ADM, Valero Bidding For Some VeraSun Ethanol Plants -Sources
March 17 2009 - 5:15PM
Dow Jones News
Archer Daniels Midland Co. (ADM) and Valero Energy Corp. (VLO)
bid Tuesday on some of VeraSun Energy Corp.'s (VSUNQ) ethanol
plants for sale in a bankruptcy auction, according to people
familiar with the negotiations.
The auction, which began Monday, continued Tuesday because some
of the 17 assets drew multiple bidders, the people said. A hearing
to report upon the auction is scheduled in bankruptcy court for
Wednesday.
VeraSun filed for Chapter 11 bankruptcy protection in October,
after taking on debt to buy rivals. As corn prices skyrocketed in
mid-2008, a poorly-executed risk management strategy led VeraSun's
costs to mount, rendering the company unable to pay its debt. The
company was unable to get enough cash while under bankruptcy
protection to keep all its plants in production or to preserve hope
of restructuring and emerging from bankruptcy in one piece.
The assets for sale have drawn interest largely due to their low
price. A floor bid on the assets from Valero, the largest U.S. oil
refiner, offered about 50 cents per gallon of ethanol production
capacity, only a quarter of the original construction cost of the
plants.
Valero is among the largest ethanol buyers in the U.S. The
company bid $280 million for five of VeraSun's plants and the
rights to build a sixth plant.
During the course of the auction, the exact plants on which
Valero, agribusiness giant ADM, and others are bidding have
shifted, the people familiar with the negotiations said. The 17
plants have been put into packages that may be different from the
groups that were previously announced, according to one of the
people familiar with the bidding.
Both Decatur, Ill.-based ADM and Valero declined to comment.
Demand for corn-based ethanol, which is commonly added to
gasoline, soared in 2005 due to a federal mandate. High corn prices
in 2008, coupled with weak gasoline demand resulted in slim margins
for producers, forcing companies like VeraSun to file for
bankruptcy protection.
-By Jessica Resnick-Ault, Dow Jones Newswires; 201-938-4435;
jessica.resnick-ault@dowjones.com