New York (Platts)--3Jun2008

US biodiesel producer/marketer Renewable Energy Group announced Tuesday
it has purchased fellow producer US Biodiesel Group, garnering a planned plant
near the Houston Ship Channel and a California storage terminal.

The all-stock deal is worth $80 million, said REG CEO Jeff Stroburg
without giving more details.

USBG's 35 million gal/year plant, to be known as REG Houston, is still
under construction and expected online in the next 30 days, he said. REG has
another Gulf Coast plant in the works, in New Orleans, but construction was
put on hold late last year as the debt market dried up, according to an REG
spokeswoman.

REG in March pulled plans for an initial public offering, citing poor
market conditions that have included sharply higher feedstock costs and weak
margins. At this point, the company is not going to try and re-launch an IPO,
said Stroburg. He noted "the debt markets are still tight [and] the equity
markets aren't really robust for any renewable fuels."

He said the deal with USBG gives REG access to key infrastructure and
distribution on the West Coast: "It's not enough to be just a producer," said
Stroburg.

Like other US biodiesel producers, REG is looking to higher-priced
markets overseas to make ends meet, but Stroburg said in the long-term "the
domestic markets are where our biggest markets are going to be."

USBG is a portfolio company of US Renewables Group LLC (USRG), a private
equity fund that develops, acquires and manages renewable power and fuels
projects, according to REG. USRG Power & Biofuels Fund II (Fund II), which
includes USBG, closed in 2007 with $475 million in capital commitments,
according to its web site.

Investors in Renewable Energy Group include Iowa's West Central soybean
cooperative, oilseed processing giant Bunge and bulk liquids transporter ED&F
Man.

--Beth Evans, beth_evans@platts.com