Green Plains, the owner and operator of a portfolio of ethanol plants in the U.S. Midwest, has engaged Bank of America as financial advisor to conduct a strategic review.
The company, which operates 10 biorefineries in six states, today posted EBITDA for the second quarter of just $4.8m on revenues of $618.8m, but executives said higher ethanol production margins and improved corn oil pricing foretell a more profitable 2H24.
Green Plains equity fell 10% to trade today at $14.42 per share and a $910m market cap – a value that executives say does not reflect the initiatives underway at the company.
“Over the last four years we have positioned the company for the future of decarbonization and to be in the position as an early large volume low carbon intensity feedstock provider to both fuel markets and in the future alcohol to jet sustainable aviation fuel industry as it develops,” CEO Todd Becker said on an investor call today.
Four of its ethanol facilities have committed to the Summit Carbon Solutions CO2 pipeline and three have committed to Tallgrass’s Trailblazer CO2 pipeline retrofit, setting Green Plains up to capitalize on decarbonization by providing a CI-advantaged liquid transportation fuel.
With four facilities committed to summer carbon solutions and three Nebraska facilities committed to Trailblazer and the Indiana opportunity mentioned, we stand ready to capitalize on decarbonization to significantly lower.
“These projects weren’t on our radar five years ago when we launched, when we launched our transformation – the impact of the IRA has caused us to focus more on projects related to decarbonizing our production, especially with the first mover advantage in Nebraska,” Becker said.
“We strongly believe the value of a decarbonized asset is not at all reflected in the current share price or enterprise value,” he added.
Green Plains has had a choppy earnings profile over the last three years, generating $45.5m of adjusted EBITDA in 2023, negative $822k in 2022, and $87.4m in 2021. The company also has a substantial debt balance and paid $37.7m in interest expense in 2023.
In a news release, the company said the strategic review would explore acquisitions, divestitures, a merger or sale, partnerships and financings.
Given forthcoming regulations through 45Z for SAF production, Green Plains could be in the “catbird seat” in Nebraska, with 287 million gallons of low CI ethanol, “which could attract serious interest from ATJ sustainable aviation fuel producers related to new products needed to supply, as well as low carbon fuel markets.”
Becker added that under multiple U.S. election scenarios, the company believes a repeal of the 45Z clean fuel production credit is highly unlikely.
“The CO2 pipeline in Nebraska is on track for second half 2025 startup and the trailblazer project could be the first sizable decarbonization play in the ethanol industry and having three facilities connected to that should put us in an advantaged position,” he said.
