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Questions abound over R70m clean fuels venture

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THE Cape Biomass company has moved to allay concerns that the R70m alternative fuels project could be delayed by more than a year pending the completion of the Port of Ngqura.
Questions have been raised about the project which the Coega Development Corporation (CDC) last month announced as its latest investor in the Coega Industrial Development Zone. 

Cape Biomass CE and owner Willie Claassen said agreement had been reached with the National Ports Authority (NPA) to use the Port Elizabeth harbour while EC Biomass awaited the completion of Ngqura. Product would be transported from the plant to the Port Elizabeth harbour and while the port had no available storage facility for the biomass pellets, Claassen was in the process of negotiating loading and storage facilities.

“The port is close to the plant so there is not much of a cost implication. It will be more of a hassle factor,” Claassen said.

Eastern Cape Biomass, which will produce biomass pellets, an environmentally friendly alternative source of energy used to fire power stations and made from forest residue, sawmill waste and alien vegetation, will set up shop in the zone.

Its product is intended solely for the export market through the Port of Ngqura. The Industrial Development Corporation (IDC) has taken an equity stake in the business.

At the time the investment was announced, Claassen said Coega had been chosen because of its proximity to areas from which raw material would be sourced, and because a deep port was essential for export of the product. 

But while Eastern Cape Biomass has secured an agreement to start delivering product to Denmark in November, Coega’s deep sea port, the Port of Ngqura, is scheduled for completion only late next year.

Claassen previously headed Star Biomass, a similar project in Richards Bay, which went belly up. 

The project was a joint venture with shipping company Grindrod, which pumped several million rands into it. Grindrod said it had decided to invest because it had hoped the biomass product could serve as base cargo for its shipments to Europe.

The Richards Bay plant was established in 2001 at a cost of more than R50m and further investments were made at a later stage, but production never reached critical mass. Grindrod bought out Claassen in 2004. 

The plant was sold at an auction last month, ironically in the same week Coega announced that it had bagged Eastern Cape Biomass as an investor.

Grindrod would not reveal how much Star Biomass fetched at the auction, but it is understood to have been less than R10m.

Claassen said the Star Biomass project went awry after he left the business. He had in the meantime been approached by Island View Shipping, a Grindrod affiliate, which has shown interest in shipping product for Eastern Cape Biomass.

The IDC’s Rentia van Tonder, head of its strategic business unit for wood, paper and other industries, said the IDC had been approached for investment in Star Biomass but rejected an application for funding. It had, however, taken up 10% equity in Eastern Cape Biomass, which it considered a viable project.“We view it as a standalone project. We are pursuing a strategy to invest in clean fuels but these are risky investments and that is why the banks don’t go there. We are confident about the future of this project, though. A thorough due diligence was done,” she said.

Mathabo le Roux

Trade and Industry Correspondent

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Last modified 2007-02-15 04:23 PM