Valero expects new ethanol unit to break even in 2009

In Texas, Valero reported results for the first quarter of 2009, and said that it expects its ethanol business, bought from the VeraSun bankruptcy, to break even in 2009. The company reported net income of $309 million for the first quarter, up 23 percent over the corresponding quarter in 2008. The company said that gasoline margins were strong despite weakening demand.

Bill Klesse, Valero’s Chairman and CEO said, “We entered the ethanol business by agreeing to buy seven ethanol plants from VeraSun. We closed on six of the plants in April, and we should close on the last plant soon. Acquiring these assets at a time of low ethanol margins enabled us to pay only 30% of replacement cost for some of the industry’s best ethanol plants. Since it is the government’s policy to include ethanol in motor fuel, this new business segment fits strategically with our business of producing clean, quality fuels for consumers. With this acquisition, we have established a sizable, strategic position within the ethanol business. Looking forward, we expect ethanol demand to grow under the federal mandate and catch up with production capacity by 2010.”

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