Chevron is buying biodiesel maker Renewable Energy Group Inc for USD3.15 B, in its biggest bet so far on alternative fuels, reported Reuters.
The second-biggest US oil and gas producer said on Monday it would pay USD61.5 in cash for each share of Renewable Energy, a premium of over 40% to the company's Friday close. Renewable Energy shares rose more than 37% in premarket trading.
Major oil firms are facing increasing pressure from governments and investors to shrink their carbon footprint and join the fight against climate change, given their large contributions to global emissions.
Many US refiners have been ramping up production of renewable diesel to take advantage of increased state and federal subsidies to decarbonize their fuels.
Chevron has set a target to cut operational emissions to net zero by 2050 and in September pledged to invest USD10 B to reduce its carbon emissions through 2028, with about USD3 B earmarked for renewable fuels.
Ames, Iowa-based Renewable Energy Group produces both biodiesel and renewable diesel.
The deal is expected to accelerate progress toward Chevron's goal to grow renewable fuels production capacity to 100,000 bpd by 2030 and brings additional feedstock supplies and pre-treatment facilities, the company said in a statement.
The transaction is estimated to close in the second half of the year and is likely to add to Chevron's earnings in the first year and to its free cash flow after the start-up of Renewable Energy Group's Geismar expansion in Louisiana.
As MRC informed before, in September 2021, Chevron U.S.A. Inc., a subsidiary of Chevron Corporation, and Bunge North America, Inc., a subsidiary of Bunge Limited (NYSE: BG), announced today a memorandum of understanding (MOU) of a proposed 50/50 joint venture to help meet the demand for renewable fuels and to develop lower carbon intensity feedstocks.
Headquartered in San Ramon, California, Chevron Corporation is the the second-largest integrated energy company in the United States and among the largest corporations in the world. Chevron is involved in upstream activities including exploration and production, downstream activities including refining, marketing and transportation, and advanced energy technology. Chevron is also invested in power generation and gasification processes.
MRC