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Yug Rusi investing $200 mln in biofuel project

Yug Rusi investing $200 mln in biofuel project
(c) 2012 Interfax Information Services, B.V.
ROSTOV. Aug 20 (Interfax) - Yug Rusi, a Russian agribusiness group, plans to launch production of biofuel at its Novoshakhtinsk plant.

The project will be implemented in three phases, the first of which will cost $200 million, Yug Rusi chairman and principal owner Sergei Kislov told reporters.

This will be sufficient to launch production of 1,000 tonnes of "green diesel" per day, he said. "I think that we will begin to do this in three years already," Kislov said.

The company intends to carry out the project with project financing, and intends to select banks that will be prepared to provide funds on the best terms.

The biofuel, which Kislov calls "green diesel," will be made from industrial grades of rapeseed and flax. "This is not biodiesel, it's a completely different product that is mixed with regular mineral diesel," he said.

"Green diesel" is superior to regular fuel and is used to enhance mineral fuel, he said, adding that the European Union now requires producers to increase the bio component in fuel to 10%.

JSC Novoshakhtinsk Oil Products Plant, according to the company's website, produces gasoline (for industrial uses, straight-run for export), home heating oil, fuel oil, ship oil and diesel fuel. The plant, which is wholly owned by Yug Rusi, increased revenue to 53.9 billion rubles in 2011 from 29.9 billion rubles in 2010, according to the SPARK database.

Yug Rusi, one of Russia's largest producers of vegetable oil, had a 32.9% share of the country's bottled vegetable oil market in the 2010-2011 season, when it sold 370,000 tonnes of product domestically and exported 44,000 tonnes, according to the company's website.

The group includes more than 20 farms with almost 200,000 hectares of farmland, 27 elevators, nine oil processing plants, a river terminal, as well as businesses that breed livestock, purchase, store and process grain, produce formula feed, corrugated packaging and oil products.

Yug Rusi does not disclose its financial results. Forbes has reported that the group's revenue grew to 38.3 billion rubles in 2011 from 31.9 billion rubles in 2010.

There have been reports that Yug Rusi's owners plan to take the company public. An IPO remains one possible way to raise financing, but the company does not intend to pursue this course in the current market situation, Kislov told reporters.

Yug Rusi has been monitoring the situation for three years already, comparing its performance with that of public companies in the same sector, Kislov said, adding that Yug Rusi is equal to their level.

Kislov declined to give a valuation of the company, saying that this should be done by the market.