Chemrez mulls new P2-B biodiesel plant in anticipation of big demand

Anticipating the huge demand for biodiesel with the passage of the Biofuels Act, Chemrez Technologies Inc. plans to put up a new biodiesel plant worth around P2 billion in three years.

ChemTech chief operating officer Dean Lao Jr. said the new plant will be three times the size of its existing plant.

Lao said the company also plans to debottle its five-month old plant to raise current capacity by 20 percent in order to meet the growing demand for biodiesel in the both international and local markets. The plant currently produces 60 million kilos of biodiesel a year.

Immediately upon effectivity of the biofuels law, a minimum one percent biodiesel by volume shall be blended into all diesel engine fuels sold in the country, and up to two percent blend after two years.

Lao said the company needs to prepare for the projected increase in demand for biodiesel as the Biofuels Act bans the importation of alternative fuel from other countries.

The domestic demand for coco-biodiesel is estimated at 70 million liters a year based on the seven billion liters of petrodiesel consumed by the country last year. The figure is seen to more than double to 160 million liters.

The debottling is expected to start this month or January 2007 and is slated for completion by March next year.

Lao said ChemTech is also looking at exporting to Australia and Taiwan, which are seeking alternatives to petro-diesel but have limited capacity to produce crops for the manufacture of biodiesel.

Shares of ChemTech closed at P5.20 on the resumption of its trade yesterday simultaneous with the listing of additional P1.5 billion worth of shares. The stock opened at P5.50 per share, 25 percent higher than the company’s offer price.

"It is very encouraging. We thought it would start at P5.20. This is really a pleasant surprise. We hope it keeps going up," Lao said.

ChemTech sold 340.9 million common shares at P4.40 a share, equivalent to 11.5 times the company’s earnings per share for 2007 and translates to a 12.58 discount to the weighted average price of ChemTech shares for the last 10 trading days.

The company currently exports its biodiesel product under the BioActiv brand to Europe and Japan

BioActiv enjoys an advantage in the export market because biodiesel made from coconut oil has unique qualities which helps clean fuel systems, boost engine power and reduces nitrous oxide emissions.

Aside from biofuel, ChemTech also produces acrylite binders, the main ingredient used to make water-based house paints and which holds a substantial 40 percent share of the local market where it competes with local and foreign companies.

ChemTech also controls 70 percent of the domestic market for polystyrene resins which is a major raw material for the manufacture of plastic food packaging and appliances. Its brand Hi-Flo and Hi-Flex are highly regarded for quality and reliability in the plastics industry.