Green Plains shuts plant, faces ethanol downturn

Source: By Jarrett Renshaw and Michael Hirtzer, Reuters • Posted: Friday, November 16, 2018

(Reuters) – Green Plains Inc, the nation’s fourth-largest ethanol producer, has permanently shuttered a Virginia production plant and cut output at several other facilities as it tries to navigate a supply glut that has pummeled biofuel profits.

Green Plains announced on Thursday that it was closing a plant in the town of Hopewell that had capacity to produce 60 million gallons annually. Thirty-one jobs will be cut, it said in a news release.

With ethanol plants in Corn Belt states such as Iowa and Illinois struggling to make money, further-flung facilities have been under even more pressure as bringing in corn from far away boosts feedstock costs.

Ergon BioFuels LLC, a subsidiary of privately held Ergon Inc, in September said it would permanently shut down its only ethanol plant in Mississippi, while Conestoga Energy Holdings LLC last week said it would temporarily halt ethanol output at its plant in Texas.

Green Plains, whose shares were down nearly 2 percent to $16.82 in late-morning trading, had purchased the Virginia plant just three years ago for $18.25 million. The company has taken some of the most drastic measures in the industry to reduce debt and rein in production, including a recent sale of three ethanol plants to Valero Energy Corp.

The measures come as ethanol prices have hit decade-year lows on flat domestic demand and a trade war with China that has left a major buyer of excess production on the sidelines.

Green Plains has idled plants in Superior, Iowa; Atkison, Nebraska; Madison, Illinois, and Fairmount, Minnesota, to help deal with weak margins, two sources familiar with the plant’s operations said this month. The Fairmount plant, a key export facility, could be down for as long as four months, one of the sources said.

“What you hear today, could be wrong tomorrow. We make decisions regularly to flex our production up and down, which is the main reason why we do not openly discuss our production rate at any given time,” Jim Stark, a spokesman for Green Plains, said in response to an email.

Plants go idle for many reasons, such as mechanical failures and planned work, Stark said, adding that the company has not made any decisions on idling plants long-term.

Reporting by Jarrett Renshaw and Michael Hirtzer; Editing by Dan Grebler