CGF retains Equity Partners to sell Clayton plant

Adamstown, Md.-based Chesapeake Green Fuels LLC has retained Pasadena, Md.-based Equity Partners Inc. to sell its idle biodiesel plant. CGF has been trying to sell the facility, which is located in Clayton, Del., for approximately six months. Due in part to the reinstatement of the biodiesel tax credit, Equity Partners Managing Partner Ken Mann estimates the plant will sell in about 60 days.

Fagen Inc. built the Desmet Ballestra-designed facility in 2006, said Mann. The bank handing the original owner’s financing foreclosed on the plant and sold it to CGF in 2008. The current owners began retrofitting the plant in 2009 to make it multifeedstock capable. Work had also begun on pump repairs and other maintenance needs. The facility needs some additional work, Mann said, noting that CGF chose not to spend money on the plant in 2010 due to the expiration of the biodiesel tax credit. The decision to sell the plant has been made because the plant’s current investors do not have tolerance for further investment in the plant, Mann continued.

Mann estimates that it will take approximately 60 to 90 days for the facility’s next owner to complete the needed work and begin operations. Depending upon what a new owner spends to fix up the plant, Mann said the nameplate capacity will range from 7 MMgy to 10 MMgy. Specific works that needs to be completed at the facility to bring it back online includes rebuilding some pumps. To complete the transition to multifeedstock capability, the new owners will also need to makes some mechanical adjustments and add some additional filtration, Mann said. He estimates this work would cost a total of $150,000. “To get to 7 to 10 million gallons, engineers in the industry say about $1 million of work is needed, including a week’s worth of programming, distillation column [work], and some work in glycerolosis process,” he continued.

There are several factors that should make the facility an attractive investment to potential buyers, Mann said. The facility is located near Pennsylvania, which makes it uniquely suited to supply biodiesel for the state’s mandate program. In fact, Mann noted that the plant is only 137 miles from Petroleum Products Corp.’s biodiesel terminal that supplies 90 percent of the biodiesel used to meet Pennsylvania’s mandate. In addition, the plant features rail and truck loading capabilities, has 250,000 gallons of biodiesel storage with nitrogen blanketing onsite, and features a free fatty acid reduction process upgraded to a glycerolysis system. The plant is also fully automated.

According to Mann, the plant sale is currently being privately negotiated. However, it is possible that process may result in an auction. Mann also said he expects the plant to be sold as a single entity rather than the equipment being sold off piece by piece. This is due in part to the fact that all permits have been maintained and the facility has already been registered under the RFS2 and IRS 637. “There are huge opportunity costs [to the buyer] if you disassemble it, move it, and have to go back through a registration process,” he said. “I would have to believe there is far more value leaving it in place.”

Mann also noted that the plant has been maintained very well during its idle status. When idled, he said, the plant was professionally emptied and cleaned. A plant manager has also remained onsite.