Renewable Energy Group (REG) announced Monday it has entered into agreements to consolidate with three commercial‐scale biodiesel plants. Western Iowa Energy, which operates a 30-million-gallon/year (mgy) facility in Wall Lake, IA; Central Iowa Energy, LLC, which operates a 30-mgy facility at Newton, IA; and Blackhawk Biofuels, LLC, which operates a 45-mgy facility in Danville, IL, are involved in the transaction. The facilities represent an additional 105 mgy of wholly owned production capacity, which would allow the combined entity to better position itself to meet anticipated demand from the petroleum industry’s distillate fuel market.

Ownership of the operations of all four companies will be consolidated in a new holding company to be named Renewable Energy Group, Inc. The consolidated company will be owned by the current members of the three acquired companies and current REG investors, including Bunge North America, ED&F Man, Natural Gas Partners, NGP Energy Technology Partners, U.S. Renewables Group (USRG) and West Central Cooperative. The transaction is subject to approvals by the shareholders of all four companies and to other conditions, including customary regulatory approvals.

REG’s chairman and chief executive officer Jeff Stroburg cited demand by major petroleum distributors and oil refiners as a key factor in the decision to move forward with plant consolidation. “As the Renewable Fuels Standard (RFS) takes effect and our nation moves toward energy reform, the distillate market is demanding technical expertise, dependable supply, more efficient distribution and creative pricing options from major biodiesel partners,” Stroburg says.

Under the 2007 Energy Independence and Security Act, the RFS calls for 500 million gallons of domestic biodiesel consumption ramping up to 1 billion biodiesel gallons in 2012. “We believe this proposed consolidation brings greater economies of scale, streamlined central management of complex logistics and decision‐making processes and enhanced risk‐management opportunities,” says Daniel J. Oh, REG’s president and chief operating officer. “By more efficiently managing our business and strengthening distribution channels, REG will continue to partner with obligated parties of the RFS in order to reduce our nation’s reliance on foreign oil.

“Consolidating these three multiple‐feedstock facilities under the ownership of Renewable Energy Group will offer technology advantages as these sites utilize a variety of raw materials like soybean oil, fats, corn oil, canola oil and recycled restaurant grease to produce large volumes of high quality biodiesel, which are then marketed through our national infrastructure system,” Oh explains.

Bill Horan, chairman of Western Iowa Energy’s board of directors states, “Although our facility is currently well positioned compared to other biodiesel manufacturers in the U.S. due to its ability to process multiple feedstocks, this proposed consolidation offers our members the opportunity to diversify their biodiesel investments while continuing and expanding our current relationship with REG.”

Horan adds, “Western Iowa Energy‘s board has carefully considered the future of our facility and believes the REG consolidation proposal is the best direction for returning value to our members.”

Central Iowa Energy’s board chairman, Jim Johnston, says, “Given current industry consolidation and production economics, it is difficult for stand‐alone facilities like our plant to succeed on their own in the 67-billion‐gallon distillate market.”

In March, Blackhawk Biofuels announced upgrades and enhanced production capabilities to utilize a wider variety of feedstocks. “The Blackhawk Biofuels board believes that a merger with REG is the best option for Blackhawk in the current challenging environment,” says Ron Mapes, chairman of Blackhawk Biofuels.