By Steve Gelsi,
Company makes diesel from animal fat, inedible corn oil
Renewable Energy Group Inc., the largest producer of biodiesel in the U.S., is expected to price its initial public offering at a discount for its stock market debut on Thursday in a muted 2012 start for new equity listings.
Renewable Energy Group plans to offer 7.2 million shares of common stock at an estimated price range of $13 to $15 a share for trading on the Nasdaq under the symbol REGI.
Based on the midpoint of the range, the Ames, Iowa, company will raise about $101 million. The underwriters are UBS Investment Bank UBS and Piper Jaffray PJC
Scott Sweet of research firm IPO Boutique said he expects the IPO to price at $11 a share, below its estimated range.
The IPO from Renewable Energy has been hit partially by a cloud over alternative energy in the wake of the controversy over Solyndra, a solar-panel manufacturer that went bankrupt last year after receiving a taxpayer-backed loan of $535 million.
It also faces unstable U.S. energy policies, Sweet said. For example, a $1 per gallon tax credit for fuel firms to blend biofuels into gasoline and other refined products expired on Dec. 31. Congress has yet to make any significant move to revive the program.
On a positive note, an expanded renewable fuels standards went into effect in July 2010, which requires a portion of diesel fuel consumed in the U.S. to come from renewable sources.
Renewable Energy Group operates six biodiesel plants, with more than 210 million gallons of capacity.
“We primarily produce our biodiesel from a wide variety of lower cost feedstocks, including inedible animal fat, used cooking oil and inedible corn oil,” the company said in its IPO prospectus. “We believe our ability to process these feedstocks provides us with a cost advantage over many biodiesel producers, particularly those that rely on higher cost virgin vegetable oils, such as soybean oil.”
In the nine months ended Sept. 30, Renewable Energy Group reported a loss of $27.3 million and revenue of $557 million, compared to a loss of $25.1 million and revenue of $147 million in the year-ago period.
Shareholders or Renewable Energy Group include Bunge Ltd. BG -0.63% and ED&F Man Holdings Limited. In 2006, the company received a $100 million private equity investment.
Steve Gelsi is a reporter for MarketWatch in New York.