Abengoa Bioenergy Sells Ethanol Plant in Midst of Company’s Bankruptcy

Abengoa Bioenergy U.S. Holding LLC bankruptcyThe biofuels industry has had a complicated history. Taxpayer.net argued that the sector’s intricate past started in the 1970s, during the early energy crises

Fast-forward to the present, and it appears the bioenergy industry still isn’t doing too well. In the midst of its bankruptcy filing, Abengoa Bioenergy U.S. Holding LLC recently sold its Hugoton, Kansas cellulosic ethanol plant to Synata Bio, according to The Wichita Eagle. The bill? $48.5 million. 

Abengoa’s bankruptcy filing 

Ethanol Producer Magazine reported Abengoa, a Spanish company specializing in biofuels, filed for voluntary Chapter 11 bankruptcy in U.S. court in February. This filing also included the company’s U.S. subsidiaries. Antonio Vallespir, president and CEO of Abengoa, said the company filed in St. Louis to enable its more profitable facilities to continue operations in the meantime. 

“[The filing] also provides the opportunity for a coordinated and supervised reorganization or sale process, while still allowing each involved debtor company substantial control over its own costs, debts and assets,” said Vallespir, as quoted by Ethanol Producer Magazine. 

In other words, all of the subsidiaries under Abengoa will take a semi-independent approach to how they handle their financial obligations. Across the Atlantic, Abengoa S.A., the owner of Abengoa Bioenergy, is undergoing a bankruptcy process that will enable it to restructure its debt without having creditors pursue claims against the company. 

It turns out that Abengoa won’t recuperate the costs associated with constructing the Hugoton plant. Specializing in producing energy from cellulose found in wheat straw or switchgrass, the facility was funded by a $133.9 million loan from the U.S. Energy Department in 2011, as noted by The Wichita Eagle. 

An outlook of the ethanol industry

Ethanol production is a sizeable industry in the U.S. According to the Renewable Fuels Association, the country produced approximately 14.2 billion gallons in 2013. Iowa is the state with the largest number of plants with 42 operating ethanol refineries.

A look at the RFA’s biorefineries map attests to as much. In general, the Midwest has the strongest foothold in the nation, with Minnesota, South Dakota, Nebraska, Kansas, Illinois and Indiana possessing the greatest share of ethanol production centers.

But analysts have speculated that the energy industry may begin turning away from ethanol. Fortune’s Dan Mitchell wrote that some lawmakers have assessed the merits of rescinding the Renewable Fuel Standard, which mandates that 95 percent of the gasoline sold in the U.S. be mixed with 10 percent ethanol. 

Legislation isn’t the only factor impacting the ethanol industry’s survival. Oversupply, decreasing oil prices and lackluster margins are causing investors to turn away from investing in ethanol biorefineries. For example, grain company Archer Daniels Midland recently announced that it’s considering decommissioning its three dry-mill corn-processing plants, a sign that the company has less interest in ethanol production. 

Assuming ethanol continues to become a challenging business, the RFA may be the only factor holding the sector together. If oil prices continue to drop and investment in other fossil fuels rises, it’s possible some of the largest biorefineries may be sold and converted into alternative production facilities. 

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.

Joel Glucksman is an experienced civil and bankruptcy litigator specializing in the representation of secured lenders and other creditors in complex suits and bankruptcies. His court appearances take him throughout the State and Federal courts in the metropolitan area, focusing in particular on the Bankruptcy Courts for the District of New Jersey and the Southern and Eastern Districts of New York. For more information, please visit Joel Glucksman's full biography at Scarinci Hollenbeck

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