4th Dec 2015 08:22
LONDON (Alliance News) - China New Energy Ltd Friday said it has struck a preliminary deal that could see the company participate in the development of two biofuel refineries across two countries in Africa.
The engineering and technology provider has signed a non-binding memorandum of understanding with Sunbird Bioenergy Africa Ltd to develop the two refineries to be based in Zimbabwe and Zambia.
China New Energy will design the refineries and supply the key operating components to the project, including pre-treatment of feedstock, fermentation, distillation and dehydration, as well as project management and support services.
The deal was signed in South Africa as part of the Forum on China-Africa Cooperation Sixth Ministerial Conference and Summit in the presence of Chinese President Xi, who has been visiting several countries in 2015 to sign major trade deals.
China New Energy's sole Non-Executive Director Richard Bennett looks to have played an important part in the deal as he is also the chief executive of Sunbird, which is building a portfolio of sustainable biofuel projects in Sub-Saharan Africa and Asia as it aims to become the largest producer of sustainable bioethanol in those regions.
If the pair can progress the partnership, the venture will develop a refinery in Zimbabwe with the capability of producing 120.0 million litres of fuel grade ethanol, which importantly will be used for the government's biofuel blending programme.
Zimbabwe currently imports petrol from other countries and is trying to reduce import bills by blending the petrol with ethanol, sugar-based biofuel with unleaded petrol, that is produced within the country.
China New Energy said it will use its experience from developing the Ubon bioethanol plant in Thailand, which the design of the new refinery will be based upon.
The cost will be similar to Udon as a result at around USD50.0 million over a two year development period. China New Energy said revenue durting that two year period, net to the company, is expected to be around USD30.0 million.
Like any project of this nature, the venture will have to conduct a feasibility study and an environmental impact assessment - neither of which have yet commenced. The company will also have to raise financing for the project but the company has said construction could start in 2016 with production potentially starting in "late 2017".
Moving to Zambia, China New Energy will develop a similar project with Sunbird, which is currently negotiating with the government about developing the refinery on the Luena Farm block in Luapula province. China New Energy said Zambian authorities have already publicly stated the project will get the go-ahead, but said final legal terms still have to be completed.
In a similar timeline to the refinery in Zimbabwe, construction is expected in 2016 with production following in 2017, with the venture also having to complete certain milestones before anything can progress.
China New Energy shares were up 1.1% to 4.20 pence per share on Friday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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