Renewable Energy Group Inc., a biofuel company that claims being the the largest producer of biodiesel in the United States, is set to make the first IPO in 2012. According to the IPO filing the company sold 68 million gallons in 2010, about 22% of the total biodiesel produced in the United States in 2010 and about 147 million gallons in 2011. Renewable Energy Group transitioned from being primarily an operator of a third party-owned network of facilities to now owning five operating biodiesel production facilities and leasing a sixth biodiesel production facility with aggregate nameplate production capacity of 212 mmgy. The company switched from producing biodiesel from higher cost virgin vegetable oils, such as soybean oil, to primarily producing biodiesel from lower cost feedstocks, such as inedible animal fat, used cooking oil and inedible corn oil.
Renewable Energy Group currently owns the following biodiesel production facilities:
- 12 mmgy facility in Ralston, Iowa,
- 35 mmgy low-cost feedstock production facility near Houston, Texas,
- 45 mmgy low-cost feedstock production facility in Danville, Illinois,
- 30 mmgy low-cost feedstock production facility in Newton, Iowa
- 30 mmgy biodiesel production facility (recently acquired SoyMor Biodiesel) in Albert Lea, Minnesota.
The company also has a seven year lease for a 60 mmgy low-cost feedstock production facility in Seneca, Illinois.
The million-dollar question is what happens next, after IPO?
The global biofuel production is estimated to reach 1,900 Million barrel in 2020, at a compound annual growth rate (CAGR) of 10% in 2015 – 2020, according to the market study Global Biofuel Production Forecast 2015-2020. According to market forecasts biofuels are the huge emerging market of a kind that happens once in a century and promises vast riches beyond imagination. However, harsh economic realities bite in the biofuel market. Renewable Energy Group bets its success on implementation of RFS2, a federal standard that requires to source 36 billion US gallons from biomass by 2022.
The United States biodiesel industry is still in a downturn. Will the company succeed raising the capital at IPO? Will Renewable Energy Group bleed out cash before the before market sees upturn? In the current economic situation the biofuel market perspectives do not seem too bright. Still, U.S.-Iran tensions are at all time high. Any calamity in the the Straits of Hormuz will drive oil prices sky high and that would be the hour of triumph for renewables and for Renewable Energy Group.