Media

Ethanol Africa gets $110m injection for first plant

Business Report

March 16, 2007
By Ingi Salgado

Cape Town - Ethanol Africa, which plans to build eight biofuel plants in the maize belt, had secured funding of $110 million (R825 million) for the first facility in Bothaville, its principal shareholder said yesterday. Heads of agreement had been signed with three investors to inject $55 million into the project, said Philip Bouwer, a director of Sterling Waterford, which owns the biggest slice of Ethanol Africa. The investors had a right of first refusal to take shareholdings in the other plants. The outstanding amount would come from borrowings. The group's bankers had committed to funding on a one-to-one debt-to-equity basis.

Bouwer was in London to facilitate signing of a final deal with one investor, but he would not identify the parties until the deal was wrapped up, probably in mid-April. He would disclose only that Sterling Waterford, which issued the world's first carbon credit notes on the JSE, was one of the investors. This investment in the Bothaville plant was in addition to Sterling Waterford's equity share in the underlying project, which would be granted in proportion to its shareholding in Ethanol Africa, Bouwer said. In the past, he said, Sterling Waterford had gone to the market seeking funding for the full roll-out of eight plants. "At this point the market for pre-productive assets is helluva tough to crack. But there is an appetite on a plant by plant basis," he said.

Bouwer countered misconceptions that the Bothaville project had ground to a halt. Construction paused last month after Ethanol Africa decided to re-evaluate its execution approach by transferring risk to a managing contractor instead of assuming all risk itself. This followed a mushrooming of project costs to almost R1 billion, a 25 percent increase over initial estimates, due to higher steel prices.

Bouwer said Ethanol Africa's initial investment had gone into preparing the site and producing final costings.

"It's a tough environment but we are making progress very steadily."

Ethanol Africa announced a black economic empowerment deal last month, in terms of which Lereko Holdings took a 25 percent stake. The other shareholders are Sterling Waterford (35 percent); Ecofields, which is owned by five founding members (22 percent); and Grain Alcohol Investments, which represents local maize farmers (18 percent).

The company is targeting first production of biofuels - more than 500 000 litres of mostly bioethanol but also biodiesel - by the second quarter of next year.

It hopes to benefit from the government's draft biofuels strategy, which proposes that cleaner-burning biofuels comprise 4.5 percent of all motor fuel by 2013 to cut emissions of carbon dioxide and reduce dependence on oil imports.

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