CHICAGO, Oct 26 (Reuters) - Green Plains Inc has paid $18.25 million for the sole ethanol plant in Virginia, it said on Monday, the latest in a string of consolidations as vast supplies and low crude oil prices squeeze industry profits.
Green Plains said it planned to spend another $6 million to $7 million for a corn oil extractor and other improvements at the plant, whose annual capacity is 62 million gallons. Located in Hopewell, south of the Richmond state capital, the facility was idled in August by Vireol Bio Energy LLC because it could not make enough profit.
Near-record production rates of corn-based ethanol, coupled with prices for crude oil and gasoline that are hovering near multiyear lows, have weighed on the industry. Ethanol prices of about $1.60 per gallon are the lowest for this time of year in about a decade, and top producer Archer Daniels Midland Co is favoring products with better returns, such as high-fructose corn syrup.
Green Plains said the Virginia facility would resume operations by the end of the year, bringing the company’s annual production capacity across 13 plants to 1.1 billion gallons.
The Virginia plant is one of only a handful of such facilities on the U.S. East Coast. The location results in higher costs for corn, the main feedstock used in U.S. ethanol production, since most of it is grown far away in the Midwestern crop belt.
However, the East Coast is one of the top markets for gasoline and ethanol, and also provides access to export ports.
Built in 2010 to produce ethanol with barley, the Virginia plant started making corn-based fuel in 2014.
“The sale value reflects a discounted purchase price mainly due to operating challenges specific to this plant,” said Ascendant Partners Managing Partner Kirk Martin, who was involved in the sale.
The deal follows Pacific Ethanol Inc’s $184 million acquisition of ethanol maker Aventine Renewable Energy Holdings earlier this year.
CHS Inc, the largest farmer-owned cooperative in the United States, bought two ethanol plants in Illinois during the past year, including one located near the Mississippi River for $196 million.
Shares of Green Plains, which reports third-quarter earnings next week, were down 3 percent at $19.21 in afternoon trading. (Reporting by Michael Hirtzer; Editing by Lisa Von Ahn)
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