Although a sluggish debt market has hampered progress on a planned biodiesel plant here, Renewable Energy Group continues to prepare for the time when the plant is completed and goes into service.
Daniel Oh, REG’s chief operating officer, said on Wednesday that the company has acquired a liquid storage terminal in California and a biodiesel plant under construction in Houston, as well as significant ownership in a 45-million-gallon facility in Illinois owned by Blackhawk Biofuel. REG is finishing the plant in Houston, which was near completion at the time of purchase, he said.
“These are all stock transactions,” Oh said. “We didn’t use cash, we used stock to acquire these assets.”
Cash financing has been a sticking point in continuing the plant project here.
REG announced in March that it had put construction on hold until it could find funding for the project. REG Chairman and Chief Executive Officer Jeff Stroburg said then that tightening of credit markets, difficulty in finding funding for biofuels projects, and rising commodities prices all contributed to suspending construction.
The company already has invested $18 million in the plant, Stroburg said in the March news release.
“Emporia requires cash that we still have to get that financing for, and that’s not available to any biodiesel or biofuel in the market today because of rising commodity prices,” Oh said on Wednesday. “Until that stabilizes, it’s going to be challenging. We’re continuing to work on that all of the time.”
Acquisitions through the recent stock transactions “are built around a network that includes Emporia. It’s a very important location and we intend to move ahead with it,” Oh said.
“They’re complementary and additive to what we’re doing in Emporia. This facility in Houston has the ability to be a terminal as well as a plant, and is a new outlet through which we will be able to sell and move what is produced in Emporia.”
Oh described Emporia as a great location to serve the California market once reasonable financing is again available in the biodiesel industry.
Biodiesel, unlike ethanol, is made primarily from oils and fats that come from agriculture or related chemical industries, Oh said. It is a direct substitute for diesel fuel.
Soybean oil — now out of favor for humans because of high levels of trans fats when hydrogenated — is often used in production of biodiesel fuel, as is animal fat.
“Again, stuff we shouldn’t be eating is a byproduct that we can make a very good fuel out of,” Oh said. “When you worry about things like corn going in that might be used for other things, what we’re really doing is adding value back into agriculture so when we use that oil and that fat we’re paying for something that didn’t used to have much value. ...
“We’re not competing for something that you’d want to put on your table. A lot of people don’t understand that difference. We get glommed in with a lot of other things.”
He expects REG to maintain the construction site here to protect its investment, and perhaps work on rail service needs.
“We have moved some equipment from that site,” Oh said. “It has nothing to do with commitment to finish in Emporia. ... Until we get debt in place, we’re not going to do anything major.”
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Posted by pizza (anonymous) on July 17, 2008 at 11:59 p.m. (Suggest removal)
I think it would be really interesting to know how much of that $18 million came from numerous government entities. I'm guessing most of it was given to REG and that they have little or no money of their own. Notice their recent transactions were all stock deals requiring no cash money. How much of that seed money was provided by local governments? REG has to keep saying they will continue to build or some governement entity might want their money back and I'm betting REG has no money. My money says that deal will never be finished. Lenders are still loaning money to solid businesses.....REG is blaming the financial markets for their poor planning. How many of you would put $18 million into a project and have no idea how you were going to finish it? Even if all the $18 million was given to you. Something fishy here.
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