Chevron to acquire Renewable Energy Group for $3.15 billion

In California and Iowa, Chevron and Renewable Energy Group struck a definitive agreement under which Chevron will acquire the outstanding shares of REG in an all-cash transaction valued at $3.15 billion, or $61.50 per share.

The transaction has been approved by the Boards of Directors of both companies and is expected to close in the second half of 2022. The transaction price represents a premium of around 57% on a 30-day average based on closing stock prices on February 25, 2022. The acquisition is subject to REG shareholder approval. Chevron said that the transaction is expected to be accretive to Chevron earnings in the first year after closing and accretive to free cash flow after start-up of REG’s Geismar expansion. 

The rationale

Last September, during its Energy Transition Spotlight, Chevron Corporation announced plans to invest more than $10 billion by 2028 to grow lower carbon energy businesses, tripling the company’s previous guidance. The company set four 2030 growth targets for new energy businesses:

1. Grow renewable natural gas production to 40,000 MMBtu per day to supply a network of stations serving heavy duty transport customers;
2. Increase renewable fuels production capacity to 100,000 barrels per day to meet growing customer demand for renewable diesel and sustainable aviation fuel;
3. Grow hydrogen production to 150,000 metric tons per year to supply industrial, power and heavy-duty transport customers;
4. Increase carbon capture and offsets to 25 million tons per year by developing regional hubs in partnership with others.

The acquisition combines REG’s growing renewable fuels production and leading feedstock capabilities with Chevron’s large manufacturing, distribution and commercial marketing position. 

Going forward

After closing of the acquisition, Chevron’s renewable fuels business, Renewable Fuels – REG, will be headquartered in Ames, Iowa. In addition, CJ Warner is expected to join Chevron’s Board of Directors. 

The Chevron backstory

Last week, Brightmark RNG Holdings LLC – a joint venture partnership between Chevron and Brightmark announced plans to construct an anaerobic digestion project at Vlot Calf Ranch in Chowchilla, California.

Earlier, Chevron and Bunge North America, Inc. announced the signing of definitive transaction agreements to create their previously announced joint venture. The new venture will create renewable feedstocks leveraging Bunge’s expertise in oilseed processing and farmer relationships and Chevron’s expertise in fuels manufacturing and marketing. The agreements are subject to customary closing conditions, including regulatory approval. Bunge’s soybean processing plants in Destrehan, Louisiana and Cairo, Illinois will be contributed to the joint venture with Chevron contributing approximately $600 million in cash. Plans include approximately doubling the combined capacity of these facilities from 7,000 tons per day by the end of 2024. The joint venture may also explore opportunities in other renewable feedstocks, as well as in feedstock pretreatment. https://www.biofuelsdigest.com/bdigest/2022/02/23/chevron-finalizes-jv-with-bunge-for-renewable-fuel-manufacturing-and-marketing/

In January, Lummus Technology’s Green Circle and Chevron Lummus Global are integrating multiple technologies from their portfolios for application in the circular economy. The partners will use a combination of the Lummus New Hope Energy plastic pyrolysis technology, CLG’s ISOCONVERSION technology and Lummus’ steam cracking technology to provide operators the ability to produce steam cracker products in large quantities from hydroprocessed mixed-waste plastic pyrolysis oil.

In December, Progress Rail, BNSF Railway Company, and Chevron U.S.A. Inc. announced a memorandum of understanding to advance the demonstration of a locomotive powered by hydrogen fuel cells. The goal of the demonstration is to confirm the feasibility and performance of hydrogen fuel for use as a viable alternative to traditional fuels for line-haul rail. Hydrogen has the potential to play a significant role as a lower-carbon alternative to diesel fuel for transportation, with hydrogen fuel cells becoming a means to reduce emissions.

Last September, Chevron and Gevo, Inc. announced a letter of intent to jointly invest in building and operating one or more new facilities that would process inedible corn to produce sustainable aviation fuel, which can lower the lifecycle carbon intensity of fuels used in the aviation industry. The new facilities would also produce proteins and corn oil. 

The REG backstory

Last week, we reported that Renewable Energy Group, Inc. which will install a state-of-the-art pretreatment facility in Germany, enabling the company to refine some of the lowest carbon intensity, hardest to convert waste fats and oils for bio-based diesel production. The project is located on the North Sea harbor of Emden, Germany at the border to The Netherlands. This project will enhance REG Emden and REG Oeding’s ability to produce renewable fuel from a wider variety of feedstocks, including ‘Generation 3’ advanced feedstocks as defined under the Renewable Energy Directive (RED) II. This strategic upgrade will enable the company to continue to expand the company’s strong global sourcing and trading position, produce more deeply decarbonized fuel and better serve European customers seeking to accelerate their transition to cleaner energy.

In January, Renewable Energy Group acquired Amber Resources, LLC (dba Sawyer Petroleum) and its affiliated entities, M.O. Dion & Sons and Amber Petroleum Products. Amber Resources is a leading Southern California full-service distributor of diesel, gasoline, lubricants, other transportation fuel components, industrial services and additives.

In October 2020, Renewable Energy Group said it would undertake a capacity expansion of its Geismar, Louisiana biorefinery by 250 million gallons annually to 340 million gallons per year. This announcement follows a thorough review and site selection process. Construction should begin in mid to late 2021 with target mechanical completion date in late 2023. More about the Geismar backstory and the expansion, here.

A Digest Data DeepDive into Renewable Energy Group

Here’s a DigestData DeepDive™ with Actionable, Relational, Granular, Global Hard Data on REG’s Bioeconomy Projects, technologies, capacities, status and partners. Taken from the databases of DigestData and including a selection of key slides from REG presentations and our most recent news coverage on emerging storylines. More on the story.

Reaction from the stakeholders

“REG was a founder of the renewable fuels industry and has been a leading innovator ever since,” said Chevron Chairman and CEO Mike Wirth. “Together, we can grow more quickly and efficiently than either could on its own.” 

“This transaction delivers premium cash value to shareholders and will give us additional resources as we aim to accelerate growth and strengthen our collective ability to deliver the sustainable fuels our customers and the world need,” said CJ Warner, REG president & CEO.