Renewable Energy Group: Biofuels Digest’s 2014 5-Minute Guide

March 20, 2014 |

Renewable Energy Group is a leading North American biodiesel producer with a nationwide distribution and logistics system. Utilizing an integrated value chain model, Renewable Energy Group is focused on converting natural fats, oils and greases into advanced biofuels and on converting diverse feedstocks into renewable chemicals. With 257 million gallons of owned/operated annual nameplate production capacity at biorefineries across the country, REG is a proven biodiesel partner in the distillate marketplace.

For more than a decade, REG has been a reliable supplier of biodiesel which meets or exceeds ASTM quality specifications. REG sells REG-9000 biodiesel to distributors so Americans can have cleaner burning fuels that help diversify the energy complex and increase energy security. REG-9000 branded biodiesel is distributed in most states in the U.S.

Rankings

50 Hottest Companies in Bioenergy: #21, 2013/14

The Situation

REG is on a roll. Most recently, the company announced (for FY2013) a 37% increase in gallons of biodiesel sold and increased revenue by 48%. REG sold 72.9 million gallons of biodiesel, an increase of 89.9% compared to Q4 of 2012; the growth in production was accounted for with the restart of REG’s Mason City plant in October.

“I am pleased to announce strong operational and financial results for 2013. We grew significantly across key metrics and finished the year a much stronger company,” said Daniel J. Oh, President and Chief Executive Officer.

Major Investors
West Central, DNB Asset Management, Norges Bank, and Oppenheimer Funds

Type of Technology(ies)
Integrated biorefinery process technology

Feedstocks:
• Commercialized: Animal fats (pork, beef, poultry), Inedible corn oil, Used cooking oil, Vegetable oils (soybean, canola)
•Development/Research State – Algae, Camelina, Jatropha

Fuel Type:
Biodiesel

Co-products
• Glycerin (three grades)
• Free fatty acid
• Soapstock
• Oleolipids

Top Past Milestones

Completed 2012 IPO.

1. Consolidated leading position in biodiesel industry.
a. Central Iowa Energy, LLC (February 2010)
b. Blackhawk Biofuels, LLC (February 2010)
c. Nova Biosource Fuels 60 MGY biodiesel facility (April 2010) SEC 8‐K filing
d. Tellurian Biodiesel, Inc. (July 2010)
e. American BDF (a joint venture of Golden State Foods, Restaurant Technologies
Inc. and Tellurian Biodiesel) (July 2010)
f. ARES Corporation’s Clovis New Mexico 15 MGY biodiesel facility
(Sept. 2010), which included an $8mm strategic investment by ARES

2. Awarded multi‐month contract for B100 with Hawaiian Electric Power Cooperative to fuel electric power generation

3. Published “Feedstock and Biodiesel Characteristics Report” available for industry use and download outlining the conversion of more than 30 commercial and novel feedstocks into ASTM specification biodiesel. Approx. 5,000 downloads to date.

In February 2014 REG broke ground on a $13.2 million upgrade to its Newton plant. The expansion will add distillation capabilities to the 30 million gallon nameplate facility, which was built in 2006. The plant, which has been online since 2007, currently processes high and low free fatty acid feedstocks.

In January, REG announced it has acquired LS9 for a purchase price of up to $61.5 million, consisting of up front and earnout payments, in stock and cash. Most of the LS9 team, including the entire R&D leadership group, will join the newly named REG Life Sciences, LLC, which will operate out of LS9’s headquarters in South San Francisco, CA.

Under the terms of the agreement between REG and LS9, REG paid $15.3 million in cash and issued 2.2 million shares of REG common stock (valued at approximately $24.7 million based on a trading average for REG stock) at closing. In addition, REG may pay up to $21.5 million in cash and/or shares of REG common stock consideration for achievement of certain milestones over the next five years related to the development and commercialization of products from LS9’s technology.

In December, REG announced that it would acquire substantially all of the assets of Syntroleum Corporation, and assume substantially all of the material liabilities of Syntroleum, for 3,796,000 shares of REG common stock worth $40.08 million at today’s market close.

Syntroleum has pioneered Fischer-Tropsch gas-to-liquids and renewable diesel fuel technologies, has 101 patents issued or pending, and owns a 50% interest in Dynamic Fuels, LLC, a 75-million gallon renewable diesel production facility in Geismar, Louisiana.

Back in November, REG opened the latest in a series of major enhancements to its biodiesel operations Friday with a ribbon cutting at the new barge loading facility at the company’s Seneca, Illinois biorefinery.

State and local officials and business leaders joined REG leadership to mark the occasion, as well as witness the first barge shipment of 420,000 gallons of biodiesel from the multi-feedstock, 60-million gallon annual nameplate capacity plant located by the Illinois River. The barge loading facility will be supported by the addition of 2.5 million gallons of new terminal storage. REG’s total investment in these upgrades is about $4.5 million.

In August, the company completed the purchase of a 30-million gallon per year capacity biodiesel plant in Mason City, Iowa, formerly owned by Soy Energy, LLC.  “We are happy to be restoring jobs to the community and look forward to working with local businesses as we work to re-open the plant.”

Former Soy Energy, LLC unit holders approved the sale in a vote Monday, July 29. Pursuant to the purchase agreement, REG acquired the biorefinery for $11 million in cash and the issuance of a $5.6 million promissory note. Due to a post-closing adjustment, the note was reduced to $5.1 million.

Future Milestones

1. Build upon market leadership through strategic acquisitions of existing biodiesel plants
2. Complete the 60 MGY REG New Orleans facility as fully integrated biorefinery
3. Raise growth‐oriented capital
4. Expand current pilot algae to fuel/chemical to small‐scale demonstration

Business Model:
Producer and marketer of renewable fuels and chemicals

Competitive Edge(s):

• Processing technology resulting in advanced fuel quality
• Nationwide marketing distribution
• Industry collaboration and partnership
• Experienced and expert management team

Distribution, Research, Marketing or Production Partnerships or Alliances

As largest biodiesel producer and marketer in North America, with a well established reputation for quality and reliability, REG sees significant growth opportunity fueled by the implementation of RFS2. REG leads the industry in its U.S. biodiesel distribution network having sold biodiesel in every state except Alaska.

REG is able to process the widest array of commercially available feedstocks and has aggressively converted the majority of its biodiesel production assets into waste feedstock biodiesel facilities. REG has also partnered with low cost waste feedstock providers to provide large, consistent, reliable volumes of waste feedstock, which is indexed to the energy markets rather than the agricultural markets, enabling REG to more effectively manage commodity risk for itself and its customers.

Research • General Atomics DARPA Algae‐to‐Jet Fuel Project Team Member • Battlefield Clutter: Waste‐to‐Energy Program through General Atomics • Locomotive biodiesel engine performance testing in collaboration with Interstate
Railroad and Kansas University

Stage
Renewable Energy Group is the largest commercial producer of biodiesel in North America. We are also a partner/commercialization vehicle for new fuels and renewable chemicals being developed by others.

Company website

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