Valero takes hold of three ethanol plants for $ 270 million

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Valero Renewable Fuels Company L.L.C. will acquire two ethanol plants with an annual production capacity of 110 million gallons from ASA Ethanol Holdings for $200 million.

The two plants located in Linden, Indiana and Bloomingburg, Ohio were previously owned by VeraSun Energy Corporation.

"The Linden and Bloomingburg plants have the same high-quality design that we got with our earlier purchase of seven ethanol plants, and they're also relatively new assets," Bill Klesse, Valero chief executive, said.

Both plants are currently idle but will be restarted within three to six months after the transaction is finalized early in 2010. Credit Suisse advised Valero on the acquisitions.

The plants will also produce dry distillers grains, a co-product of ethanol production that is sold as a livestock feed.

Valero also received approval from a bankruptcy court to acquire Renew Energy's ethanol facility in Jefferson, Wisconsin, following a bankruptcy auction last week. The acquisition of the 110 million-gallon-per-year plant is valued at $72 million. The facility is currently operating at reduced rates but is expected to go into full production over time.

"The purchase of the plant from Renew gives us additional production capacity. The ethanol plants we bought earlier this year have been very successful for Valero, and we expect these newly purchased plants to build on that success," Mr. Klesse said.

All in all, Valero will buy the three plants for roughly 41 percent of their total estimated replacement cost. The acquisitions will expand the company's ethanol production capacity to 1.1 billion gallons annually.

Valero also operates ethanol plants in Albert City, Charles City, Fort Dodge and Hartley in Iowa; Aurora, South Dakota; Welcome, Minnesota; and Albion, Nebraska.

Valero has also explored other alternative energy ventures. It has completed a 50-megawatt wind farm near its McKee refinery in the Texas Panhandle and is investing in companies that are developing technologies to produce cellulosic ethanol, biofuel from plant material, algae and animal fat, and a synthetic gasoline made from landfill waste.

The company is a wholly-owned subsidiary of Valero Energy Corporation, a Fortune 500 company based in San Antonio, Texas. New York Stock Exchange-traded Valero is also a leading ethanol producer, with seven ethanol plants in the Midwest pooling for a combined capacity of 780 million gallons annually.

Meanwhile, ASA Ethanol is owned by a former syndicate of lenders to the facilities, with West LB A.G. as the agent. The plants were originally acquired by West LB through the VeraSun bankruptcy auction.

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