Valero 2014 Annual Report Download - page 28

26 Valero Energy Corporation
replacement value, and have yielded
approximately $2.2 billion in EBITDA – a return
of more than 130 percent on acquisition and
capital costs.
The plants posted record operating income of
$786 million in 2014.
Valero Renewables has beneted from both
the scale and location of the plants, situated in
the heart of the Midwestern corn belt. Also, the
company has been able to successfully apply
its rening best practices to operation of the
plants.
Low crude prices are expected to cap ethanol
margins in the near term, but favorable margins
are expected for longer term as the crude price
rebounds. The outlook for corn production
appears favorable for ethanol producers, as
corn prices are on a long-term decline. Ethanol
demand worldwide is expected to grow.
Diamond Green Diesel
Diamond Green Diesel completed its rst full
year of operation in 2014. It is a joint venture of
Valero subsidiary Diamond Alternative Energy
LLC and Darling Ingredients Inc. that produces
renewable diesel fuel from used cooking oil,
recycled animal fat and corn oil.
Currently running at 10,800 barrels per day,
more than its nameplate of 9,300 barrels, the
plant realized joint-venture EBITDA of $165
million in 2014. Sales are committed from most
all of its capacity for the next few years.
Eyeing possible expansion to 15,000 barrels
per day, the venture is pursuing low-carbon fuel
opportunities and “green premium” markets in
California, Canada and Florida.
Hydrocracker Expansion
Continuing low natural gas prices are providing
an opportunity for hydrocracker expansions,
rst at Meraux, La., and next at St. Charles and
Port Arthur, Texas. The units run on hydrogen
produced from cost-advantaged natural gas,
and the expansions increase production of
high-demand diesel fuel and other distillates.
Valero completed a 20,000 barrel-per-day
expansion at Meraux during the fourth quarter
of 2014, expected to yield approximately
$90 million annually in earnings, using 2014
commodity prices, before interest, taxes,
depreciation and amortization (EBITDA) – from a
total investment of about $260 million.
Hydrocracker expansions are under way at Port
Arthur and St. Charles that are expected to add
another 30,000 barrels per day of total capacity.
As it is, these two hydrocrackers are performing
better than expected. They successfully started
at the end of 2012 and mid-2013, respectively,
with 120,000 barrels per day of new capacity.
The company realized annual EBITDA estimated
at $800 million over a four-quarter period ending
September 2014, compared with originally
disclosed guidance of $780 million.
Renewables
Valero became the rst traditional rener to
enter large-scale production of ethanol in 2009.
With the addition of an 11th plant in 2014,
Valero now is one of America’s largest ethanol
producers, with production capacity of 1.3
billion gallons per year – under subsidiary Valero
Renewable Fuels Company LLC, or Valero
Renewables.
The investment has proven to be highly
successful. The state-of-the-art plants were
purchased at less than 35 percent of