Switzerland’s Clariant books Swfr225m impairment charge for Romanian bioethanol plant

MADRID (ICIS–Clariant has booked a Swiss francs (Swfr) 225m ($241m) impairment charge for its bioethanol plant in Podari, Romania, because it has “not yet achieved the targeted yields,” the Swiss chemicals producer said on Monday.

Shares in the company were down almost 2.5% on the Swiss Exchange in European morning trading.

Chemical analysts said the plant’s delayed ramp up was a “negative surprise” but would not affect Clariant’s profitability in the medium term.

STRAW TO ETHANOL
Clariant wanted to establish the Podari plant, which will produce ethanol from straw, as the flagship facility for its Sunliquid technology.

It was expected to convert 250,000 tonnes/year of straw into 50,000 tonnes/year of cellulosic ethanol or bioethanol.

“While we are disappointed by this impairment, we are however pleased with our strong group financial performance in the first three quarters of 2022,” said Clariant’s CEO, Conrad Keijzer.

“The industrialisation of our new technology remains challenging, and therefore impacts underlying financial assumptions, giving rise to the impairment announced today [Monday]. Nonetheless, we will continue our efforts to achieve commercial viability of the technology.”

The plant was completed in 2021 and started operations in Q2 2022.

In June, energy and petrochemicals major Shell signed an agreement with Clariant to purchase the entire bioethanol off-take from the plant which it intended to use in fuel blending, bio-based chemicals and other applications such sustainable aviation fuel (SAF).

A spokesperson for Clariant told ICIS on Monday that despite the setback in yields, it would fulfil its agreement with Shell.

“We have already begun producing yields at Podari and are delivering all ethanol that meet the agreed specifications to Shell. Though we cannot comment on how much that is at the moment precisely, we are currently operating Podari at yields that are below our initial performance target,” the spokesperson.

“It is common practice to adjust and optimise certain processes and settings based on findings made during the ramp up process of an industrial plant,” it added.

TECHNOLOGY INCOME
On Monday, analysts at German investment bank Baader said the impairment charge could slow the licensing of Clariant’s Sunliquid technology.

It was expecting to cash in around $100m in direct sales from the plant as well as license income in the mid-term, they added.

“The value of the plant which is still in Clariant’s balance sheet is now in the low double digit Swiss francs million… Clariant aims to address the operational challenges by continuously adjusting production processes with the target of achieving commercial viability of the new technology,” the analysts pointed out.

“According to Clariant, no additional capex [capital expenditure] will be needed. However, further ramp up costs in 2023 will weigh on Clariant’s financial performance, in our view. This impairment has no impact on cash, will be booked in December 2022 and will, therefore, be reflected in the full year 2022 results.”

The company will announce its 2022 financial results on 2 March.

Front page picture: Clariant’s bioethanol plant in Podari, Romania
Source: Clariant

(Swfr1 = $1.07)