John Myers Jr, Business Reporter
Minister of industry investment and commerce, Karl Samuda (centre), speaks with (from left) Robert Levy, president and CEO of the Jamaica Broilers Group, and Chris Levy, senior vice president of operations, on a familiarisation tour of ethanol plant at Port Esquivel, St Catherine, in June. - Contributed
JB Ethanol Limited wants to double capacity at its Port Esquivel plant after turning over an impressive $6 billion of revenues in 10 months, but is wary of taking the plunge because of uncertainty over the short-term performance of ethanol prices in its sole market, the United States.
A decision could be made as early as next month, said Christopher Levy, senior vice-president at Jamaica Broilers Group and the executive in charge of the company's nascent ethanol business.
Double capacity
JB Ethanol's 60-million gallon plant was commissioned into service in July 2007. The expansion would double capacity to 120 million gallons.
In 10 months, the JB Ethanol plant churned out 45 million gallons of fuel grade ethanol for export to the United States, which annualised would be about 54 million gallons.
Levy said production was "pretty much where we expected" and that any decision to proceed with the expansion of the $1 billion plant would be made entirely on maximising the company's investment in biofuels, whose core business is commercial chicken production.
"The whole project was always designed to double capacity. The infrastructure was put in place so it's not a significant investment to go up on capacity," he told Wednesday Business.
But no firm decision has been taken to move ahead with the expansion plans, not yet. "The board is considering it now," said Levy, adding that a decision was likely in a month or two.
Ethanol is selling at about US$2.82 per gallon in the US, having started the year at around US$2.20 per gallon, but Jamaica Broilers is not sure the high prices will be sustained. The US is the biggest consumer of ethanol, but it is also a big producer (although mostly corn-based), second only to Brazil, which uses sugarcane as feedstock.
Feasible decision
"The price is very short term, so it's really looking at the opportunity to maximise the original investment," said Levy, the likely heir apparent to his father, Robert Levy, current president and CEO of the group, whose core business is poultry production. "We feel that if the decision is made, then it should be quite feasible."
Fuelled by ethanol, Jamaica Broilers reported record revenues of $20 billion in its financial year ended May 3, 2008, up from $11.5 billion in 2007. The biofuel also contributed $321 million to operating profit of $1.98 billion.
Half of the $6 billion of ethanol sales were generated in the fourth quarter, a period in which the group doubled revenues to $8 billion.
Growing demand
The demand for ethanol has strengthened in recent months as oil prices climb to new records, reaching US$143 per barrel this week. Projections from oil traders, Venezuela, and even OPEC's president, say oil could US$170 and US$200 by year end.
In such a scenario, ethanol would thrive, since the high oil price is one of the drivers of ethanol demand. Jamaica, having three ethanol refineries - Petrojam Ethanol Limited, Jamaica Ethanol Processing Limited and JB Ethanol - has a combined capacity of 150 million gallons of the biofuel annually.
That amount could significantly increase as government concludes negotiations with the Brazil-based Infinity BioEnergy for the sale of the five-state owned sugar factories, which the Brazilian company said it would use to produce sugar and ethanol. Jamaica is already the Caribbean's largest producer of ethanol.
john.myers@gleanerjm.com
