US biodiesel leader heads for the EU – what’s up with used cooking oil, and what is REG’s path forward with the German-based biodiesel producer?
In Iowa, Renewable Energy Group [REGI] and IC Green Energy announced that REG will acquire ICG’s majority equity ownership position in German biodiesel producer Petrotec AG (XETRA: PT8). Closing of the transaction is expected before year end.
REG CEO Dan Oh
Last month, REG CEO Dan Oh told The Digest, “We’re not done growing, that’s for sure! We’ve done something of consequence every quarter. We tend to be product and logistics focused when looking at a new market right now we are long biomass based diesel, and the two biggest markets are the US and EU, and our strength in lipids might feed into a number of products there.
“But it’s not just a case of looking for a good market, there are lot of good technologies developed overseas, too. We look far and wide, we’ve not done anything but we do state that “we are actively looking”, and we will lead with things we do well, and we want to retain a fantastic group of people that we have built up.”
ICG, Israel Corporation’s vehicle for investing in the alternative energy market, accepted an offer from REG European Holdings B.V. to purchase ICG’s 69 percent equity ownership in Petrotec AG for US $20.9 million, or US $1.235 per share, to be paid in newly issued REG shares valued at the 30 trading day volume-weighted average for the day prior to signing. The REG subsidiary will also purchase ICG’s loan to Petrotec AG in the amount of approximately US $15.4 million.
In the next several weeks, REG European Holdings B.V. intends to make a cash tender offer for all other Petrotec shares at a price no less than the value per share to be received by ICG.
More about Petrotec
Petrotec is a fully-integrated company utilizing more than 15,000 collection points to gather used cooking oil (UCO) and other waste feedstocks to produce biodiesel at its two biorefineries in Emden and Oeding, Germany. Petrotec’s nameplate production capacity is 55.5 million gallons (185,000 MT) per year, produced predominantly from UCO. Petrotec’s collection service, treatment processes, and biorefineries, are certified by both German and European regulators. Its biodiesel is compliant with EU standard EN 14214 and is one of the most sustainable biofuels marketed in Europe.
The company has been benefitting of late from premiums awarded for using waste-based biodiesel that count towards renewable fuel obligations under the EU’s Renewable Energy Directive. Last year, we reported that with the Renewable Energy Directive’s double-counting feature for waste-based biofuels and the proposed quadruple counting for second generation biofuels in the RED reform proposals, Petrotec saw Q2 2013 production rise by 22%.
Back in 2012, we reported that Petrotec had moved into the Spanish market via a local office in Barcelona, after concluding there was existing market for the production of biodiesel from used cooking oil, especially now with the market gap left by policy prohibiting Argentine biodiesel. The company had started collecting used cooking oil and producing biodiesel on a tolling basis.
The company found itself mixed up in a bizarre dioxin scare back in 2011 when Petrotec sold dioxin contaminated fatty acids to an unnamed Dutch company for use as an industrial lubricant. Then, the Dutch intermediary sold the product to Harles and Jentzsh for use in animal feed. H&J mixed the biodiesel waste products into animal feed, leading to the destruction of “thousands of chickens” and instructions to “a thousand farms” to refrain from selling contaminated feed.
ICG is best known in the sector as the lead investor in Primus Green Energy, which last year commissioned its 100,000 gallon-per-year natural gas-to-gasoline pre-commercial demonstration plant at its Hillsborough facility.
The demonstration plant utilizes Primus’ proprietary STG+ technology, which is a four-reactor catalytic process that converts syngas derived from natural gas or other feedstocks to gasoline, jet fuel, diesel or aromatic chemicals directly, without the need for further treatment. The process produces drop-in fuels that are ready for immediate distribution, sale and consumption using the existing fuel distribution infrastructure.
Reaction from REG
“REG’s investment in Petrotec is a natural extension of our business strategy which should enable us to better capture value from international trade flows and to participate in European biofuel markets,” said Daniel J. Oh, REG President and CEO.
“Petrotec’s people, culture, business model and technology are similar to ours at REG. We look forward to working with the Petrotec team as REG expands its business into Europe and further delivers the key benefits of our international industry: energy security and diversity, environmental stewardship and food security.”