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

North American Biofuels Outlook for 2020

Regulatory: After a rocky, nearly two-year period of uncertainty regarding the BTC, the biodiesel industry reached a significant milestone in late 2019 when the BTC was reinstated retroactively from its expiry in January 2018 through December 2022.  This multi-year extension eases near-term regulatory concerns and could prompt more investment and M&A in biodiesel. Small Refinery Exemptions to the Renewable Fuel Standard, granted by the Environmental Protection Agency, remain an unknown variable that could continue to hurt demand.

Ethanol: High production volumes, trade dispute and policy changes limiting demand created major pressures for plant owners in 2019. If these headwinds continue into 2020, look for continued plant idling or distressed M&A activity. A few larger players might return to the M&A scene, lured by the prospect of attractive valuation levels for plant assets.

Biodiesel: Due to the reinstatement of the BTC, many producers will collect windfalls. In the near-term, many biodiesel operators could have the capital to restart, operate or acquire plants.

Renewable Diesel: Given the wide profit margins, the market expects more renewable diesel to come on-line over the next year or two.  Currently, 882 MGPY of renewable diesel capacity is under construction in the US. 

Advanced Biofuels: The advanced biofuels industry is waiting for a technological breakthrough. Several innovative companies, including Red Rock, Fulcrum BioEnergy, and LanzaTech are building plants that will utilize new feedstocks.   

Given the limited M&A activity for operating plants in 2019, it will not take much in 2020 to top this past year in deal activity and value.

About Ocean Park

Ocean Park is a leading boutique investment bank focused on the renewable fuels, energy, food, AgTech and agribusiness sectors. The Ocean Park team has significant operational and transaction experience, including advising on mergers and acquisitions, financings and restructurings. Since its founding in 2004, Ocean Park has successfully completed over 60 transactions and client engagements. Its professionals are based in Los Angeles, Houston and, Omaha. For more information, please visit www.oceanpk.com or call (310) 670-2093.