POET+FHRe=HUGE: POET in ‘exclusive discussions’ to buy FHR’s 800m gallon portfolio: advanced biorefining, economies of scale in focus

From South Dakota, The Digest has learned that POET is in exclusive discussions with Flint Hills Resources over the possible acquisition of their biofuels business.

Flint Hills Resources is the nation’s fifth-largest bioethanol producer, and this acquisition would include all six of their bioethanol production facilities in Iowa and Nebraska with a combined annual capacity of approximately 800 million gallons., along with two terminals in Texas and Georgia.Flint Hills Resources is the fifth largest ethanol producer in the United States. Closing of a transaction would bring the POET fleet to 33 bioprocessing facilities across 8 states. The FHR plants are in Faimont, Nebraska; and Arthur, Menlo, Shell Rock, Fairbank and Iowa Falls, all in Iowa.

The Koch backstory

In March, Koch Strategic Platforms president David Park told Mergers & Acquisitions that “energy transformation is an exciting area and one of the four specific verticals in which we are currently pursuing investments. The energy transformation space could include investments in fossil fuel value chain transformation, new sources of energy, energy infrastructure and the electrification of transportation.”

FHR’s efforts to transform the fleet’s technologies

FHR unveils a $50M gambit to make Überprotein at ethanol plants.

Deinove, FHR move to 2nd stage in advanced animal feed R&D.

FHR’s Shell Rock ethanol plant pleased with FQTP upgrade. 

POET tips towards an advanced biorefining future

In a statement, POET said, “this acquisition will grow our competitive advantage through greater size, scale and improved efficiencies. Perhaps most importantly, it will reinforce POET’s position as a global leader in green bioproducts, with an ever-growing suite of renewable solutions including bioethanol, renewable CO2, purified alcohol, high-protein animal feed, asphalt additives and corn oil used for renewable diesel.”

Let’s reflect on that a moment. Ethanol, corn oil, protein. That’s table stakes these days for a dry mill biorefinery. In fact, protein and ethanol were there from the start — what’s changed in the past 12 years has been the quality and composition of the protein, the ethanol yields, and the appearance of corn oil extraction to create a new product.

But what about these other products. Hmm, renewable CO2. That’s not a stretch, though finding good markets at good prices for CO2 sometimes can be tough. Carbonated beverages can only order so much. Purified alcohols — that’s a food-grade ethanol product, sort of the thing that the old Pacific Ethanol has now pivoted toward.

But there’s more. Asphalt additives. That’s a code word for Project Lignin, more or less, because that’s the main opportunity for low-carbon lignin right now, according to Jack Miller, author of the seminal LIGNIN 2021, a PIVOTAL YEAR market study.

We think there might be yet more. For example, alcohol upgrading to hydrocarbons as an additional market. We wonder about acetate, and perhaps even methyl acetate — those are two-carbon molecules of interest. For some time to come, the price of carbon intensity reduction is going to be so high that combustion will likely prove to be the star product. But, why not RNG made from the stillage produced at a plant, when fed to methanogens? Or, what about dehydrating ethanol to ethylene and splitting the resulting water to make green hydrogen?

The Bottom Line

POET put it best:

POET expressed: “We are confident in the future of the biofuels industry and view this as the next step in our mission to bring value to rural America and create even more high-quality bioproducts for consumers all over the world. We look forward to the many opportunities that lie ahead as a result of this significant addition to the POET network.”

33 plants and something like 2,4 billion gallons. POET has certainly bet its future on the economies of scale that come from a larger network — and of course they see that in a world that is now rapidly defossilizing, those who own the means to defossilize the cheapest look like the ones to bet on to win.