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World Energy Aiming to Be Major Player in North American Biofuel Market: CEO

04/05/2018

World Energy's recent acquisition of a stake in California-based alternative jet fuel and biodiesel producer AltAir Paramount and its merger with privately held Canadian biodiesel producer Biox Corp. mark the start of a "push" to become a much-larger supplier of biomass-based diesel in the North American market, its CEO said in an interview this week.

"It's no secret that California, Canada and renewable diesel are emerging as the new high-growth frontiers for advanced biofuels," Gene Gebolys told OPIS. "These moves are part of World Energy's ongoing push toward building out a large-scale platform across North America to provide growing markets with reliable biomass- based diesel supply."

The Boston-based biofuel producer in late March said it had merged with privately held Canadian biodiesel producer Biox Corp. in a deal valued at $345 million. That deal came a week after World Energy said it has acquired Delek US Holding's Paramount, Calif., refinery assets and its interest in renewable jet and diesel producer AltAir Paramount. The deal will give World Energy its first presence in the lucrative California market.

Gebolys said he believes both moves will benefit the company given the growing demand for advanced biofuels, predicting that the renewable fuel industry's future lies in providing fuels with "ever-lower" carbon intensities.

"Biofuels, particularly those focused on diesel applications, have a huge role to play in that," he said. "We intend to do everything we can as a company to drive the growth of advanced biofuels as the market matures into one characterized by fewer larger, more-efficient players."

Although the moves are aimed at making World Energy more of a major player in the industry, Gebolys downplayed the notion of rivalries among producers, explaining that other "quality-focused, large-scale producers are driving toward the same goals we are. The market needs an ever-growing amount of reliably supplied renewable fuels. No one company will own this market. We need each other to succeed."

He added that the two deals also will offer synergies to the company.

"Commodity businesses operate better at scale," he said. "Not only can we operate many plants more efficiently than we can operate one or two, but we can better accumulate and disseminate know-how across the fleet. One of the most- important parts of operating a larger platform is that it allows all plants to learn from each other to the betterment of all."

Gebolys seemed especially bullish on California. The state "has long been severely constrained logistically," he said, but the company's facility there "connects to water, pipe, rail and truck in the heart of the second-most- populous urban area in the country."

"Our plan is to not only produce renewable diesel and its coproducts there," he added, "but to optimize the facility to help make the blending and dissemination of all renewable fuels more efficient in that vitally important market."

Part of that plan will focus on renewable jet fuel, and Gebolys said that his business there "has been at the forefront" of its commercialization.

"All fuel markets start small, but our group in California is doing important work on aviation applications and quietly have been for many years," he said.
"That has been important as airlines are becoming more and more proactive about pursuing low-carbon solutions for aviation fuel."

Further, Gebolys said renewable diesel will become more of a focus for the company. "Renewable diesel and renewable jet have been steadily increasing market share as a percentage of all advanced biofuels," he said. "As drop-in fuels, they have some compelling advantages over other biomass-based diesel alternatives. "We have every intention of continuing to invest in renewable diesel in our [California] facility and elsewhere."

World Energy acquired the refining, pipeline and storage assets of the Paramount facility as well as Delek's stake in AltAir for roughly $72 million, a figure that includes estimated working capital, Delek's portion of proceeds from the recently reinstated 2017 $1/gal biodiesel blenders tax credit and deal costs.

The deal covered the 63-acre refinery complex that includes AltAir's 45-million- gal/year renewable jet and renewable diesel production facility; 1.7 million bbl of product storage; a truck rack with 28,000 b/d of throughput capacity; rail storage for up to 70 railcars; and pipelines stretching more than 71 miles connecting the facility to major southern California distribution hubs including Long Beach.

AltAir Fuels' Paramount facility, which began commercial operations in early 2016, has signed renewable jet fuel offtake agreements with United Airlines, World Fuel Services, Gulfstream, Air BP and KLM, and has supplied its renewable jet fuel to a Navy carrier strike force.

The company also stands to benefit from a proposal under consideration by the California Air Resources Board to allow alternative jet fuel to generate LCFS credits as an opt-in fuel starting as early as Jan. 1, 2019, as well as from last year's decision by the UN's International Civil Aviation Organization to hold carbon emissions from the commercial aviation sector at 2020 levels.

The merger with Biox came after the two companies partnered in 2016 to buy and run a Houston biodiesel plant with an annual capacity of 90 million gal. In July, Gebolys said that he expected an expansion at the plant to increase its capacity 50% by early this year.

Biox also operates a biodiesel plant in Hamilton, Ontario, with an annual capacity of 16 million gal and is developing a 12-million-gal/year combination renewable diesel/biodiesel plant in that province.

--Michael Schneider, mschneider@opisnet.com
 

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