Iowa-based Renewable Energy Group Inc. has reached an agreement with Springdale-based Tyson Foods Inc. to acquire its portion of Dynamic Fuels LLC., a bio-diesel plant that makes fuel from animal byproducts.
Created in 2007, Dynamic Fuels was a joint venture between Tyson and Syntroleum Corp. of Tulsa. Each company owns a 50 percent share of the plant, which is located in Geismar, La.
As the first large-scale renewable diesel plant, Dynamic Fuels was capable of producing upwards of 75 million gallons of synthetic fuel per year, according to a statement on the company's website.
Under the terms of the agreement, Renewable Energy Group, or REG, will acquire Tyson's 50 percent interest, pay $18 million in closing costs on top of refunding $12 million of Dynamic Fuel's debt. Tyson also will receive future production payments up to $35 million over the next 11.5 years.
Andrew Rojeski, vice president of renewable energy for Tyson Foods, said that selling its stake will allow Tyson to channel its capital into other opportunities.
"REG is a long-term customer of ours, buying fats, oils and greases to make renewable fuel, and we hope to continue that relationship," Rojeski said in a news release.
The plant, which opened in October 2010, has faced an uncertain future since it ceased operations in October 2012. Because the plant has been idle for so long, it incurred net losses of $38 million, according to Tyson's annual earnings report in 2013.
Operations ceased initially for mechanical upgrades but remained closed because of an unsteady market.
Tyson warned in a 2010 SEC filing that its renewable energy ventures and other initiatives might not be as financially successful as it initially announced because of factors "that include, but are not limited to, availability of tax credits, competing energy prices, failure to operate at the volumes anticipated, abilities of our joint venture partners and our limited experience in some of these new areas."
Although Tyson didn't report its net loss, Syntroleum's quarterly report did. For the first quarter of 2014, Syntroleum's net loss was $6.5 million. The company reported an operating loss of $2.5 million and operating expenses of $2.8 million for the quarter ending March 31.
"We will continue to explore other ways to commercialize opportunities outside our core business, such as renewable energy and other technologically-advanced platforms," according to Tyson's SEC filing.
After the deal is finalized with Tyson, it would give the company full ownership of Dynamic Fuels. In December, REG announced that it was acquiring Syntroleum and all its assets.
"Upon closing, this is another milestone for REG in growing our core advanced bio-fuels business," Daniel J. Oh, REG president and CEO, said in the release. "It gives us the opportunity to further expand our production capacity into new product lines, while growing our overall advanced bio-fuel manufacturing capability, and bringing on other renewable chemical applications."
Business on 05/22/2014