Limited Biofuels M&A Activity in 2019, Stage Set for Potentially Busy 2020

February 18, 2020 |

Ethanol M&A

In 2019, ethanol transaction volume remained historically low and valuations declined. The total capacity that changed hands was the second lowest in five years. It included only two transactions with operating plants.

The three transactions encompassed four plants with 226 MGPY of production capacity, as follows:

  • Federated Co-operatives acquired Terra Grain Fuels’ operating ethanol plant in Belle Plaine, Saskatchewan, Canada. Federated Co-operatives will continue to operate the 40 MGPY plant. Terms were not disclosed.
  • Attis Industries acquired Sunoco’s non-operating ethanol plant in Fulton, New York. Sunoco divested its only ethanol plant in the US for $20M. As part of the transaction, Sunoco entered into a 10-year offtake agreement with Attis Industries.
  • Glacial Lakes Energy acquired two operating ethanol plants in South Dakota from Advanced BioEnergy. With this $47.5M acquisition, Glacial Lakes now owns four plants in South Dakota.

US ethanol producers were plagued by a glut of product and the lowest margins since 2008.  According to Iowa State University’s Center for Agricultural and Rural Development, operating margins for US ethanol producers averaged just $0.08 per gallon in 2019. 

Thin margins forced several ethanol plants to curtail or cease production. Some of the industry’s largest players idled their capacity. Some of the more notable idled or shutdown plants included: 

  • Valero’s plants in Bluffton, Indiana and Riga, Michigan, totalling 170 MGPY.
  • POET’s 92 MGPY plant in Cloverdale, Indiana.
  • Siouxland Energy Cooperative’s 90 MGPY plant in Sioux Center, Iowa.
  • Plymouth Energy’s 50 MGPY plant in Merrill, Iowa.
  • Three Rivers Energy’s 50 MGPY plant in Coshocton, Ohio.
  • Corn Plus’ 40 MGPY plant in Winnebago, Minnesota.

Low margins prompted strategic buyers to delay or curtail M&A activity. This buyers’ market drove down valuations. Advanced BioEnergy’s sale to Glacial Lakes Energy for $48M, a valuation of $0.55 per gallon, underscored the pressure on valuations. The price was well below the five-year average of $0.72 per gallon.

Next, let’s look at biodiesel M&A.

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