Shell Oil To Buy Abengoa in Hugoton
Joe Denoyer - October 14, 2016 3:05 pm
OMAHA (DTN) — Shell Oil Company has agreed to buy Abengoa Bioenergy’s cellulosic ethanol plant in Hugoton, Kansas, for what could be a significantly discounted price of $26 million, according to court documents filed Wednesday in the U.S. Bankruptcy Court for the District of Kansas. The plant was built at an estimated cost of $400 million to $500 million.
Court documents show Shell is being put forward by Abengoa Bioenergy as the stalking-horse bidder on the plant. A stalking-horse bidder is the first bid in an auction and more or less sets a floor price for the auction. Abengoa is selling its ethanol assets as part of a bankruptcy reorganization.
“The debtor has determined that the sale of the purchased assets by public auction will enable it to obtain the highest and best offer for these assets (thereby maximizing the value of the estate) and is in the best interests of the debtor’s creditors,” according to a motion to sell filed with the court.
Though a purchase agreement has been signed by officials at both Shell and Abengoa, there is an official auction scheduled. If additional qualified bids are made for the plant and its liabilities, Abengoa will conduct an auction on Nov. 21, 2016, at the company’s office in Chesterfield, Missouri, according to court documents. If approved, the sale would be completed by no later than Dec. 8.
As part of the purchase agreement, Shell will assume a number of existing contracts Abengoa has related to the operation of the Hugoton plant.
Shell is not new to the biofuels industry. The company is part of a joint venture with Raizen to produce sugarcane ethanol in Brazil. Shell is one of the largest biofuels blenders in the world, blending about 2.4 billion gallons in 2014, according to Shell’s website.
In addition, Shell owns and operates two pilot plants in Houston, Texas, used to study advanced biofuels.
Mark Fisler, managing director of Los Angeles-based Ocean Park Advisers, told DTN in August the 25-million-gallon Hugoton plant remains in “cold status.” The plant was in the middle of start-up when Abengoa’s financial problems surfaced.
In August, Fisler predicted interested buyers of the Hugoton plant would come from all around the world and from three main camps.
That included from existing cellulosic ethanol development companies and from first-generation corn ethanol companies looking to produce “generation 1.5” ethanol and maybe use some of the cellulosic aspects of the plant for corn fiber.
The third camp included advanced biofuels/bio-based chemical companies that may retrofit some of their existing technologies to the plant.
Fisler said the cellulosic ethanol plant still has a “very small number” of employees who remain connected to the site and would be employees with “sound institutional knowledge” about the technology.
The Abengoa plant is designed to use a variety of feedstocks, including wheat straw, switchgrass and even municipal solid waste. It was expected to provide an annual $17-million, 300-million-ton feedstock market for area farmers.
The 25-million-gallon Hugoton plant is designed to process about 1,000 tons a day of corn stover, wheat straw, milo stubble, switchgrass and other biomass feedstocks, all within a 50-mile range of the plant. The plant also is designed to produce electricity.
In August, Abengoa sold three of its ethanol plants to Omaha-based Green Plains Inc. during a recent auction. Green Plains bid $237 million to purchase plants in Madison, Illinois, Mount Vernon, Indiana, and York, Nebraska. The plants have an annual combined production capacity of 236 million gallons.
KE Holdings LLC made a successful $115 million bid to buy the Abengoa plant in Ravenna, Nebraska, while Kansas-based ethanol plant builder ICM Inc. was the high bidder at $3.15 million for the Abengoa plant in Colwich, Kansas. ACE Ethanol, LLC, was the successful back-up bidder on the Kansas plant, with a bid of $3 million. The Abengoa corn ethanol plant in Portales, New Mexico, so far has not sold.