Albion ethanol plant profitable for new owners

ALBION -- Less than a year after ethanol producer VeraSun Energy Corp. filed for bankruptcy, seven of the company's plants have become the few profitable areas for oil refining giant Valero Energy Corp.

"Right now, ethanol's been one of the bright spots in the system," said Valero spokesman Bill Day. "We've been pleased with its profitability."

Valero executives were visiting Albion's ethanol plant Friday to meet with employees and local leaders, and to kick off the plant's new United Way campaign.

Albion's plant is part of the group of seven ethanol plants and one undeveloped site that the company bought at auction in April from VeraSun for $477 million.

The plants' purchase was the first foray into ethanol production for the San Antonio-based Valero, which has long been buying ethanol as the nation's largest independent oil refiner.

Day said the company had long been considering a venture into ethanol and had been eyeing VeraSun's plants for their ideal location and equipment, but their price was too high.

The bankruptcy sale brought that price down significantly, allowing Valero to buy the plants for about a third of what they would have cost to build new, Day said.

He said that being an ethanol producer gives Valero more diversity, allowing it another way to make money when oil's price is high and refining profit margins are low.

That's the situation the company is in right now, as it reported $254 million in losses for the second quarter. But the cycle of the ethanol market runs counter to that of oil refining, allowing the company to have one profitable area while the other is down.

Those counter-running markets have often put the oil refining and ethanol businesses at odds with each other. Valero's own chief executive officer, Bill Klesse, called for the federal government to repeal tax credits for ethanol producers last year.

Day acknowledged that his company's about-face on ethanol could be described as an "if you can't beat 'em, join 'em" strategy, but he and another Valero executive said that with the government's renewable fuel standard mandating increased ethanol use, ethanol's role in the future of American energy is undeniable.

"The way we look at it, we're in the fuels business," said Gene Edwards, Valero's executive vice president for corporate development and strategic planning. "Ethanol is growing, and it will definitely be part of the mix going forward."

Valero restarted the 110-million-gallon-per-year Albion plant in June, and Day said it's running at full capacity. The company retained every one of the plant's employees and filled a few open positions when it took the plant over to bring the total number of employees to 52.

Day said Valero's size and involvement in several areas of fuel production give it some valuable economies of scale and insulation from the ups and downs of the ethanol industry.

"We know as a big company how to withstand the cyclical process," Day said. "We're here for the long term."

Plant manager Andy Roberts said that for the staff of a plant that was shut down for six months, that's a valuable asset to have.

"It provides us some stability in this industry that a lot of others in this industry would love to have," Roberts said.

SOURCE: theindependent