Last Updated May 22, 2009 2:02 PM EDT
Philadelphia-based oil refiner Sunoco -- jumped into the ethanol-producing business this week with its winning $8.5 million bid for a Northeast Biofuels plant. The Volney, N.Y. plant cost $200 million to build back in 2006 and at full production can produce about 100 million gallons of ethanol a year.
The deal isn't without flaws. Northeast Biofuels, which filed for bankruptcy in January, was never able to get the plant into full production mode because of some design problems. Sunoco spokesman told the Philadelphia Inquirer it might have to spend $10 million to $20 million to get the plant to full production.
Even if it costs an additional $20 million, bringing the total investment up to $28.5 million, that is still an 86 percent discount. What's even crazier, is Sunoco outbid a consortium of companies that offered $1 million for the upstate New York plant. One million dollars! The most expensive home in nearby Syracuse is going for $1.3 million.
Sunoco's purchase marks the second oil refiner to get into the ethanol business. Valero Energy, the largest U.S. oil refiner, snapped up seven plants and a development site from bankrupt VeraSun's plants for $477 million. Valero said it paid 30 cents on the dollar for the plants.
This week ethanol producer Green Plains Renewable Energy bought two plants in Nebraska for $123.5 million. Green Plains purchased the plants from AgStar Financial Services, a lending group that bought them from VeraSun.
The acquisition makes Green Plains the fourth-largest ethanol producer in the U.S. and boosts its capacity by 45 percent. Green Plains CEO Todd Becker said the company paid the equivalent of 82 cents an operating gallonfor the plant, in MarketWatch.
Bankruptcy court has claimed at least 10 producers including Pacific Ethanol and Aventine Renewable Energy's filing in April.
This means a glut of ethanol plants is hitting the marketplace. Now that I've shaken off my initial too-cheap-to-be true sticker shock, I'm prepared to watch prices fall even further.
See BNET's previous coverage of the biofuels industry:
- GreenHunter Puts 'For Sale' Sign on Biodiesel Refinery
- POET to Use Corn Cobs -- Not Natural Gas -- to Power Cellulosic Ethanol Plant
- Miracle Biofuel Plant Jatropha Reveal Its Achilles Heel
- Who Will Buy Bankrupt Ethanol Maker Aventine?
- Green Plains, Sunoco Deals Highlight Bargain-Basement Ethanol Plant Prices
- NASA Takes a Crack at Algal Biofuel
- Does Conoco Deserve a Subsidy to Produce Biofuels?
- Ethanol Industry Squeezes an Otherwise Profitable Farmer Mac
- Virent Energy, Shell Poised for Second-Gen Biofuels Race
- Does EPA Biofuels Proposal Really threaten Corn-based Ethanol?
- California Kicks Corn-based Ethanol to the Curb, Welcomes Futuristic Biofuels
- Ethanol Plants Idle, Workers Wait as VeraSun Buyout Drags Out
- Oil Refiner Valero Plows More Money into Renewables with Terrabon Investment
- Aventine Files for Bankruptcy; CEO Miller Points to RINs
- Pacific Ethanol's Troubles Signal More Bankruptcies to Come
- Codexis Deal highlights Shell's Increasing Interest in Biofuels
- Oil Giants Wade into Renewables Pool