REG discusses Geismar expansion, Houston shutdown in Q3 results

Cynthia (CJ) Warner, president and CEO of Renewable Energy Group Inc., provided an update on the expansion of the company’s Geismar renewable diesel plant and elaborated on plans to shut down the company’s Houston biodiesel plant during a third quarter earnings call held Nov. 4.

Warner said plant operations continued to be strong during the third quarter. Total production for the three-month period was down 7 percent when compared to the same period of 2020. She primarily attributed the drop to the impact of Hurricane Ida on the renewable diesel facility in Geismar, Louisiana. “The Geismar team brought the plant down safely in preparation for the storm and then safely returned it to normal operations once the local utilities were back up and running, resulting in only two weeks of unplanned downtime,” Warner said.

Warner also confirmed that the storm caused no material damage to the plant and did not delay the improvement and expansion project currently underway at the Geismar plant. That expansion project aims to add 250 MMgy of production capacity to the facility, boosting annual production capacity to 340 MMgy. A groundbreaking ceremony for the expansion has held Oct. 14.

Current plans call for the Geismar facility to continue to produce renewable diesel. Warner, however, said the company is often asked about the potential to produce sustainable aviation fuel (SAF) at the facility. She noted the facility produced the first commercial batches of SAF in the U.S. back in 2010. REG acquired the facility in 2014 and has optimized Geismar to maximize profitability through renewable diesel production, Warner said. “As it stands today, we know the investments it would take to produce scalable SAF at Geismar—both now and following the improvement and expansion project,” she added. “However, given current market conditions and consumer demand, we continue to optimize for renewable diesel production.” Should the economics change, Warner said REG will reassess the situation.

Also during the call, Warner elaborated on the Sept. 29 announcement that REG will close its 35 MMgy biodiesel plant in Houston, Texas. She said REG has operated the Houston plant since 2008 and stressed the plant has consistently run well. “We made the decision not to renew the long-term property leases there as it would have imposed an uncompetitive fixed cost on the plant,” she said. “Note that one of our other 11 plants are subject to a similar lease.”

“Combined with the fixed-cost burden of that lease, the lack of REG’s hallmark multi-feedstock processing capability left the plant in a definitively non-competitive position relative to the other facilities in our portfolio,” Warner added. “These factors together drove the difficult decision to shut the plant down.”

REG produced 128 million gallons of biodiesel and renewable diesel during the third quarter, down 7 percent when compared to the third quarter of 2020. Production at Geismar was down 13 percent due to downtime caused by Hurricane Ida. North American biodiesel production was down 4 million gallons, or 4 percent, primarily due to production optimization.

REG sold 176 million gallons of fuel during the third quarter, flat with the same period of last year. Renewable diesel sales increased 9 million gallons.

REG reported third quarter revenues of $1 billion on 176 million gallons of fuel sold, up from $572 million in revenues reported for the third quarter of last year. Net income available to common stockholders was $42 million, compared to a net income of $22 million for the same period of last year. Adjusted EBITDA was $68 million, up from $55 million.