A corporate finance advisory firm says signs point to a number of mergers and acquisitions in the North American biofuels industry this year.
“Our experience leads us to believe there will be an increased number of owners and boards of renewable fuel companies evaluating their options in 2016, if not testing the market for reasonable assessments of the value of their plants,” said Bruce Comer, founder and managing director at Los Angeles-based Ocean Park Advisors.
Ocean Park Advisors provides advisory and restructuring services to lenders, institutional investors and companies. They have closed 21 biofuels transactions totaling more than 750 million gallons of production over the past five years.
Comer said there are 94 stand-alone plants that account for 5.3 billion gallons, or 36% of domestic production.
“With dampened expectations for profitability, mostly due to commodity prices and excessive production capacity, we expect most remaining non-strategic players to explore exits this year,” Comer said.
He cites three announcements in making his prediction:
REG, a biodiesel producer based in Ames, Iowa, announced the acquisition of the 20 million gallon per year Sanimax biodiesel plant in Wisconsin, sending a signal that one of the industry leaders will continue building its armada of plants.
Abengoa has begun to market its global, first-generation ethanol assets due to financial distress at the Spanish parent company. In the U.S., Abengoa owns six ethanol plants with a combined capacity of 381 MGPY. This could represent a challenge for the sector to absorb.
ADM announced a strategic review of its dry mills. With 1.7 BGPY comprised of three dry mills and five wet mills, ADM is the industry leader, and is now evaluating its commitment to the ethanol industry due to the long-term outlook on sector profitability.
“We believe this could be the year that creates a leaner and more strategic biofuels industry to carry American-made renewable fuels into the coming decades,” Comer said.
Source: Ocean Park Advisors. Read their January article in Biofuels International.