The Paramount Deal: World Energy takes off with audacious $72M acquisition of AltAir and the Paramount oil refinery

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In Massachusetts, World Energy has acquired renewable jet and diesel producer AltAir Paramount, and its Paramount Petroleum refinery assets, both collocated in Paramount, CA, as well an adjacent tank farm and most of Delek’s California pipeline assets, from Delek US Holdings, for $72 million in total consideration.

It’s the first time ever that a biofuels enterprise has acquired a well-known petroleum refinery. Sign of changing times (though there have been noted conversions by petroleum refiners of individual refineries, e.g. Eni’s switchover in Venice, Italy to renewables).

The purchase includes a 63-acre complex consisting of a 45 million gallon per year renewable jet / renewable diesel production facility, 1.7 million barrels of product storage, a truck rack with 28 thousand barrels per day of throughput capacity, rail storage for up to 70 rail cars, and pipelines stretching over 71 miles connecting the facility to major southern California distribution hubs including Long Beach.

World Energy is one of the largest and longest serving advanced biofuel suppliers in North America. Founded in 1998, the company now has more than 245million gallons of biodiesel and jet fuel production capacity, Verified Q-RINs, BQ-9000 quality, fleets services with delivered diesel blends from B99 to B5, glycerin & fatty acids, and engineering services. The company operates biodiesel manufacturing plants in Houston, TX, Natchez, MS, Rome, GA, Harrisburg, PA, and now Paramount, CA.

Where in the world is Paramount?

It’s adjacent to East Compton, south of downtown Los Angeles and situated alongside the Los Angeles River as it wends its way into Long Beach — or think of it as just east of the junction between the Long Beach and Riverside Freeways.

The refinery itself is the old Douglas Oil refinery, if your Los Angeles or energy roots go back a ways — and at one point it was owned by Conoco and then DuPont after the Conoco acquisition — before being spun-off as the Paramount Refinery and ultimately being acquired by Alon USA and then Delek. The petroleum refinery itself has been idle for some time. The jewel in the crown is the

The AltAir backstory

In January 2016 we reported that the Department of the Navy obtained 77.66 million gallons of cost-competitive, drop-in biofuels blends in support of the launch of the Great Green Fleet, which will officially debut January 20th in San Diego at a launch ceremony that attracted US Secretary of the Navy Ray Mabus and US Secretary of Agriculture Tom Vilsack. The fuel provided meets the F-76 marine diesel specification — somewhat different and more complex than conventional diesel because of the at-sea requirement for fuels with a higher flash point. The price for the fuel to the DLA is $2.05 per gallon. So, yes, renewable fuel fans, the Navy will be running on the fuel that Islamic State can’t make or seize. It’s cost-competitive, drop-in, non-food, next-gen, advanced renewable fuel. And this buy is from AltAir.

Navy to launch Great Green Fleet with 77 million gallon buy of cost-competitive, non-food advanced biofuels blends

We reported in January on a bit of biofuels from the bush, poured into and powering one of those Flying Kangaroos, and you have the latest news out of Australia, and a beauty if you happen to barrack for aviation biofuels. The world’s first dedicated biofuel flight between the United States and Australia, QF96 from Los Angeles to Melbourne. The trans-Pacific 15 hour flight operated with approximately 24,000kg of blended biofuel, saving 18,000kg in carbon emissions. Qantas will use biofuel processed from Brassica Carinata, a non-food, industrial type of mustard seed, developed by Canadian-based agricultural-technology company, Agrisoma Biosciences (Agrisoma). Across its lifecycle, using Carinata-derived biofuel can reduce carbon emissions by eighty percent compared to traditional jet fuel.

AltAir, which converted the Carinata oil into jet fuel, operates the world’s first commercial-scale renewable jet fuel plant at the AltAir Paramount refinery in Paramount, Calif. The plant produces 35 million gallons per year of renewable fuels, including Honeywell Green Jet Fuel, using Honeywell’s UOP Renewable Jet Fuel process, which produces fuels that are chemically identical to petroleum-based fuels. Delivery of the fuel to the aircraft is provided by supply partner World Fuel Services from Miami, Florida.

Qantas, Agrisoma, Honeywell, AltAir, WFS partner in historic first Pacific jet biofuels flight

We reported in June 2015 that AltAir Fuels would begin regularly scheduled deliveries of sustainable biojet fuel to United Airlines LAX operations this year, the airline announced today. AltAir’s Paramount, California-based refinery converts sustainable feedstocks, like non-edible natural oils and agricultural wastes, into low-carbon, renewable jet fuel. This fuel is price-competitive with traditional, petroleum-based jet fuel, but achieves a 50 percent reduction in carbon dioxide emissions on a life cycle basis when compared to traditional jet fuel.

Under the terms of the agreement, United purchased up to 15 million gallons of sustainable aviation biofuel from AltAir over a three-year period, with the option to purchase more.

