Shell May Snag 95% Discount on Next-Generation Ethanol Plant

Source: By Mario Parker, Bloomberg • Posted: Friday, October 14, 2016

Royal Dutch Shell Plc is set to pay $26 million for Abengoa SA’s ethanol plant that cost it and taxpayers about $500 million to build.

Shell’s so-called stalking-horse bid, which is subject to court approval, was disclosed in documents filed Wednesday with Kansas District’s U.S. Bankruptcy Court. If Abengoa receives competing bids, an auction will be held Nov. 21 for the 25 million-gallon-a-year-plant, the filings show. The bid was confirmed by Mark Kisler, managing director at Ocean Park Advisors, Abengoa’s consultant.

“This move is in line with Shell’s strategy to develop biofuels that deliver substantial CO2 benefits and use sustainable feedstocks,” Natalie Mazey, a Shell spokeswoman said in an e-mailed statement. “Future use of the facility to support Shell’s biofuels program will be subject to a future investment decision.”

Congress had envisioned cellulosic ethanol making up the bulk of requirements under the Renewable Fuel Standard. The 2007 energy law calls for oil refiners to use escalating amounts of biofuels as the U.S. seeks to reduce pollution and decrease dependence on foreign sources of energy. The mandate has sparked legal battles between petroleum and biofuel supporters. U.S. regulators have adjusted the targets in recent years, partly because cellulosic ethanol isn’t as commercially available as expected.

Energy Loan

The plant in Hugoton, Kansas, was designed to produce cellulosic ethanol, a variety derived from non-edible feedstocks, such as plant waste instead of corn. Abengoa, based in Seville, Spain, received a $132.4 million loan and a $97 million grant from the U.S. Energy Department to build the operation, which took about a decade to develop.

Abengoa repaid the government loan in full, a company spokesman said by e-mail.

In March, Abengoa filed a Chapter 15 bankruptcy in U.S. courts. Most of the company’s U.S. subsidiaries have filed for protection under the country’s bankruptcy laws, a spokesman has said. Last month, Abengoa completed the sale of three U.S. ethanol mills to Green Plains Inc.