Abengoa: The Only Global Ethanol Producer (2)

Europe: Uncertainty requires flexibility
Mr. Salgado admits that Abengoa has learned from its experience with the Salamanca plant. “It was a hard lesson,” he said, “and now we are trying to apply these lessons to our new projects. In our new projects in the United Kingdom, Germany and the Netherlands, we have paid a lot of attention to diversification of raw material, logistics and flexibility. I mentioned before that our two projects in the United States have water access and I can tell you that water access is also going to be a major issue in Europe. Our new projects all have water access, multiple feedstock flexibility and they will all produce 400 million litres, or approximately 100 million gallons. They can produce ethanol from corn, barley, wheat, sugar beet juice and wine alcohol and they have excellent access to local and export markets. I’m very pleased about the result.”

Brazil: Leveraging knowledge from Dedini
Similar to the United States, the Brazilian ethanol market seems ready for an aggressive acquisition strategy. Acquisition prices are expected to drop in the next few years and the market is still extremely fragmented. But the acquisition of Dedini was not the first step in such a strategy. “The most important strategic motive to buy Dedini was to acquire a major producer with excellent expertise on the agricultural side and an excellent reputation in the market. We can now leverage the expertise that was present in Dedini with our own and I think we can expand significantly through that. Acquisitions are also an option, but I think the major value will be created through organic expansions and new greenfields”.

Growth of Abengoa in the United States: Cellulose focussed
Looking at the aggressive growth plans of Cosan in Brazil and abroad, or looking at the production capacity of ADM, POET and Verasun Energy, we asked Mr. Salgado about the Abengoa’s goals in terms of growth. Focussing on the US market, he said “the important thing for us is to have critical mass in all three markets. We have 200 million gallons in operation today and 200 million that will come online in the next 2 years. Another 100 million gallons with our hybrid project in Kansas, that will produce 88 million gallons from corn, and 13 million gallons of cellulosic ethanol from biomass. That’s 500 million gallons and that is what we see a our critical mass. Our strategy is focussed on generating cash flow to invest on our biomass technology. Subsequently, any growth beyond 500 million gallons is going to be much more focussed on 2nd generation ethanol. If the hybrid concept in Kansas is successful in terms of Capex and Opex, we plan to replicate it on all our locations, because we don’t believe that second generation biofuels will be established immediately, without a period of transition from first generation.”
Vision: CO²-based value of ethanol
Besides its focus on cellulosic ethanol, Abengoa is currently pursuing aggressive plans to improve the life cycle of its plants. “We have the vision that ethanol in the future is going to be valued on the displacement of CO2,” he said. “In that sense, the same molecule of ethanol is going to have different value depending on which raw material is used and which energy sources is used in our plants. We are working very hard to provide products with an even better life cycle than we currently have.” For sure, its experience with raw materials in the US, Brazil and Europe will result in the synergies it is looking for.