Green Fuel to pump in $260m

HARARE - Ethanol-producing company, Green Fuel plans to invest $260 million more in the project including in their power generation scheme between now and next year, the company’s general manager Graham Smith told Parliament yesterday.

Addressing the parliamentary portfolio committee on Youth, Indigenisation and Economic Empowerment chaired by Justice Mayor Wadyajena, Smith said in the long run, a cumulative total of $1 billion will be spent towards developing various projects.

“Between now and next year we want to generate 18 megawatts (MW) of power under phase three such that we export 15MW to the national grid. Our production of 120 million litres will save between $8-9 million less of petrol imports monthly, keeping this in circulation in the country,” he said.

He noted that they would be implementing expansion projects in the long run to 2020, which will see production of 450 million litres of ethanol per annum, enough to meet national requirements and the export market.

“Green Fuel will be able to export around 80 MW to augment the nation’s power grid supply. Four thousand and five hundred hectares of irrigation schemes will be developed for small scale farmers, feeding over 18 000 families. Our exports will increase and yield approximately $25 million,” said Smith.

The trickle-down effects on completion of the Kondo Dam will see the development of a green belt downstream.

“The benefit to local communities will be immense as the development of irrigation schemes can help feed over 100 000 families.”

Wadyajena also demanded the company’s indigenisation compliance certificate, to which the Green Fuel executives led by Derrick Elliot explained that they had complied but had not yet been issued with the certificate.

Elliot said the private companies — Macdom Investments and Rating Investments, are wholly indigenised and entered into a joint venture with government to form Green Fuel. “The indigenisation process is underway. The transaction per se which you are relating to is essentially what we are working towards. As a result of that, the negotiation of the valuations and contribution for the parties towards the project which will quantify is underway,” Elliot told the committee.

He added that they had initially ceded close to 10 percent of the shareholding and were currently in the process of negotiating and trying to come up to the 51 percent threshold for its partner, government.

“We are indigenised, but we don’t have a certificate. We are in the process of finalising this joint venture,” Elliot said.

The Chisumbanje ethanol project’s total investment is estimated at $368 million.

Willard Mbona, a Green Fuel director told the parliamentary portfolio committee that government’s stake was valued at $36 million, representing about 10 percent of total shareholding.

“Government’s movable and immovable assets at Chisumbanje are worth $12 908 757. The other item which we looked at during the valuation is what we call the sweat equity (a party’s contribution to a project in the form of effort — as opposed to financial equity). These are the feasibility studies that government undertook in order to implement the project, whose value is $6 126  231,” said Mbona adding that “this rounds up to around $19 million.”

“There are options which government has been calling on. First option is if you look at land as an economic zone, secondly if it is under title or if it continues as it is.”

He added the valuation of land estimated at $17 million would add up to total of $36 million of government’s contribution.

Mbona explained that apart from government’s contribution, other shareholders poured in a total of $332 million as part of the company’s market value besides on-going initiatives of capital expenditure.

“The valuation does not reflect the actual value of the company per se, but this is in terms of the discounted cash flow method.  Macdom and Green Fuel’s market value is placed at $331 849 251,” he said.

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