Valero Buying Indiana Ethanol Plant as Prices for Biofuel Rally

Valero Energy Corp. (VLO), the world’s largest independent refiner, has agreed to buy a 110 million-gallon-a-year ethanol plant in Mount Vernon, Indiana, from Aventine Renewable Energy Holdings Inc. (AVRW)

The plant would be Valero’s 11th for production of ethanol. The value of the acquisition wasn’t disclosed by the San Antonio-based company. Ethanol futures have risen 48 percent this year.

“Valero is the largest gasoline merchant in the U.S., they have a very large position and they’ll always need ethanol to blend,” Fadel Gheit, an analyst at Oppenheimer & Co., said in a telephone interview from New York. “Valero has plenty of cash, the stock is performing well, so if they need it, why not do it?”

After the purchase, Valero’s ethanol-processing capacity will rise to 1.3 billion gallons a year. The plant is idle and should resume output in the next several months, according to a statement from Valero.

Indiana is the fifth-largest corn-producing state. In the U.S., ethanol is mainly made from corn.

Valero slid 84 cents, or 1.5 percent, to $54.35 a share at 1:04 p.m on the New York Stock Exchange. The shares have gained 7.7 percent this year.

Denatured ethanol for April delivery rose 3.4 cents,or 1.2 percent, to $2.835 a gallon in Chicago after touching $2.84, the highest intraday price since Nov. 3, 2011.

To contact the reporter on this story: Lucia Kassai in Houston at lkassai@bloomberg.net

To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Charlotte Porter, Richard Stubbe

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