Albion ethanol plant profitable

ALBION, Neb. — Less than a year after ethanol producer VeraSun Energy Corp. filed for bankruptcy, seven of the company's plants have become the few profitable areas for oil refining giant Valero Energy Corp.

“Right now, ethanol's been one of the bright spots in the system,” Valero spokesman Bill Day said. “We've been pleased with its profitability.”

Valero executives visited Albion's ethanol plant last week to meet employees and local leaders and to kick off the plant's new United Way campaign.

Albion's plant is one of seven ethanol plants and an undeveloped site that the company bought at auction in April from VeraSun for $477 million.

The plants' purchase was the first foray into ethanol production for the San Antonio-based Valero, which has long been buying ethanol as the nation's largest independent oil refiner.

Day said the company had been considering a venture into ethanol and had been eyeing VeraSun's plants for their location and equipment, but the price was too high.

The bankruptcy sale brought the price down significantly, allowing Valero to buy the plants for about a third of what they would have paid to build new, Day said.

He said that being an ethanol producer gives Valero more diversity, allowing it another way to make money when oil's price is high and refining profit margins are low.

That's the situation the company is in right now, as it reported $254 million in losses for the second quarter. But the cycle of the ethanol market runs counter to that of oil refining, allowing the company to have one profitable area while the other is down.

Those counter-running markets have often put the oil refining and ethanol businesses at odds.

Day acknowledged that his company's about-face on ethanol could be described as an “if you can't beat ‘em, join ‘em” strategy, but he and another Valero executive said that with the government's renewable fuel standard mandating increased ethanol use, ethanol's role in the future of American energy is undeniable.

“The way we look at it, we're in the fuels business,” said Gene Edwards, Valero's executive vice president for corporate development and strategic planning. “Ethanol is growing, and it will definitely be part of the mix going forward.”

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