M&A Transactions Help Define Current US Biodiesel Era

by Ron Kotrba (Biodiesel Magazine) For better or worse, the U.S. biodiesel industry continues to consolidate. While 2014-’15 has been a rough period in the sector, the fallout has presented undeniable opportunities for key players with strong balance sheets and keen business acumen.

The aftermath of that prolonged down biodiesel market is naturally a greater frequency in plant acquisitions, mergers and joint ventures by companies that were positioned to weather the storm, since 2016 brought with it a forward-looking tax credit, more stability in the renewable fuel standard (RFS) policy, and an increased reliability in U.S. EPA’s program management.

Three experts discussed biodiesel’s current business environment at Christianson & Associates’ Biofuels Financial Conference Oct. 17-18 in Minneapolis, during which mergers and acquisitions (M&A) took center stage.

Oral arguments on the lawsuit filed against EPA on its use of the general waiver to lower all biofuel categories in RFS are expected next year. “If the court comes back with an opinion counter to what EPA is saying, we could see a much larger demand for RINs,” Laznik (Michael Laznik, the chief financial and operating officer of World Energy) said.

He said when the tax credit is in effect or reinstated retroactively, it provides a boon for producers, and as it goes away, higher RIN prices are expected. “But this becomes a story that’s too hard to tell [to financiers],” Laznik said, adding that banks don’t like volatility and equity has become too hard to source. “If you pitch it as a biodiesel plant, they might walk away,” he said, “but if you pitch it as property, then you might get a mortgage.”

Since jet fuel travels through the pipeline, concerns over trailback of biodiesel into jet fuel has kept biodiesel largely out of pipelines, but after years of extensive testing and balloting at ASTM, the allowable trace limits have been risen, which bodes well for moving greater volumes of biodiesel in pipelines in the coming years.