Valero And Mission NewEnergy Execute 5-year, US$3.5B Biodiesel Supply Agreement
20 December 2009
| Mission NewEnergy’s basic plan is to ship biodiesel produced in Malaysia from jatropha seeds produced in India to markets in Europe and the US. M1 and M2 are its biodiesel plants in Malaysia. Source: Mission NewEnergy. Click to enlarge. |
Australia-based Mission NewEnergy Limited, a biodiesel refiner and one of the world’s largest Jatropha plantation companies by acreage (350,000 acres in India), has entered into a binding five-year biodiesel Supply Agreement with Valero Marketing and Supply Company, a subsidiary of Valero Energy Corporation, the largest independent crude-oil refiner and marketer in North America.
The agreement further provides a subsidiary of Valero the right to purchase up to 25% of Mission at A$0.45 per common share, representing a 61% premium to the current 30-day Volume Weighted Average Price.
Under the terms of the supply agreement, Mission will supply Valero with up to 200,000 tonnes (60 million gallons) of biodiesel per year. Valero has the right to double that amount to 400,000 tonnes per year and to extend the term by an additional five years. The agreement represents gross revenue potential to Mission of more than US$3.5 billion based on prevailing market prices, maximum volume and contract life.
Over the course of the contract, Mission will supply Valero with biodiesel produced from its captive Jatropha feedstock. Subject to favorable economics, as Mission’s available stock of Jatropha matures to scale Mission will supply Valero with palm oil based biodiesel.
Mission was the first non-German biodiesel producer to be certified by AGQM, the German Biodiesel production process certification body.
Under the terms of the equity deal, Mission will issue Valero two tranches of warrants to purchase common stock. The first tranche of 81.41 million warrants will expire on 31 August 2010 and if fully exercised will provide Mission with A$36.6 million. The second tranche will be issued to allow Valero to maintain their tranche-one equity stake of 25% based on the conversion of any of the other currently outstanding Mission convertible securities.
Tranche two warrants are exercisable at a 20% discount to the 20-day volume weighted average price (VWAP) prior to the date of exercise and are capped at a maximum of 68.58 million expiring 30 September 2012.
The transactions with Valero are subject to Mission shareholders’ approval.
In order to meet its funding needs given the size and scope of the supply agreement with Valero, and to satisfy its other commercial objectives Mission is considering various financing options. The first product shipment under the Supply Agreement is expected to occur during the second quarter of calendar year 2010.
Mission NewEnergy has operations in Australia, Malaysia, India and Mauritius. Its biodiesel refineries are located at Kuantan Port in Malaysia. Currently operating a 100,000 tonne per annum biodiesel facility, Mission is building a second, 250,000 tpa (approx. 75 million gallons p.a.) plant using Axens’ second-generation heterogeneous catalyst adjacent to the 100,000 tpa plant.
Resources
Mission NewEnergy Investor Presentation Sep 2009
Who actually controls Valero? They seem to be buying every potential source of future liquid energy.
Posted by: kelly | 20 December 2009 at 06:42 AM
Valero is a public company, so it is ultmately controlled by the stock holders.
Posted by: vrd863 | 20 December 2009 at 07:35 AM
Okay it is biofuel but do we have to have it produced half the world away and then sent by tanker(petroburning)? We have plenty of farm land in the US
Posted by: kermitcroaked | 20 December 2009 at 10:01 AM
Maybe the stocks in double percentage blocks with public names like ExMo, Cheveron, BP, etc..
Posted by: kelly | 21 December 2009 at 05:22 AM
Kermit: I'm thinking India has 350,000 acres of jatropha ready to produce right now - there is nothing in the US even close. It takes something like 5 years to get a jatropha plant up and running. Plus, follow the money more: US corn growers get subsidies from the US govt --- would jatropha growers get the same subsidies? Doubtful. Labor and overhead are probably a fraction of what they are in the US per gallon biodiesel; so they are probably going to make big money sending it over here & to europe in tankers....kind of like sending raw materials to China & other Asian countries for assembly by low wage workers, then having it sent back and sold in the US at a nice profit.
Posted by: ejj | 22 December 2009 at 11:16 AM
Ultimately this is awesome news...great that Valero, which no doubt is sitting on a warchest of cash from when gas prices were sky high, is investing heavily in biofuels. They recently bought up a bunch of bankrupt ethanol refineries in the US...I'm still trying to figure out their long term strategy, but it obviously involves getting away from fossil fuels somewhat (or diversifying their supply chain). They will probably keep all their gas stations & blend biodiesel & ethanol at their refineries for sale at their gas stations. This is essentially cutting out the biofuel middle-man which means more profits.
Posted by: ejj | 22 December 2009 at 11:24 AM
"..controlled by the stock holders.."
Imagine 1 billion shares outstanding and you own 100 of them. You don't control the company and even a fund that holds 10 million shares does not. The BOARD controls the company and most do not even know who those people are.
Posted by: SJC | 22 December 2009 at 11:53 AM
SJC,
Very good point. In addition, Board members often 'interlock' in related firms and if '10 million shares' is the largest block its board members can gain control of the firm, even if their not clearly identified.
Posted by: kelly | 23 December 2009 at 04:55 AM