Tyson, Syntroleum to restart bio-fuel plant by July

by The City Wire staff ([email protected]) 160 views 

Tyson Foods said on Monday it’s renewable fuel plant in Geismar, La., has sat idle for the past six months, but that's about to end.

Syntroleum Corp.,Tyson’s partner in the joint venture Dynamic Fuels, said Wednesday (May 8) a new catalyst was ordered in February with an expected delivery for late June.

“We anticipate a restart of the Geismar plant in mid to late July,” Gary Roth, CEO of Syntroleum said during the company’s conference call on May 8.

He said the new catalyst will increase the diesel yields up to 80% over the system previously used. Roth estimates last year’s revenues of $4.09 per gallon would have been worth $4.55 if the new catalyst had been in place at that time, a difference of $13 million in total.

“Rather than interrupt the feedstock supply chain, we believe the better alternative is to defer operations until installation of the new catalyst,” Roth said

The catalyst cost $3 million, and company officials said the cost to maintain the idle plant for the past six months has been roughly $12 million, shared equally between the partners.

Syntroleum said it will cost about $20 million in working capital to restart the plant, most of which is the investment in feedstock.

At the going rate, yellow grease is about 40 cents a pound, tallow is slightly higher and chicken fat is about 38 cents a pound. The plant uses about 1.6 million pounds of animal fat per day. A 30-day supply of feedstock runs around $20 million at the today’s prices.

“Given dynamic feasibility the utilized lower cost feedstock, we calculate current cash margins using the new catalyst, yellow grease prices and petroleum and product prices as of May 6, 2013 to be approximately 78 cents per gallon,” said Ron Stinebaugh, senior vice president of finance for Syntroleum.

He said after positive margins in the first half of 2012, they turned negative for the full second half of the year. This begs the question of if the market conditions repeat in 2013.

Stinebaugh told investors he expects demand for biomass based diesel to be constant in 2013 and 2014, helped by a government mandate for renewable fuel production through this year.

Syntroleum shares soared more than 32% following Wednesday’s call. The stock closed at $5.51, up 1.35% on the day.

Tyson (NYSE: TSN) shares also got a lift on Wednesday, setting a new 52-week high before closing at $25.01, up 41 cents.