months without accounting for potential synergies.

Reaching one billion gallons of annual production will be a benchmark for VeraSun and represents a maturing of the renewable fuels industry. We believe scale and efficiency are important as we continue to focus on reducing production and distribution costs and increasing value for our shareholders, customers and plant communities.

—Don Endres, VeraSun Chairman and CEO

July 23, 2007 in Ethanol | Permalink | Comments (6) | TrackBack (0)

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Comments

Ethanol from corn, what a boondoggle. Here is hoping for increased biobutanol production... I am not holding my breath, though.

Once the feedstocks start to evolve from corn, wouldn't much of the existing equipment still be utilized? Yeah, there may be a few extra steps to break down cellulose first, and maybe some yeast strains change, but you still reuse much of the corn ethanol infrastructure, right? Companies don't just invest 3/4 of billion dollars into something that is only going to be viable for 5 years.....

A company mentioned here, POET Energy, says on its site it will devote 25% of an Iowa 125 million gallons per year plant (I guess that's around 30 million gallons per year) to producing cellulosic ethanol from corn cobs. So if as it says here they have a billion gallons production, that's 3% or less of volume. This seems smart to me since even if the cost of the cellulosic is significantly more than that of corn, it can be subsidized by the corn ethanol until this "prototype" process is worked out, streamlined, firing on all cylinders. I would bet smart companies in the corn ethanol business will see the value in cellulosic as incorporation of cobs and husks boosts the ROI per bushel of input. Plus this technology, once cost effective, will permit diversification away from exclusively corn inputs if, as is regularly claimed in media reports, there is a ceiling on how much corn can be used.

"even if the cost of the cellulosic is significantly more than that of corn, it can be subsidized by the corn ethanol"

Back when E3 Biofuels was building their plant, the project manager contacted me and we had a number of discussions, by phone and e-mail. That is exactly what I suggested that they do: Use corn ethanol production to subsidize cellulosic production. But, they already had a lot of capital sunk into their plant (which is supposed to be offset by lower energy inputs).

Technically speaking, anyone could do this relatively easy. If you want to claim to produce cellulosic ethanol, grind up the cob and all, throw in some cellulases, and then ferment as you normally would with corn. Your conversion of cellulose would be pretty poor, but you would be converting some to ethanol.

Cheers, RR

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