Guardian Cos. buys ethanol plant for $55M
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The sale of a financially struggling ethanol plant in southern Minnesota is the latest evidence of tough times in the renewable fuel business.
The deal was part of the consolidation under way in Minnesota's $2 billion ethanol industry.
The Guardian Cos. bought the Heron Lake BioEnergy plant, a 60 million-gallon-a-year ethanol producer, for $55 million. Through the first nine months of 2012, Heron Lake lost nearly $3 million.
Guardian Cos. CEO Don Gales said there are buying opportunities for companies like his because the ethanol industry is going through a difficult economic phase.
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"Right now, there is oversupply of ethanol in the market," Gales said. "And with that you're seeing some facilities shutting down or cutting back on production. And we think we'll continue to see that for a while until the supply and demand gets back into balance."
Times are tough for ethanol plants, said Pavel Molchanov, an analyst at Raymond James, because their main ingredient, corn, soared to record prices over the past year as drought shrank supplies. Molchanov said that development also made ethanol profits scarce.
"Some companies have decided to simply shut down production rather than produce and sell at a loss," Molchanov said, who added that ethanol plants are selling for bargain prices. The Heron Lake plant cost more than $100 million to build. Guardian bought it for half that.
Guardian is based in the southern Minnesota community of Janesville.
