22 September 2017

Zimbabwe: Green Fuel's $1bn Expansion Project On Hold

Photo: The Guardian
(File photo).

Ethanol producer, Green Fuel has put on hold its $1 billion expansion programme as the current environment does not support the scale of investment, sources have said.

The company, jointly owned by The Agricultural Development Authority and businessman Billy Rautenbach's Madcom and Investment Rating had an ambitious target to construct two additional plants with combined capacity of 40 million litres per month and develop farmland measuring 40 000 hectares in the medium term.

Currently, the company has 10 000 ha under sugarcane, out of 50 000 ha at its disposal. The expansion is part of company's medium term plans of becoming a regional ethanol producer.

"For now, it is on hold because the environment is not attractive... but obviously it remains in our plans," said a source who spoke on condition of anonymity. "There is a lot of money involved; money for opening new fields, investing in water and the processing plants.

"So such investments can't be sustained by organic resources because we are operating in a challenging environment. Just like any other business, it is difficult to raise capital."

Green Fuel company secretary Derick Elliot was reluctant to comment on the matter.

Zimbabwe made petrol blending compulsory in 2013, starting off at 5 percent and scaling up to 20 percent, to lower the country's fuel import bill. Early this year, Government liberalized ethanol production and sales in the country following Green Fuel's occasional failure to supply the required volumes for the country's ethanol blending mandates.

Excessive rains have been a constant source of frustration to Green Fuel, keeping the company away from harvesting the required sugarcane to feed the ethanol processing plant.

Arda chairman Mr Basil Nyabadza said last year at least $300 million was needed to construct Kondo Dam to support the expansion programme. He said any further expansion of ethanol production was hinged on the availability of water. "We have a budget of $300 million to construct Kondo dam and it is very difficult to raise that kind of money under the current environment," Mr Nyabadza recently said.

Osborne Dam and Rusape Dam are currently providing irrigation water to the existing plantation and the two water sources cannot sufficiently support the envisioned expansion.

Upon completion, Kondo Dam will store 3,5 billion cubic metres of water mainly for power generation and irrigation development in the Chisumbanje area, which lies in the south eastern part of the country. The dam has potential to support 200 megawatts power plant and has a high ecotourism potential, which will benefit the Zimbabwean economy.

Green Fuel has so far invested over $320 million into the ethanol project since its inception in 2009. The plant started running in 2012 and is currently producing 10 million litres of ethanol per month. The ethanol facility currently employs about 5 000 workers, of which half of them are casual. The company also produces its own electricity for the plant.

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