Financial Times: Teesside goes big on green fuel with new plant

By Chris Tighe
Published: March 15 2007 02:00 | Last updated: March 15 2007 02:00

One of the world’s largest bioethanol plants is to be built in Teesside by a new company established by British business heavyweights with backing from two global private equity firms.

Ensus will today announce it has secured an investment approaching £250m for the “green fuels” facility, which will have an annual production capacity of 400m litres at the Wilton International site, near Middlesbrough. Even before the plant has been built, the company has secured a contract to sell all bioethanol output to Shell for 10 years.

About £90m is coming from private equity firms the Carlyle Group and Riverstone Holdings, which have acquired Ensus. This is their first venture in the UK biofuels market, although they have experience of similar investments in North America. The project is also supported by about £150m in debt finance arranged by the Royal Bank of Scotland, Société Générale, the financial services group, and Calyon, the broker.

Construction starts this spring with the plant expected to enter full production in early 2009 – ahead of the UK’s introduction in 2010 of a mandatory target of a 5 per cent biofuels content in transport fuel. Biofuels, made from renewable biomass materials, are a key element of efforts to reduce transport’s effect on climate change.

The Ensus facility would, at full capacity, be capable of supplying 35 per cent of the UK petrol market’s estimated bioethanol requirement at the 5 per cent target level. Its proposed capacity is almost six times that of the UK’s first, 70m-litre bioethanol plant, which British Sugar is scheduled to open in Norfolk this summer.

Ensus, chaired by Sir Rob Margetts, chairman of Legal & General Group, the insurer, has a board of directors with solid financial, political and industry experience in companies including ICI, Shell and GTL Resources. “We aren’t a bunch of entrepreneurs,” said Alwyn Hughes, chief executive.

It plans over the next five years to build several more bioethanol plants in the UK and continental Europe, establishing itself as a leading European provider.

In the UK, where the Renewable Transport Fuels Obligation – initially requiring a 2.5 per cent biofuels content – comes into force in April 2008, it is expected that carbon emissions will be reduced by 1m tonnes by 2010 through the use of biofuels.

However, biofuels have run into international controversy over concerns about a potentially inflationary impact on global food prices and environmentally contentious land use. These worries, and pressures being experienced on the margins by UK biodiesel producers, may have contributed to frustrating Ensus’s original intention to list on Aim, the alternative market to the London Stock Exchange. But, said Mr Hughes: “We see huge advantages in private equity.”

The Ensus facility, he said, would run on wheat, a feedstock in surplus across the European Union, supplied by Glencore, the grain trader.

The plant is further evidence of the increasing role of Teesside as a world-league centre for process industries and renewables, building on its existing strength in chemicals and petrochemicals.

Copyright The Financial Times Limited 2007

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