US biofuels set for "big year of consolidation," says consultancy

Early signs suggest that 2016 will be a big year of consolidation for the North American biofuels industry following already a high level of merger and acquisition activity in 2015, Ocean Park Advisors says.

According to the industry advisor, the ethanol industry in particular is ripe for consolidation. It noted there are still 94 standalone plants totalling 5.3 billion gallons, or 36% of domestic production.

"With dampened expectations for profitability, mostly due to commodity prices and excessive production capacity, we expect most remaining non-strategic players to explore exits this year," said Bruce Comer, founder and managing director.

Announcements so far this year are indicative of the potential flow for 2016, the firm says. Those include Renewable Energy Group Inc's (REG) acquisition of a biodiesel plant in Wisconsin which suggests that one of the major companies in the sector will continue building its fleet of plants. Troubled Spanish group Abengoa SA, meanwhile, has put up for sale its first-generation ethanol assets. In the US, it owns six ethanol plants with a combined annual capacity of 381 million gallons. Also, Archer Daniels Midland Co (ADM) announced a strategic review of its dry mills. The company is the industry leader with three dry mills and five wet mills totalling 1.7 billion gallons of capacity.

Ocean Park Advisors tracked 10 biofuels deals in 2015, worth an estimated USD 750 million (EUR 676m) to USD 850 million. They involved 13 plants with 888 million gallons of capacity. In addition, there were three acquisitions of advanced biofuels/renewable chemical companies.

(USD 1.0 = EUR 0.901)

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