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“With dampened expectations for profitability, mostly due to commodity prices and excessive production capacity, we expect most remaining nonstrategic players to explore exits this year,” Comer said. “This could represent a challenge for the sector to absorb,” Ocean Park Advisors stated.
Ocean Park Advisors pointed to two examples in the ethanol industry: Abengoa and Archer Daniels Midland Co. For ADM, Ocean Park Advisors stated that the industry leader, with three dry mills and five wet mills totaling 1.7 billion gallons of annual production capacity, is evaluating its commitment to the ethanol industry due to the long-term outlook on sector profitability.
Earlier this month the largest player in the North American biodiesel sector, Renewable Energy Group Inc., announced a deal to acquire the 20 MMgy Sanimax biodiesel plant in Wisconsin, bumping up its number of active U. “Our experience leads us to believe there will be an increased number of owners and boards of renewable fuel companies evaluating their options in 2016, if not testing the market for reasonable assessments of the value of their plants,” Comer said.
The ethanol industry is particularly ripe for consolidation, Comer said, noting the existence of 94 stand-alone plants with 5.3 billion gallons of production capacity totaling 36 percent of the ethanol industry’s domestic production capacity.
Ocean Park Advisors says the North American biofuel industries saw a “dramatic” consolidation of players last year and, after just two months into 2016, all indications point to an even greater number of mergers and acquisitions this year.
Bruce Comer, founder and managing director of Ocean Park Advisors, said limited availability of capital will compel independent players in the advanced biofuels and renewable chemicals space to explore strategic collaborations or sales.
The firm noted Abengoa has begun marketing its global, first-generation ethanol assets due to financial distress at the Spanish parent company. This is evidenced by ADM’s announcement to conduct a strategic review of its dry mills.
“However, we believe this could be the year that creates a leaner and more strategic biofuels industry to carry American-made renewable fuels into the coming decades.” Biodiesel Magazine encourages encourages civil conversation and debate.
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