United to start flying biofuels out of LAX in 2015; AltAir to supply 15 million gallons in 3-year deal

In March 2016, we reported that United Airlines made history by becoming the first U.S. airline to begin use of commercial-scale volumes of sustainable aviation biofuel for regularly scheduled flights with the departure of United Flight 708 from Los Angeles International Airport. The launch marks a significant milestone in the commercial aviation industry by moving beyond demonstration flights and test programs to the use of advanced biofuels for United’s ongoing operations.

United Airlines launches regular commercial flights from LAX to SFO on AltAir biofuel

In May 2017 we reported that Singapore Airlines (SIA), in partnership with the Civil Aviation Authority of Singapore (CAAS), started operating a series of 12 ‘green package’ flights over a three-month period on its non-stop San Francisco-Singapore route. The first of the 12 flights, SQ31, departed San Francisco at 1121hrs (San Francisco Time) on 1 May 2017 and arrived in Singapore at 1910 hrs (Singapore Time) on 2 May with 206 passengers on board. Over the three-month period, flight SQ31 was powered by a combination of HEFA (Hydro-processed Esters and Fatty Acids), a sustainable biofuel produced from used cooking oils, and conventional jet fuel. The biofuel, produced by AltAir Fuels, will be supplied and delivered to San Francisco by SkyNRG in collaboration with North American Fuel Corporation (NAFCO), a wholly owned subsidiary of China Aviation Oil (Singapore), and EPIC Fuels.

Singapore Airlines launches first of 12 biojet flights on San Francisco route

In April 2017 we reported that Air Canada is participating in the Civil Aviation Alternate Fuel Contrail and Emissions Research project, a research project led by the National Research Council of Canada to test the environmental benefits of biofuel use on contrails.

This project uses advanced sensing equipment mounted on a research aircraft operated by the NRC to measure the impact of biofuel blends on contrail formation by aircraft on five biofuel flights operated by Air Canada between Montreal and Toronto in the coming days weather permitting. During these flights the National Research Council of Canada will trail the Air Canada aircraft with a modified T-33 research jet to sample and test the contrail biofuel emissions. The sustainable biofuel is produced by AltAir Fuels from used cooking oil and supplied by SkyNRG.

Air Canada takes off with biofuels tests

AltAir: The Multi-Slide Guide

Renewable jet fuel, competitive cost, at scale: The Digest’s Multi-Slide Guide to AltAir

Renewable jet fuel, competitive cost, at scale: The Digest’s Multi-Slide Guide to AltAir

Reaction from the stakeholders

“This acquisition places us in the heart of the growing California cleaner fuels market by adding to our platform the world’s first renewable jet refinery and one of only three US renewable diesel plants,” said Gene Gebolys, World Energy’s CEO. “Our move into California, into renewable jet/diesel technology, and into expanding our downstream distribution capabilities are important next steps in our effort to establish a reliable coast to coast supply presence for growing blended biofuel customers.” he continued, “We look forward to being a great corporate citizen in Paramount and to making ever larger contributions to the nation’s quest for cleaner renewable fuels.”

“Supported by the frameworks of the national Renewable Fuel Standard and California’s Low Carbon Fuels Standard programs, AltAir converted a struggling petroleum refinery to one of the country’s most important renewable fuel refineries, while preserving and converting approximately 100 jobs to the green economy,” said Bryan Sherbacow, AltAir co-founder. “I am proud to have led the development of AltAir, excited to have facilitated this transaction with World Energy and am thrilled to join the company’s executive leadership team to make an even bigger impact in California, North America and beyond.”

Uzi Yemin, Chairman, President and Chief Executive Officer of Delek said, “We have been focused on deriving value from our non-core assets in California as they are outside of our geographic footprint. This marks the second step in this process following the announced agreement to divest five west coast asphalt terminals for $75.0 million. The Paramount transaction provides additional cash to Delek and should enable us to reduce costs. We continue to evaluate options for our Long Beach and Bakersfield assets. Cash proceeds from this and future transactions could be used in our capital allocation program to return cash to shareholders.”

Vandewater Capital Holdings, the lead investor and controlling shareholder of AltAir Fuels from its inception in 2013 until Delek acquired a controlling stake in October of 2015, brought AltAir from concept to a leading refinery of renewable fuels. Describing AltAir’s track record, Jason Aintabi, Vandewater’s founder, and previous Chairman and CEO of Altair, said, “We are very proud of what we were able to accomplish here. Altair is a globally recognized facility that has helped pioneer an era of impact investment in America’s energy future.  Our sustainable fuels are proudly used by the Department of Defense, United Airlines, UPS as well as other prominent companies.”

The Bottom Line

It’s a masterstroke. An entry into hydrocarbon fuel markets to match what REG has been aiming at — while getting a leadership position on the big opportunities in California and in the aviation biofuels market with a proven producer of low-cost fuels. It’s been a bravura run for AltAir — with little of the fanfare that’s attended to companies like Solazyme and Amyris, AltAir got it done. And now — a bravura acquisition that shakes of the world of renewable hydrocarbon fuels well, as President Trump might say, big league.