Together, the plants have an annual production capacity of 780 million gallons. The aggregate purchase price of $477 million represented approximately 30% of the plants' replacement cost. The purchase [image-nocss] price excludes working capital and inventory currently estimated at approximately $75 million. Credit Suisse advised Valero on the transaction.
As North America's largest petroleum refining and marketing company, Valero is a leading buyer of ethanol for blending in its gasoline, and its purchase of the plants will give Valero a dedicated supply of ethanol.
The purchase of the plants in the original bidin Charles City, Fort Dodge and Hartley, Iowa; Aurora, S.D.; Welcome, Minn.; and the site under development in Reynolds, Ind.is expected to close on April 1. The purchase of the additional plantsin Albion, Neb. and Albert City, Iowais expected to close shortly afterward, subject to regulatory approval. Valero plans to operate all of the plants through its subsidiaries.
"These are high-quality, relatively new assets in good locations for buying feedstocks," said Valero chairman and CEO Bill Klesse. "We expect increases in the Renewable Fuels Standard to continue. We are also pleased to have such quality people join Valero."
This is Valero's initial entry into ethanol production, but it has made investments in other alternative energy companies in recent months. Valero has also completed the first phase of a wind farm near its McKee Refinery in the Texas Panhandle that when complete will generate 50 megawatts of electricity. In 2008, Valero established an Alternative Energy & Project Development Group to explore opportunities in alternative and renewable energy sources.
Valero, based in San Antonio, Texas, with approximately 22,000 employees and 2008 revenues of $119 billion. The company owns and operates 16 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately three million barrels per day, making it the largest refiner in North America. Valero is also one of the nation's largest retail operators with approximately 5,800 retail and branded wholesale outlets in the United States, Canada and the Caribbean under brand names including Valero, Diamond Shamrock, Shamrock, Ultramar and Beacon.
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