by Bruce Comer, Frank Kim and Zak Putlak (Ocean Park/Biofuels Digest) As ethanol producers pursued mergers and acquisitions, and renewable diesel firms built and expanded plants, the biofuels industry increasingly focused on securing feedstocks. Producers seeking to consolidate, optimize or sell plants helped double the number of mergers and acquisitions in 2021 over 2020, including one of the biggest biofuel deals ever. Sellers sought to unload underperforming plants or to generate capital to reinvest in higher-value specialty ingredients or carbon capture projects. In the biodiesel and renewable diesel markets, instead of acquiring operating plants, the larger companies spent significant capital to build and retrofit plants, amplifying a frenzy of investment amid a battle for limited feedstock supplies.
The M&A splurge in ethanol was the most intense in five years. Four out of the five top ethanol producers were involved in a transaction in 2021. That included a big prize: the acquisition of Flint Hills’ ethanol business by POET, giving it 800 million gallons per year (MGPY) of additional capacity.
The story in renewable diesel (RD) and biodiesel (BD) was building, not buying. Petroleum refiners and biodiesel producers led a construction boom in renewable diesel, as 12 plants are either under construction, expanding or have been completed, accounting for 3.9 billion gallons and $7 billion-plus in investment through 2024.
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The integrated oil companies’ and the independent refiners’ newly found interest in biofuels stems from their decision to generate compliance credits internally, repurpose older refineries, turn a profit, respond to shareholder pressure, invest in a high-growth market, and hedge with investments in promising carbon markets such as California and Oregon.
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Instead of buying biodiesel plants, companies deployed capital to renewable diesel projects and to secure feedstock for their plants. The largest soy oil producers are also the largest biodiesel producers. Last year, many of these firms notched deals with major oil companies to supply them with feedstock for their RD operations.
In some cases, it’s even become more profitable for vegetable oil producers to sell their oil to RD producers than produce biodiesel.feeral
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The entry of integrated petroleum firms into renewable diesel has opened a new chapter in the renewable fuel story.
The upshot: Often seen as antagonists, petroleum, renewable fuels and agricultural interests are finding ways to coexist, partner and co-invest
Perhaps the greatest near-term pressure will be on independent, non-feedstock aligned biodiesel producers in a feedstock-short environment dominated by the largest energy and agricultural companies.
The year presented further examples of the strategic shifts by ethanol producers. As with the pivot to hand sanitizers at the onset of the pandemic, many ethanol producers in 2021 deployed capital to transition their products to higher-value specialty alcohols or ingredients, or invested in CCS initiatives to lower carbon intensity and increase value for their products. The industry continues to consolidate.
Similarly, in biodiesel and renewable diesel, many producers with capital looked to convert existing plants or refineries into more profitable RD plants, feedstock pretreatment and investments in new feedstock supply chains. As demand for biofuels and low-carbon supplies grow in the US and globally, the pressure on feedstock supplies will intensify. READ MORE