BIO FUEL PRODUCTIONS IN TANZANIA

LEVINA KATO, 28th November 2009 @ 21:17, Total Comments: 0, Hits: 324

THE envisaged multi-billion ethanol production investments in Bagamoyo and Rufiji districts will now be integrated with sugar production, the 'Sunday News' can confirm.

Ethanol fuel is a gasoline alternative that is manufactured from the conversion of carbon based feed stocks such as sugar cane, sugar beets, switch grass, corn, and barley. It is an alternative from petroleum based fuels and it is said to be better for the environment.

After striving for almost two years, in bid to develop the agro-energy projects in the country amid strong criticism by local and international experts, Sekab BioEnergy Tanzania Limited intends to set up a flex factory to offset local sugar shortage.

The company's Managing Director, Mr Anders Bergfors, said during an exclusive interview in Dar es Salaam on Friday that the new component of their project would see an addition of some 56,000 tonnes supplemented to total country's sugar estates capacity.

There are four main sugar companies in Tanzania: Mtibwa, Kagera, Kilombero and the Moshi-based TPC. The four have a total production capacity of 300,000 tonnes annually. The country also has smaller factories like Manyara, which produces 2,000 tonnes annually.

However, the country is facing a sugar deficit of about 50,000 tonnes, according to statistics from the Sugar Board of Tanzania.

"Our planned Greenfield sugar production is in response to the government's request to Sekab to offset sugar deficit," Mr Bergfors said.

Apart from sugar shortage, the company's chief believes that their new project plan would smoothen the change from ethanol and sugar production, based on market price trends.

"Agro energy is still new in Africa and Tanzania in particular. We intend to mitigate some commercial risks which might arise as a result of price fluctuation. Flex factories have worked well in Brazil," he said.

The investment in sugar production, he said, would run parallel with ethanol production which has been delayed for a year due to financial constraints.

"The aim is to start work in June next year. We are looking for partners in developing the company as well as the project," he said.

Negotiations on partnership are at different levels and a Mauritius-based company, has been identified. Mr Bergfors however, declined to mention the name of the company.

Due to pending negotiations on partnership and financing, he said the company expects to deliver its first ethanol and sugar products in 2012.

Mr Bergfors also revealed that efforts to borrow from local banks in order to finance the company's operations in Tanzania had hit a snag due to high interest rates.

He said the company was working out possibilities to borrow from International institutions such as the International Finance Corporation (IFC).

Sekab BioEnergy project plans suffered a big blow following the withdrawal of its majority owners, namely the three municipalities in Northern Sweden with 70 per cent share holding, and the global financial crunch.

"We are glad, that minority shareholders -- Eco Development in Europe have interest and will take forward investment ventures in Africa from SEKAB International," the MD said.

In July this year, Sekab applied to the Swedish International Development Agency (SIDA), for a Credit Enhancement Guarantee to secure funds from local banks.

However, the application bounced due to what the Swedish Embassy's First Secretary, who is also the Programme officer for Energy, Mr Goran Haag described as failure to meet requirements in the regulations for the SIDA credit instrument.

"The Project development costs are not eligible and procurement of services and goods shall be performed in international competition," Mr Haag had revealed, explaining why his office could not award the Credit Enhancement Guarantee to SEKAB.

He said SIDA was only allowed to issue a credit guarantee to a project that is developed and ready for implementation and where services and equipment will be procured in international competition.

"What SEKAB applied for was a credit guarantee that would be used to facilitate commercial loans for financing of continued project development activities," he said.

The Government of Sweden had cautioned and recommended that renewable fuels like ethanol and bio diesel be produced in a sustainable way by professional and responsible companies like SEKAB international.

Meanwhile, the Government of Tanzania has expressed full commitment to support Sekab Bio Energy Tanzania Limited investments in Bagamoyo and Rufiji districts.

The Commissioner for Energy and Petroleum Affairs, Mr Bashir Mrindoko, said the Government is interested in investing in Sekab projects because of bio fuels potentials to the country.

Sekab is a consortium of BioAlcohol Fuel Foundation (BAFF) of Sweden, Svensk EthanolKemi AB (SEKAB) of Sweden and Community Finance Company Ltd (CFC) of Tanzania.