Green Plains has signed an asset purchase agreement with Valero Renewable Fuels Company to sell three of its ethanol plants for $328m.
Green Plains stated that the transaction will result in the sale of 280 million gallons capacity or 20% of its reported ethanol production capacity to Valero.
The consideration to be paid by Valero includes $300m in cash and $28m in working capital, which will also be paid in cash. The ethanol plants are located in Lakota, Iowa, Bluffton, Indiana and Riga, Michigan.
Green Plains president and CEO Todd Becker said: “The sale of these three ethanol plants demonstrates our commitment to strengthening our balance sheet and unlocking value for our shareholders.”
“As we stated in May, when we outlined our Portfolio Optimization Program, we would divest assets that enable us to execute our long-term strategic objectives.
“This sale is the first step towards our strategic objectives to prove the value of our assets and to significantly reduce or eliminate term debt by the end of 2018.”
The company has also entered into an asset purchase agreement with Green Plains Partners to acquire the storage and transportation assets and the assignment of railcar leases associated with the Lakota, Bluffton and Riga ethanol plants.
It will exchange nearly 8.9 million units it owns in Green Plains Partners, valued at $120.9m, for the storage and transportation assets and railcar leases.
In addition, Green Plains and the Green Plains Partners have agreed to extend the storage and throughput services agreement an additional three years to 30 June, 2028.
Becker said: “Exchanging a portion of Green Plains’s ownership in the Partnership to acquire the three ethanol facilities’ storage assets from Green Plains Partners is highly beneficial to both parties.
“For Green Plains, it maximizes the cash proceeds from the sale of the three ethanol facilities and reduces the associated minimum volume commitment throughput of ethanol production.
“For Green Plains Partners, it lowers the distributable cash flow needs, enabling us to maintain the current annual distribution, making for an accretive transaction for the Partnership unitholders.”
The transactions are subject to customary closing conditions and regulatory approvals. They are expected to be closed in the fourth quarter of this year.