By Michael Hirtzer
CHICAGO, Oct 26 (Reuters) – Green Plains Inc has
paid $18.25 million for the sole ethanol plant in Virginia, it
said on Monday, the latest in a string of consolidations as vast
supplies and low crude oil prices squeeze industry profits.
Green Plains said it planned to spend another $6 million to
$7 million for a corn oil extractor and other improvements at
the plant, whose annual capacity is 62 million gallons. Located
in Hopewell, south of the Richmond state capital, the facility
was idled in August by Vireol Bio Energy LLC because it could
not make enough profit.
Near-record production rates of corn-based ethanol, coupled
with prices for crude oil and gasoline that are
hovering near multiyear lows, have weighed on the industry.
Ethanol prices of about $1.60 per gallon are the lowest
for this time of year in about a decade, and top producer Archer
Daniels Midland Co is favoring products with better
returns, such as high-fructose corn syrup.
Green Plains said the Virginia facility would resume
operations by the end of the year, bringing the company’s annual
production capacity across 13 plants to 1.1 billion gallons.
The Virginia plant is one of only a handful of such
facilities on the U.S. East Coast. The location results in
higher costs for corn, the main feedstock used in U.S. ethanol
production, since most of it is grown far away in the Midwestern
crop belt.
However, the East Coast is one of the top markets for
gasoline and ethanol, and also provides access to export ports.
Built in 2010 to produce ethanol with barley, the Virginia
plant started making corn-based fuel in 2014.
“The sale value reflects a discounted purchase price mainly
due to operating challenges specific to this plant,” said
Ascendant Partners Managing Partner Kirk Martin, who was
involved in the sale.
The deal follows Pacific Ethanol Inc’s $184 million
acquisition of ethanol maker Aventine Renewable Energy Holdings
earlier this year.
CHS Inc, the largest farmer-owned cooperative in
the United States, bought two ethanol plants in Illinois during
the past year, including one located near the Mississippi River
for $196 million.
Shares of Green Plains, which reports third-quarter earnings
next week, were down 3 percent at $19.21 in afternoon trading.
(Reporting by Michael Hirtzer; Editing by Lisa Von Ahn)