By Steve Gelsi
The nation's largest biodiesel refinery went on the block this
week for an undisclosed price after the owner shut down the $70
million facility in the face of low demand.
In a sign of the recession trumping policy talk in Washington
and elsewhere, GreenHunter Energy Inc. (GRH) said it plans to sell
the 105 million gallon-a-year plant by Nov. 15 as it moves to meet
roughly $50 million in financing obligations with a key lender.
All this comes less than a year after the June 2008 plant
opening on the Houston ship channel that was attended by Texas
Governor Rick Perry, who heralded the project as a path toward the
future.
Energy prices have since fallen drastically, a global recession
has dampened demand for fuel, and federal mandates to produce 500
million gallons of biodiesel a year haven't yet kicked in. To make
matters worse, the GreenHunter plant sustained damage last year
during Hurricane Ike.
While the Environmental Protection Agency has issued proposed
rules to implement the Renewable Fuel Standard, a comment period
doesn't end until July 27, with no deadline set on carrying out the
new measures.
Left to fend for itself in a market already glutted by gasoline,
the plant was idled in February in the wake of a drastic industry
slowdown.
Biodiesel production is forecast to fall by about half of 2008's
level of 700 million gallons, leaving plants like GreenHunter's on
the sidelines, according to estimate from the National Biodiesel
Board.
GreenHunter BioFuels said it hired an investment bank to weigh
its options, which include an outright sale, possible domestic or
international strategic partners, alternative financing or raising
new capital.
On Tuesday, GreenHunter said it won a default extension to Nov.
15 with German lender WestLB AG on $38.5 million in principal debt
and a $10 million term loan.
"We have positioned the company in a manner that should allow us
time to seek a number of solutions to our present financial
situation," GreenHunter CEO Gary Evans said in a statement. "This
is especially important now that credit markets have begun to
improve and crude oil prices, which have a direct correlation to
the price of biodiesel, have recently increased."
So far, GreenHunter Energy has fared better than others in the
biofuels business, with Pacific Ethanol recently filing for
bankruptcy protection for some of its operating units, as well as
the high-profile blowup of VeraSun.
Distressed biofuel assets have drawn interest from other energy
firms, as shown by some recent transactions. Oil giant Valero (VLO)
purchased seven VeraSun plants earlier this year for $477 million
in cash. Last month, a bankruptcy judge approved the $8.5 million
sale of a Northeast Biofuels plant in central New York to big oil
refiner Sunoco (SUN). Green Plains Renewable Energy (GPRE) paid
$124 million to buy two ethanol plants in Nebraska from
VeraSun.
U.S. biodiesel is typically made from soybeans, recycled cooking
oil and animal fats. The government allows a $1-per-gallon tax
credit for blending biodiesel with petroleum diesel.
-Steve Gelsi; 415-439-6400; AskNewswires@dowjones.com