Valero says all 7 ethanol plants at capacity

WASHINGTON, July 21 (Reuters) - Top U.S. oil refiner Valero Energy Corp (VLO.N: Quote, Profile, Research) said all seven of the ethanol plants it bought in March from a bankrupt producer were now running at capacity and making money.

"Ethanol is kind of a bright spot for us right now. They are generating cash flow," Valero spokesman Bill Day said of the plants, which have the combined capacity of about 780 million gallons a year, or about 7.5 percent of the total U.S. operating capacity to make the fuel.

Valero began production at the 110-million-gallon-per-year ethanol plant in Welcome, Minnesota, during the first week of July, Day said by telephone.

The company bought the plants from VeraSun Energy, which filed for bankruptcy protection after locking in pricey contracts for corn, the main input cost for making ethanol.

Four of the plants were already running. Two of them, one in Nebraska and one in Iowa, had to be restarted. The Welcome plant had never made ethanol before July.

For months ethanol producers had lost money or made only miserable profits as corn prices spiked.

But over the past several weeks margins have recovered slightly to about 25 to 35 cents a gallon as prices for the grain have fallen.

Part of the fall came after the U.S. Department of Agriculture said this month farmers will harvest their second largest corn crop ever. (Reporting by Timothy Gardner; Editing by Walter Bagley)