Jatropha investments strengthen in Central America, India

By | April 26, 2010
Several developments unfolded recently in global jatropha commercialization efforts. In the Central American country of Guatemala, the Roundtable on Sustainable Biofuels is working with SG Biofuels to develop sustainability standards for jatropha farming. "There aren't any standards right now," said Kirk Haney, CEO and president of SG Biofuels.

Last year SG Biofuels established a community farming initiative in Guatemala with 385 farmers working 1,400 acres of marginalized land. Haney told Biodiesel Magazine that while many jatropha business models have failed in recent years, jatropha hasn't. "The plant didn't fail-the businesses did," he said. "Some of these companies were handing out seeds with a $5 bill and saying, 'Go plant this.'" Haney said his company approached the community of interest in a different way.

"We wanted to find a community to partner with, not take over," he said. "We worked with community leaders. We gave them seedlings. We donated fertilizer. We provide tech support and advice. And we contracted with the farmers for all of their production." Haney emphasized that the importance of the contract cannot be understated. "It helps create rural entrepreneurship," he said.

Haney pointed out that in places outside the U.S., some land is community-owned, not privately held-a foreign concept to most Americans. Some of this land, especially in the subtropics, was once rainforest, cut down long ago for cattle pastures, but after years of intense grazing the land has become stressed and marginalized. "It is abandoned pastureland so when a company like ours can come in with a new technology like this-I don't want to say it's an easy sell, but they see it as a very good economic opportunity," Haney said. Contracts signed by the community farmers lock in their profit and take away the execution risk. "There is a floor in the offtake agreement, it's indexed to a couple of different factors," Haney said.

The RSB observed how SG Biofuels approached this jatropha farming initiative and liked what it saw, Haney said. "The pilot project with SG Biofuels provides us with the opportunity to test and improve our sustainability standards against a unique model of jatropha production," said Matthew Rudolf, RSB's regional manager of the Americas. First harvest is expected this summer.

Across the planet, the Indian government has reaffirmed its approval allowing Australia-based Mission NewEnergy Ltd. to invest additional capital into its wholly-owned subsidiary, Mission Biofuels India Pvt. Ltd., for the purpose of carrying out with its originally approved activity of contract-farming jatropha and use of its oil for domestic and export markets. "Of key interest is the official confirmation of Mission's ability to export jatropha oil," said James Garton, Mission NewEnergy's head of corporate finance, mergers and acquisitions.

In December, Mission NewEnergy signed an offtake agreement with Valero Energy Corp. for its jatropha-based biodiesel, a contract worth $3.5 billion. "The Valero contract is already in effect and we were expecting the first shipment of product in April," Garton told Biodiesel Magazine in late March. Just like palm, canola and many others, jatropha biodiesel has yet to be approved by the U.S. EPA to count toward biomass-based diesel obligations under RFS2. "Our understanding is that the EPA, while it has not yet made its ruling, is not concerned about jatropha achieving the necessary hurdles to be an approved pathway to [reducing] greenhouse gas emissions," Garton said. "Rather it is a question of whether there will be sufficient quantities of jatropha in the U.S. to justify inclusion. Given the largest ever biodiesel offtake agreement is between Mission NewEnergy and Valero for jatropha biodiesel-and Valero is the largest obligated party under RFS2-we can clearly demonstrate that jatropha will be relevant in the U.S. Even more so, given the environmental and political attractiveness of jatropha, we are of the view that it will be approved by the EPA."

Mission NewEnergy currently uses palm oil as feedstock for its 30 MMgy biodiesel refinery at Kuantan, Malaysia, and as its jatropha operations mature, the company plans to phase out its use of palm oil. The company said it anticipates that by 2014 it will be able to supply its operating 30 MMgy biodiesel plant, along with its 75 MMgy refinery in commissioning, entirely with jatropha oil. "[We] have 350,000 acres under contract and, based on the first gestation period now being completed, we are delighted to have just more than 170,000 proven, productive acres," Garton said.

When Garton was asked to compare Mission NewEnergy to its competition, he said overall the company is well-positioned strategically as a fully integrated, established player that has already reached "critical jatropha plantation mass."

"Mission NewEnergy started its business years ago and has the benefits of early failures to practically guide it going forward," Garton said. "Mission NewEnergy is not a whiteboard and Excel model exercise-we have empirical data and real experience." Some of the advantages Garton said Mission NewEnergy holds over its competition include the company's deep penetration in rural markets where the seeds are; active plantation management by way of proprietary software, business operating procedures and global positioning system mapping; a novel rural bank financing scheme; and farmer trust as a result of the company's continued human presence.
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