UK Ensus sale may have long-term implications for fuel ethanol

24 July 2013 17:56  [Source: ICIS news]

LONDON (ICIS)--The sale of UK-headquartered bioethanol producer Ensus to Germany-based producer CropEnergies will have long-term implications for the European fuel ethanol market, sources said on Wednesday.

The sale of Ensus, which operates a 400,000 cubic metres (cbm)/year bioethanol production plant in the northeast of England, to CropEnergies was announced on 19 July.

CropEnergies bought the plant from The Carlyle Group, for the issuance of 2.25m new CropEnergies shares at €5.98 per share, equating to a total value of €13.5m ($17.8m). T
he Carlyle Group will become a shareholder in CropEnergies as part of the sale, holding 2.6% of the stock.

The plant also produces 350,000 tonnes of dried protein animal feed (DDGS).

“We are delighted with the news that Ensus will become a key part of CropEnergies existing biofuels production network. As one of the most successful bioethanol producers in the industry, CropEnergies bring huge expertise and experience in this field, as well as a strong commitment to invest further in the Ensus operations in the UK,” said Peter Sopp, Ensus CEO, on 19 July.

CropEnergies said at the time of the acquisition announcement: “With the purchase of Ensus, CropEnergies strengthens its position as one of the leading bioethanol producers in Europe and increases its annual production capacity of bioethanol by 50% to more than 1.2m cubic metres.

“Via Ensus, CropEnergies gains access to the British bioethanol market, the third largest market for bioethanol in the EU after Germany and France,” it added.

Market sources said the sale price was significantly lower than what the plant originally cost, although this was not confirmed.

According to Ensus, the plant will restart once essential maintenance has been carried out following the sale.

Although there was no immediate impact on market conditions in the European fuel ethanol market, sources said there will be longer term consequences from the sale.

“Prices will be subject to decreases once the Ensus plant and the Vivergo plant are running simultaneously,” one source said.

“CropEnergies will run the plant big time – they’re a larger company and will want to recover costs. This means there will be too much product when you consider there is also Vivergo in the UK, and Abengoa not far away in Rotterdam [in the Netherlands],” another source said.

“A huge amount of ethanol will be produced and will definitely have an impact on prices,” the source added.

The Vivergo plant, a joint venture between UK-based AB Sugar, BP and US-headquartered DuPont, can produce 420m litres/year (420,000 cbm/year) at full capacity and is based in Hull, the UK.

The Vivergo plant was officially opened at the beginning of July, although it had been running since December.

Sources agreed that fourth-quarter prices for fuel ethanol are currently weak, with values assessed at €572/cbm FOB (free on board) Rotterdam. One source suggested this weakness may be a consequence of the extra capacity set to re-enter the market later on this year.

Although the Ensus plant originally ran on wheat as a feedstock, sources suggest CropEnergies will opt to use corn as a feedstock once the plant restarts, as it has a better yield and produces more by-product DDGS.

($1 = €0.76)

By: Sarah Trinder
+44 20 8652 3214

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