Sniace Plans to Start Building Ethanol Plant in Spain

www.bloomberg.com
December 11, 2009

(Bloomberg) - - Sniace SA, the Spanish chemicals maker that's branching into renewable energy, expects to start building a 100 million-euro ($147 million) ethanol plant in the first quarter after a five-year approval process. Talks to complete the financing of the project are "very advanced" and will conclude before the end of the year or at the start of 2010, Chairman Blas Mezquita said yesterday in an interview in Madrid. Elecnor SA will build the plant at Sniace's main site in the northern Spanish city of Torrelavega, he said.

Mezquita is expanding in energy to reduce Sniace's dependence on production of viscose and Cellulose. Revenue from its chemicals business has dropped to half of total sales and will fall to about 25% in two years, according to company estimates. Sniace also plans to build an ethanol plant in Poland and has submitted a bid to develop wind parks in northern Spain. "Sales could grow six or seven times" with the new energy projects, Mezquita said. "We are practically talking about a completely new company."

Sniace climbed 11% to 1.38 euros in Madrid trading, the biggest gain in six weeks. The stock has added 68% since the start of the year. Chemicals makers are investing in energy projects that use renewable resources such as wind, sunlight and plant biomass to tap government incentives and curb polluting emissions. Global demand for fuel ethanol will rise 14% this year to 69 billion liters, Christoph Berg, a managing director at industry adviser F.O. Licht, said Nov. 3.

Await Approval
Sniace has waited five years for approval for the Spanish ethanol plant as it had to win clearances from both regional and local authorities. It will be 21 to 23 months before the facility is ready to deliver the fuel. Mezquita expects the plant to generate more than 20 million euros in earnings before interest, tax, depreciation and amortisation in 2012. That's about two times the company's Ebitda last year. Bioethanol, made by fermenting crops such as wheat, can be mixed with gasoline for use in cars and planes, helping to curb consumption of oil-based motor fuel.

Polish Project
Sniace expects to win approval for the Polish ethanol plant, to be built near to the German border, in the first half of 2010 after Germany reviewed the project. Construction may begin before the end of next year, Mezquita said. "Two weeks ago there was a meeting with the German authorities and in principle there will be no problem for the regulatory process to proceed in Poland," Mezquita said. "In a few months or three we could get the licenses."

Sniace and two partners have submitted a bid to develop a 200-MW wind-energy project in Cantabria. A decision by the regional government may be announced before the end of next month, Mezquita said. Sniace, which was founded in 1939 and has operated in Cantabria for 70 years, has "a fair chance of winning," he said. Other chemicals manufacturers branching into new energies include Novozymes A/S, the world's largest industrial enzyme maker, which has met with international venture capital funds to discuss clean-technology acquisitions, the company said Nov. 18.