For sale: Houston biodiesel plant, nation's largest

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Jun 23, 2009 (Houston Chronicle - McClatchy-Tribune Information Services via COMTEX) -- GRH | Quote | Chart | News | PowerRating -- GreenHunter Energy said today it is exploring a possible sale of its massive biodiesel refinery at the Houston Ship Channel as it works to improve its balance sheet and struggles with a tough market for the alternative fuel.

The Grapevine-based firm also said it has struck an agreement with lenders to delay some loan payments until November and waive any events that may put the company in default before then.

GreenHunter hired an investment banking firm to look for a potential buyer for the 105 million gallon per year plant, the nation's largest. The firm will also help find domestic or international partners, alternative financing, potential new equity capital and enough working capital to get the plant running again, the company said in a statement today.

The $70 million GreenHunter plant opened in June 2008 and was touted for its ability to make biodiesel from a variety of vegetable oils and animal fats, rather than being tied exclusively to expensive soybean oil, like many of its rivals.

At a grand opening ceremony last summer, Gov. Rick Perry said the project represented "the future of energy in Texas and the United States."

But GreenHunter's Houston plant has been idle since February amid weak domestic demand for the fuel, new trade barriers on U.S. biodiesel exports to Europe and low oil prices that have made renewables less competitive with petroleum based fuels, said Jack Zedlitz, a company spokesman. Last year, the plant also was temporarily forced to shut down after receiving damage from Hurricane Ike last September.

Mostly made from vegetable oils in the U.S., biodiesel has been touted as a homegrown way to help reduce dependence on oil, cut tailpipe emissions and aid American farmers. To stoke demand, the U.S. government offers a $1-per-gallon tax credit to companies that blend biodiesel with petroleum diesel.

But many U.S. producers have struggled to remain profitable amid higher prices for soybean oil, the chief feedstock used to make biodiesel in this country. Some have cut production, while others have temporarily shut down.

Energy legislation in 2007 was supposed to require blending of 500 million gallons of biodiesel in 2009, doubling to 1 billion by 2012. But the Environmental Protection Agency still hasn't approved the rules to put the law into practice. That delay has left many domestic producers without a U.S. market for the fuel.

Texas has 30 biodiesel plants with a total production capacity of 691 million gallons per year, according to the Biodiesel Coalition of Texas. But much of that capacity has been idle in recent months, including several plants in the Houston and Galveston area.

GreenHunter said a new amendment on its credit agreement with lender WestLB with give it some breathing room while it explores options for the Houston plant. The amendment gives it until Nov. 15 to make payments on a $38.5 million loan and a $10 million credit line.

"By amending our existing credit agreement with WestLB, we have positioned the company in a manner that should allow us time to seek a number of solutions to our present financial situation," Gary C. Evans, GreenHunter's chairman and CEO said in a statement.

Recently the company, which also has wind energy projects and other renewable energy assets, said it is also exploring strategic alternatives for other company assets in a bid to improve liquidity and strengthen its balance sheet.

brett.clanton@chron.com

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