UTILITY GROUP NTR has completed a reorganisation of its major operating units by merging its US ethanol unit with Nasdaq-listed Green Plains Renewable Energy and taking a stake of more than 40 per cent in that business.
The transaction yesterday follows the sale by NTR of Irish Broadband, a new investment in solar power, a re-entry into wind power after the sale of Airtricity, the closure of its German biodiesel unit and the sale to the Government of its interest in the West-Link bridge. A “liquidity event” for NTR investors is likely in the coming weeks.
NTR’s Bioverda unit is developing two 100 million gallon corn-to-ethanol plants in Indiana and Tennessee. These are scheduled for completion this autumn.
The group bought out its joint venture partner Virgin in the past week in advance of the merger deal with Green Plains, which will combine the bioethanol operations of the two companies. It is believed the deal with Virgin cost some €40 million.
The production capacity of the combined Bioverda and Green Plains operations will exceed 300 million gallons of ethanol per year.
The transaction is subject to various shareholder approvals, as well as lender and regulatory approval. “It’s over 40 per cent, it’s a significant influencing stake,” said NTR finance director Michael Walsh of the company’s interest in Green Plains.
“The market is going through a period of consolidation. The business and the industry remain fundamentally profitable, notwithstanding currently high corn prices,” he said.
“However, scale is important. In order to achieve scale we needed to get access to a currency that would enable us to participate in the consolidation and that currency is public stock – that’s what Green Plains provides.”
As part of the merger transaction, NTR will invest a further €60 million cash in Green Plains at a price of $10 per share in that company.
“This additional investment is expected to be used for general corporate purposes and to finance future acquisitions,” NTR said.
“At current market prices, the transaction is valued at approximately $383 million, which includes approximately $212 million for the completion of plant construction, the $60 million equity investment and $111 million in new equity issued.”
“The merger proposal matches two progressive ethanol producers, creating a solid platform for future growth,” said NTR chief Jim Barry.
“The opportunity presented by Green Plains further extends our footprint in the North American renewable energy market . . . By combining operations and management, together with the additional capital, opportunities for industry consolidation should emerge.”
Green Plains’ chief Wayne Hoovestol said both companies would benefit from the increased scope, scale and critical mass.
“We are stronger and more diverse as a combined company, and we believe this is in the best interest of all stakeholders,” he said.
