Ethanol Plants Idle, Workers Wait as VeraSun Buyout Drags Out

Several companies including U.S. oil refiner Valero Energy have swooped up ethanol plants from bankrupt-plagued VeraSun Energy. But employees at many of these plants are still worrying and waiting for the deals to close so they can get back to work.

Valero has the highest profile deal -- seven ethanol plants, plus a development site for $477 million-- an acquisition that launched the country's largest oil refiner into the ethanol business. Valero finalized its acquisition of all the plants except one in Albion, Neb., where residents and workers are hoping the deal closes soon. The acquisition may not be finalized until the end of the month and the ethanol plant may not be running for another additional month.

VeraSun, which filed last year for Chapter 11 bankruptcy protection, was one of the country's largest ethanol producers with 16 production plants in eight states. Valero bought a big chunk, but other companies have bid successfully for the plants as well.

And that's where the trouble lies. German financial giant WestLB won a bid March 18 to buy two of VeraSun's plants in Bloomingburg, Ohio and Linden, Ind., for $99 million. The acquisition has not been finalized and in an article by Ethanol Producer, a spokeswoman with WestLB said the company was "still analyzing the situation."

WestLB has had it's own problems, and this dragging-of-the-feet could be related. WestLB is owned by the German state of North Rhine-Westphalia and local banks and sustained major losses after investing in U.S. subprime mortgages. It received a government guarantee in November to keep it afloat. The European Commission has gotten involved and has been talking about new restructuring plans since a deadline for an ownership plan expired last month.

Employees at the Bloomingburg plant, which opened just over a year ago, are still receiving paychecks. If this deal falls apart it's not clear if there are other companies waiting to buy the idling plants. With the ethanol facilities selling for such a bargain, there should be plenty of bidders. But with other ethanol producers filing for bankruptcy including Aventine who knows how long the process could take? There will be a glut of plants on the market, driving prices for these facilities even lower.

AgStar Financial Services, representing a group of 16 lenders, purchased six of VeraSun's ethanol plants through a credit bid of $324 million. Those plants are sitting idle as well.

Word is there is lots of interested buyers, but workers may be waiting awhile before the plants are running again.

See BNET's additional coverage of the biofuels industry:

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  • 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
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