Australian biodiesel refiner Mission NewEnergy today said it had signed a binding five-year pact to provide a subsidiary of Valero, the US' biggest independent refiner, with up to 200,000 tonnes of biodiesel annually which can be doubled at Valero's instance.
The deal is potentially worth $3.5 billion.
Under the terms of the deal, Mission will issue Valero two tranches of warrants to acquire common stock subject to approval of shareholders.
The agreement also provides for Valero's subsidiary, Valero Marketing and Supply Company, the right to buy 25 per cent of Mission at 45 cents a share.
"We are delighted to be supplying Valero and look forward to expanding our commercial relationship," Nathan Mahalingam, Mission's managing director said.
"The increasing demand for biodiesel driven by the Renewable Fuels Standard and coupled with this long-term supply agreement solidifies the United States a key market for Mission going forward," Mahalingam said.