Last week, Renewable Energy Group entered into agreements to consolidate three commercial-scale biodiesel plants.
Western Iowa Energy, which operates a 30 MGY facility in Wall Lake, Iowa; Central Iowa Energy, LLC, which operates a 30 MGY facility Newton, Iowa; and Blackhawk Biofuels, LLC, which operates a 45 MGY facility in Danville, Ill., are involved in the transaction.
The facilities represent an additional 105 million gallons per year (MGY) of wholly-owned production capacity which would allow the combined entity to better position itself to meet anticipated demand from the petroleum industry's distillate fuel market.
Ownership of the operations of all four companies will be consolidated in a new holding company to be named Renewable Energy Group, Inc. The consolidated company will be owned by the current members of the three acquired companies and current REG investors, including Bunge North America, ED&F Man, Natural Gas Partners, NGP Energy Technology Partners, US Renewables Group (USRG) and West Central Cooperative. The transaction is subject to approvals by the shareholders of all four companies and to other conditions, including customary regulatory approvals.
REG's chairman and chief executive officer Jeff Stroburg cites demand by major petroleum distributors and oil refiners as a key factor in the decision to move forward with plant consolidation.
"As the Renewable Fuels Standard (RFS) takes effect and our nation moves toward energy reform, the distillate market is demanding technical expertise, dependable supply, more efficient distribution and creative pricing options from major biodiesel partners," Stroburg adds. Under the 2007 Energy Independence and Security Act, the RFS calls for 500 million gallons of domestic biodiesel consumption ramping up to 1 billion biodiesel gallons in 2012.
"Consolidating these three multiple-feedstock facilities under the ownership of Renewable Energy Group will offer technology advantages as these sites utilize a variety of raw materials like soybean oil, fats, corn oil, canola oil and recycled restaurant grease to produce large volumes of high quality biodiesel which are then marketed through our national infrastructure system," explains Daniel Oh, REG's precident and COO.