Published on: 21:34PM Feb 09, 2009
Bankrupt ethanol producer VeraSun Energy Corp says it reached a deal to sell five ethanol facilities to U.S. refiner Valero Energy Corp for $280 million. VeraSun has asked a bankruptcy court for approval to sell its assets, and is now required to hold an auction seeking rival bids. March 13 is the deadline for other bids; an auction will take place three days later.
The deal includes VeraSun facilities in South Dakota, Iowa, Minnesota and Indiana totaling about 670 million gallons of ethanol annually.
But who is this Valero, anyway, and why would they want these ethanol plants?
Valero happens to be the largest refiner in North America, based in San Antonio, with 2008 revenues of $119 billion. Valero owns and operates refineries in California, Texas, Oklahoma, Tennessee, Louisiana and Delaware, as well as facilities in Canada and the Caribbean -- combined throughput capacity is approximately 3 million barrels per day. Valero also is one of the nation's largest retail operators with approximately 5,800 retail and branded wholesale outlets.
As to why Valero would actually want to buy these facilities, one guess is that they are picking them up at about a third of what it costs to build these plants – a pretty good way to get in the ethanol game.
By the way, Valero shares rose 3.7% after Goldman Sachs raised the refiner’s price target and upgraded refineries across the board. Goldman Sachs analysts expect Valero to see higher margins in 2009 as the steady drop in demand for gasoline stabilizes.