Plans to build a £150 million ($246.2 million) bioethanol plant in the UK are set to be shelved in favour of recommissioning a plant in the US, where legislation is more favourable to investment, Environmental Finance has learned.
Bioethanol maker Vireol Bio-Industries has planning permission to build a plant at Grimsby, Humberside, that would convert wheat into up to 200 million litres of bioethanol a year, and also produce 175,000 tonnes of high protein animal feed.
The plant, which was being developed in partnership with alternative investment firm Future Capital Partners (FCP), would have been the fourth large bioethanol plant in the UK.
Vireol had planned to build the plant using equipment from a shuttered plant, which it bought in March 2013, in Hopewell, Virginia.
But a political row over EU targets for bioethanol in transport fuel, and the maximum amount that can come from 'first generation biofuels' that are made from food crops, caused the company to reassess its plans last summer, Vireol finance director Andrew Hartley told Environmental Finance.
Although a final decision has yet to be taken, Vireol is considering reopening the plant in Hopewell in the second quarter of 2014, because the policy environment in the US is more clear than in Europe, Hartley added.
Vireol's website is already advertising for positions at the plant in the US. Reopening the plant would require investment of some $11 million.
"The market situation in Europe is less favourable than it was, and the situation in the US is much more clear-cut," Hartley said. "Raising debt in the current legislative environment is virtually impossible – the EU cannot make up its mind what it's doing.
"Put that in front of a bank and, if they are polite, they will say: 'wait and see'."
The relationship between Vireol and FCP sees FCP raise finance from its clients to help fund the projects. The acquisition of Hopewell for $13 million was wholly equity funded, but the £150 million investment required in the Grimsby plant would "require an element of senior debt as currently modelled", Hartley added.
Hartley said that plans for the site at Grimsby, which would have directly created about 70 jobs, were currently "in abeyance" until there were clearer policy signals from the EU.
"It's a real problem raising any finance in Europe for new ethanol projects at the moment. The politicians in the EU are talking about advanced biofuels when, in reality, they don't exist on a commercial scale, at least not at the level required – they are way ahead of themselves. The issue for investors would be even if the politicians came up with something definite, could you trust them, because they have already gone back and had a rethink."
Peter Cripps
People:Andrew Hartley
