Beta Renewables in cellulosic ethanol crisis, as Grupo M&G parent files for restructuring

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From Italy comes an industry shocker:

“Italian newspapers reported over the weekend that cellulosic ethanol developer Mossi & Ghisolfi shuts down this week,” reported a source from Europe. “227 people of whom 121 from the Crescentino ethanol refinery are to stay at home. The Crescentino operation has 60 days to present a new survival plan. The other firms have 120 days.”

The Crescentino cellulosic refinery built and operated by Grupo M&G, which was the world’s first commercial-scale refinery, is to be shut down as a part of a restructuring effort for the debt-laden parent company.

The company tumbled into economic crisis primarily as a result of delays and cost overruns on a PET chemical plant project in Corpus Christi, Texas aimed at making clear plastic bottle resins — a project plagued by difficulties many of which stemmed from Hurricane Harvey slamming into the Texas coast last year.

What’s going on?

Dire headlines in local Italian media

According to reports in Italian media, the Tortona-based company, under its arrangements with the courts, will have 120 days to present a restructuring plan — excepting in the case of the cellulosic biorefinery project in Crescentino, which the company has 60 days to develop its plan.

In all, 50 employees at the company’s RD headquarters and R&D facility in Tortona, and 121 employees from the Crescentino biorefinery, which will be paid from state Italian extraordinary intervention Fund owing to the economic crisis at M&G.

Overall, eight companies in the Group will be covered by the extraordinary intervention: Mossi & Ghisolfi, M & G Finanziaria, Biochemtex, Beta Renewables, Italian Bio Products, IBP Energia, M & G Polimeri, Acetati Immobiliare, and the clock for development of the company rescue plan started running on October 26th.

We reported earlier this month that Mossi & Ghisolfi was in discussions with some private equity and industrial players who have expressed interest in buying Beta Renewables after the parent company suffered significant losses and a 90% drop in operating profit.

The loss of Guido Ghisolfi in 2015

The company was rocked in March 2015 by news that Guido Ghisolfi, 58, the CEO of Beta Renewables, dies in an apparent suicide, after the charismatic business leader was found in his dark-color, late model Lexus, on a road side near Carbona Scrivia, less than three miles from his company’s facility in Tortona, dead of a gunshot wound at close-range.

In a statement at the time, Grupo Mossi Ghisolfi said, “He was suffering from severe depression and yesterday this resulted in his untimely passing close to his home in Tortona, Northern Italy. The family and the Mossi & Ghisolfi Group management wish to express their immense and deep regret. Guido Ghisolfi was a rare Italian entrepreneur with great skills, perseverance and intuition. He was able – together with his father Vittorio and his brother Marco – to lead the Group to become a global organization. The Mossi & Ghisolfi Group today is one of the global leaders in the field of plastics and in the field of chemicals derived from renewable sources, in the last of which, in particular, Guido Ghisolfi showed outstanding inspiration, courage and dedication.”

The company moving on: Indian opportunities

In October 2015, we reported that Beta Renewables, Novozymes and CVC India Infrastructure Pvt. have signed an MOU to develop a biorefinery in Punjab using wheat and paddy straw as feedstock. The previously announced project and plans for five more around the country will require investment of around $1 billion. The MOU was signed at a renewable energy summit that saw another 12 MOUs signed for biomass, waste-to-energy, co-generation and solar projects. New policies supporting the industries are credited with helping to drive these new investments.

Beta’s momentum in 2014

In late 2104, we reported that Brooke Renewables and Hock Lee Group presented a Letter of Intent to the Sarawak State Government marking their intention to invest in the 2G Bioethanol and Bio chemical plant as the first phase of the $1B, 5-year Sarawak Biomass Hub project.

In October 2014, Biochemtex and Beta Renewables had announced an agreement with Energochemica SE for the construction of a 16.5 million gallon (55,000 ton per year) cellulosic ethanol plant.  The project has expected to commence immediately and the start-up of the plant was anticipated for the first half of 2017.

But the company’s technology had been plagued by pre-treatment issues, and Crescentino had received a major overhaul aimed at producing a more homogenous and refinery-friendly feedstock product from raw biomass that was arriving to the plant with considerable amounts of dirt and debris.

In September, GranBio initiated production at the first commercial-scale plant for second-generation ethanol in the Southern Hemisphere.  The 82 million liter Bioflex 1 unit uses the PROESA pre-treatment technology. In July, M&G Chemicals announced that its wholly owned subsidiary M&G International S.à.r.l had entered into a Sino-foreign joint venture with Anhui Guozhen CO, Ltd.

The company backstory

Grupo M&G is presently the world’s largest producer of PET for packaging applications with 1.7 million ton of capacity annually. M&G is also a technological leader in the polyester market. Group sales proceeds in 2008 were almost $2.6B. The group has manufacturing assets in Brazil, Italy, Mexico and USA and supports three R&D facilities in Rivalta, Italy; Sharon Center, Ohio; and in Poços de Caldas, Brazil.

Chemtex is a full service project solution provider that offers state-of-the-art technologies (licensed and own), technology development (from its R&D facilities in the USA and Italy) and a complete range of project management, engineering, strategic sourcing and construction services for its clients throughout the world.

Beta Renewables — a subsidiary of Chemtex, and Grupo M&G — had developed and deployed a low-cost cellulosic biofuels technology, known as PROESA. Chemtex employs approximately 1000 staff located in key centers throughout the world – Tortona and Rivalta in Italy, Wilmington, NC and Sharon Center, OH in the USA, Shanghai and Beijing in China and Mumbai, Bangalore and Baroda in India.

Reportedly at the time, the company was within weeks of closing the financing on a commercial-scale facility planned for North Carolina. The project had attracted a $99 million conditional loan guarantee from the U.S. Department of Agriculture under its 9003 Biorefinery Assistance Program. The project has also received support in the form of BCAP monies to support local landowners and farmers with the establishment costs for selected perennial grasses.

The Crescentino project

The first thing you notice about the Beta Renewables cellulosic ethanol plant in Crescentino is the size and scope. After the long “five years away” era of cellulosic biofuels, where systems fit on benches, or in small shacks that held pilots, this 20 million gallon cellulosic biofuels project, up close and in person, is like seeing the Saturn V rocket for the first time. The Titan that powered Project Gemini, the Redstones and Atlases that powered Project Mercury, look like midget rockets launched out of backyards by comparison.

Crescentino is a project many thought would never get built. Several years of industry skepticism preceded a decision by Beta’s parent Chemtex (itself a subsidiary of M&G, one of the world’s largest producers of PET for synthetic fibers and plastic bottling) to build the project off its own balance sheet.

Cellulosic biofuels at scale: The Digest’s 2016 Multi-Slide Guide

Beta’s Business Development Manager Michelle Marrone gave this illuminating presentation at the Scaling Up Conference in Ottawa last year.

The Bottom Line

As with Abengoa, here’s a cellulosic technology tumbled into bankruptcy, essentially, by problems elsewhere in the company, In the case of Abengoa, solar. Here. issues with fossil-based PET production. In both cases, excessive debt loads and project delays and cost-overruns were the key factors — and cellulosic ethanol, though much smaller in scope, was no exception to the problem at Grupo M&G although the ramping-up difficulties are more generally expected with first-of-kind technology and the costs were much lower than for world-scale PET production.

What next? Clearly, there is an opportunity for current investors Novozymes or TPG to step forward — or, perhaps, another petrochemical business player. There are no early indications of where the technology might land — but for the time present, operations are at a standstill in Crescentino, Italy.