Valero agrees to buy three ethanol plants

HOUSTON, - Valero Energy Corp (VLO.N) agreed on Monday to buy three more ethanol plants that will boost its ethanol production capacity to 1.1 billion gallons per year.

Valero, the nation's second largest oil refiner, will add the three plants with a combined capacity to produce 330 million gallons per year to seven purchased in March.

Valero agreed to pay $200 million for two plants from ASA Ethanol Holdings LLC, a consortium of creditors who took over the plants when previous owner VeraSun Energy Corp went bankrupt.

Valero will buy the third plant from Renew Energy, a privately owned ethanol producer that went bankrupt in January, for $72 million.

Valero expects the purchase of three ethanol plants to close in early 2010, pending regulatory approvals.

The former VeraSun plants in Linden, Indiana, and Bloomingburg, Ohio, are idled. Valero expects to restart them in three to six months after the deal closes.

The Renew plant near Jefferson, Wisconsin, is operating at reduced rates, but Valero said it expects it to reach full production "over time."

The seven plants Valero currently owns were purchased at auction from VeraSun in March for $537 million.

VeraSun was the biggest publicly traded U.S. ethanol producer before entering bankruptcy on Oct. 31, 2008.

U.S. ethanol producers were hard hit by the economic downturn in 2008 with many companies forced into bankruptcy.

The U.S. Environmental Protection Agency earlier this month put off a decision to increase the amount of ethanol that can be blended into a gallon of gasoline from 10 percent to 15 percent that would boost returns for ethanol producers.

source: reuters