Renewable Energy Group, the biodiesel company that suspended construction of its Emporia plant last year, has announced a proposed agreement to consolidate with three midwestern biodiesel plants in a move the company said will make it stronger.
REG also is still committed to completing its plant in Emporia as soon as the markets improve and financing is in place.
“Emporia remains a very important project to us and one we want to complete,” said Daniel Oh, REG president and chief operating officer. “We’re limited by access to debt capital and only that. We fully intend to finish the project, and we are very disappointed that it’s not done yet because it’s part of our growth strategy.”
The proposed consolidation involves three biodiesel plants that will add 105 million gallons per year to REG’s capacity. Western Iowa Energy of Wall Lake, Iowa; Central Iowa Energy of Newton, Iowa; and Blackhawk Biofuels of Danville, Ill., are the companies involved in the proposal.
The three biofuel facilities will allow REG to position itself to meet anticipated demand from the petroleum industry’s distillate fuel market, according to a press release.
The consolidation is subject to the approval of the shareholders of all four companies and to other conditions, including customary regulatory approvals, the release stated.
“I think it’s a good thing for anybody that has anything to do with REG,” Oh said, “because the acquisition of these facilities, assuming it goes through, will grow our production base and our ability to make money.”
The acquisition of the plants will take place with transactions of private stock instead of cash, a move that Oh said requires trust on the part of all parties involved.
“People really have to be willing to believe in REG to do that, and these three companies have had a lot of time to do due diligence and check it out,” Oh said. “I think it’s a validation of REG and where we’re heading and our ability to work within the industry.”
Biodiesel is an industry with potential to thrive, especially under the 2007 Energy Independence and Security Act, which included a renewable fuel standard of 500 million gallons per year of domestic biodiesel consumption, to be increased to 1 billion gallons per year in 2012.
That will help when Emporia’s plant is finally finished. The Emporia plant will be a multiple feedstock plant that can refine fuel from different sources, including animal fat.
“There are a few things that are fundamental about Emporia,” Oh said. “One is the soybean crush Bunge has, which is a good source of raw material for crude soybean oil. And because you’re in Kansas, that’s a great livestock state. The way the government is heading with the way the rules will be, animal fat will be favored. So Emporia is a great location for us, and we’ve just been unable to complete it based on the debt capital markets. When they return, we’ll get that going.”
REG announced plans to build in Emporia in April 2007. Construction began that summer, but was put on hold in March 2008 because of tightening credit markets and rising commodity prices. REG had invested $18 million in the plant at the time it was put on hold.
Some members of the business community see the consolidation as a positive development.
“I see it as a good sign for REG,” said Kent Heermann, executive director of the Regional Development Association of East Central Kansas. “They’re not throwing in the towel and giving it up. They’re positioning themselves to be the leader, the companies are partners now with ownership responsibilities, and they’re trying to get more capacity and consistency and quality product.”
When the Emporia plant is up and running, it is expected to employ about 30 people. When that happens is a matter of when the credit markets loosen up and financing is in place.
“We remain committed to the area no matter what,” Oh said.
wanderer (anonymous) says...
Is it just me or is this starting to sound like the Ingenium project?
May 13, 2009 at 12:39 p.m. ( permalink | suggest removal )
pizza (anonymous) says...
This deal will never happen. They have no money and have frittered off all the taxpayer money they could get. It's just another one of Heerman's pipe dreams. Just drive by the area and see your tax dollars at work. Yet Heerman keeps babbling his same old tune.....when will he be replaced?
May 13, 2009 at 5:35 p.m. ( permalink | suggest removal )
Steve_Corbin (anonymous) says...
I sure hope Mr. Heermann and the RDA are in contact with Seimens, Who is opening a new wind turbin plant in Hutch that will employee 400. That company has subcontractors that may want to locate close to the new Hutch plant. Are they pursuing this?
May 14, 2009 at 6:33 a.m. ( permalink | suggest removal )